• New GST is one of the biggest tax reforms in nation’s history
  • Amazon established GST Cafés to help merchants comply

India’s new tax regime is causing widespread headaches for small merchants and the e-commerce companies they work with.

The Goods and Services Tax, which went into effect July 1, has been touted as the biggest tax reform since the country’s independence seven decades ago, aimed at replacing hundreds of regional and federal levies with a standardized national tax. But retailers are discovering the new system is anything but simple. They’re battling a dizzying array of documentation requirements and product classifications, which affect the percentage of tax charged, that threaten to choke businesses with bureaucracy. Thousands of small merchants have been dropped from e-commerce sites because they can’t meet the new requirements.

Seller Archit Agarwal is still struggling to get the new rules straight after months of preparation. The owner of A2A Trading sells imported wireless headphones on Amazon.com Inc.’s local site, but he’s scrambling to figure out how his existing warehouse stock should be taxed, how customer returns should be handled and how detailed record-keeping should be. In August, he’ll start filing three sets of monthly tax returns.

“The new system is overwhelming,” said the 32-year-old just days after the GST was put in place. The harried Agarwal was heading into a low-rise building in Bangalore to one of Amazon’s 16 pop-up GST Cafés. A sign outside advertises “Get GST compliant and sell online chinta-free,” and dozens of sellers have come to offload their ‘chinta,’ or worries , before the online giant’s panel of taxation experts.

India Can Tout a Big Reform, But Not Yet Reformers: Mihir Sharma

The rate of GST varies depends on the product and service, ranging from zero to 28 percent, as well as numerous exemptions….