Ecommerce platforms such as Amazon, Flipkart may not require offices in each state to comply with the withholding tax provision under the goods and services tax (GST).
However, the companies will have to collect tax when they make payments to suppliers from October 1 onwards.
The developments comes in line with the implementation of Section 52 of the Central GST Act which states that tax collected at source (TCS) has to be collected by ecommerce operators by both Indian and foreign ecommerce companies, when a supplier supplies some goods or services through its portal and the payment for that supply is collected by the ecommerce operator.
Under the provisions, the companies will be required to deduct tax at the rate of 1% (CGST)+1% (SGST) before making the payment to the supplier for proceeds of a sale, as per the provisions of the act.
The companies had requested the government to defer the provision as it would create compliance issues. While the ecommerce companies would need to have its presence in every state, vendors will face working capital issues.
Officials from State and Central government who met a day before the GST Council meeting scheduled on September 28, supported the implementation of TCS but have approved to the relief on presence in every state and thus ruled that the ecommerce players will not need a premise in each state to register for GST.
According to reports, the government will also provide detailed clarifications in form of frequently asked questions.
New GST Provision For Ecommerce Players
Under the new provision, the companies will be required to deduct 1% central GST on intrastate supplies of over $3.46K (INR 2.5 Lakh).
In the case of interstate supplies for an amount over $3.46K (INR 2.5 Lakh), TCS will be 2% including GST.
However, there will be no TCS liability on a seller, based outside of India and is working on foreign ecommerce platforms.
These provisions are aimed at keeping a check on tax evasion as Tax Deducted at Source (TDS) and/or Tax Collected at Source (TCS) will leave a trail of transactions.
Recently, the the Internet and Mobile Association of India (IAMAI) had stated its views against the provision and also called the tax an “unfair liability” imposed on the sector.
This development may bring some relief to the companies but multiple registrations at every state of the country remains to be another big challenge for them.
Earlier, the players had also appealed to the government to provide a single-registration system instead of multiple state registrations as the latter would increase their compliance costs.
The implementation of TCS may affect the ecommerce platforms and may especially discourage new suppliers to come onboard and may also discourage cash-on-delivery payment modes.
[The development was reported by ET]