The central and state governments believe such a move would vastly expand the potential reach of small enterprises through e-commerce, the official said on condition of anonymity.

Currently, physical sellers need GST registration only if they have annual sales of more than ₹40 lakh, while all online sellers compulsorily need GST registration irrespective of turnover. The proposal, if approved, will bring online and offline sellers on par as far as GST registration is concerned.

"Representations have come from the industry and trade to bring parity between online and offline sellers on the issue of GST registration, saying that the current norm comes in the way of small businesses reaching a larger customer base. Discussions are on between the central and state governments. The law committee of the GST Council will examine the matter before a decision is taken," the official cited above said on condition of anonymity.

The move is significant given that a large part of the Indian economy is informal, and could benefit significantly from going online. India has over 6.3 million unincorporated, non-farm micro, small and medium businesses accounting for a third of its economic output. Of this, over 2.3 million are traders and close to 2 million are manufacturers.

However, despite their strong contribution to economy, small businesses are vulnerable to economic shocks. Making procedures easy for small businesses to tap the potential of e-commerce is expected to benefit this segment and help save and create jobs.

Enterprises with a ₹40 lakh annual turnover would have monthly sales of around ₹330,000. Assuming a 20% profit margin, they would be making a monthly profit of barely ₹66,000. Experts said the current practice of excluding online sellers from the ₹40 lakh registration exemption threshold is an artificial segregation of businesses, and that many small firms do not sell online because of the requirement of GST registration.

"With extensive focus on supporting the growth of micro, small and medium enterprises, it would be very beneficial if the GST thresholds for them are kept at par with other businesses even when they are engaged in supplying through e-commerce platforms," said M.S. Mani, a partner at Deloitte India.

Experts also said parity of GST registration norms would encourage small businesses to adopt the digital way of doing business.

Online sellers were treated differently in the context of GST registration at the time of introducing the indirect tax reform in 2017 because policy makers and traders were apprehensive of the impact of e-commerce on conventional traders. The move to bring parity on registration norms suggests stakeholders are now confident these two can co-exist, said a tax professional, who spoke on condition of anonymity.

GST started off with a ₹20 lakh threshold for registration ( ₹10 lakh for special category states). In 2019, this was raised to ₹40 lakh sales ( ₹20 lakh for special category states). Now, most of the states barring some small state economies, have ₹40 lakh threshold for GST registration.