India’s fast-growing e-commerce and retail logistics sector is facing major uncertainty after recent GST amendments created confusion over how local delivery and Goods Transport Agency services should be taxed. The Forum for Internet Retailers, Sellers & Traders (FIRST India), representing more than 300 e-commerce platforms, logistics companies and digital marketplaces, has approached the Union Ministry of Finance seeking immediate clarity.
The confusion stems from Notification No. 17/2025 Central Tax issued on 17 September 2025. The amendment, linked to Section 9(5) of the CGST Act, requires e-commerce operators to pay 18 percent GST on local delivery services unless the service provider is registered under Section 22(1). However, the law does not clearly explain what qualifies as “local delivery.” As a result, MSMEs and logistics providers are struggling to determine how to classify short-distance or intra-city movements.
Although the changes were introduced after the 56th GST Council Meeting to simplify taxation in the transport sector, they have unintentionally created new compliance challenges for marketplaces, delivery partners and the MSME sellers who rely on them. Many businesses are unsure who should pay the GST — the platform, the logistics partner or the seller. There is also a risk of double taxation when a shipment involves both interstate and intra-city transport handled by different service providers.
The situation has led to inconsistent approaches among major e-commerce companies. Flipkart is claiming exemption under GTA rules, while platforms like Meesho are not doing so, believing that they do not fall under the exemption category. Smaller logistics partners are struggling even more because different e-commerce players follow different interpretations of the rules.
FIRST India’s Director General, Sushma Morthania, said the intention behind the GST changes was good, but the lack of operational clarity has created widespread confusion. She stressed that e-commerce logistics is essential for MSMEs participating in the digital economy. A timely clarification, she said, will protect small sellers, ensure consistent compliance and support thousands of logistics partners.
FIRST India has requested the Ministry to clarify key points:
- The exact definition of “local delivery services” and how they differ from GTA and courier services.
- Whether the current B2C exemptions for GTA services under Notification 12/2017 apply when deliveries are made directly to consumers.
- How intra-state GTA services booked through e-commerce platforms should be treated.
- Whether add-on services like cash-on-delivery handling or product verification count as part of GTA services or require separate taxation.
FIRST India emphasises that clear instructions from the Ministry will help ensure fair competition and prevent misinterpretation. Clarity on whether Flipkart’s exemption approach or Meesho’s non-exemption approach is correct will help all platforms follow the law consistently and avoid accidental non-compliance.
About FIRST India
FIRST India works to identify challenges in the retail and e-commerce sector and convert them into policy priorities. With the support of its members, the organisation gathers data, develops recommendations, and collaborates with stakeholders to support the growth of India’s digital commerce ecosystem. It aims to remove barriers to digital trade and help shape policy at both national and global levels.
Subscribe Deshwale on YouTube
