Tax Collected At Source Is An Unfair Liability For Ecommerce: IAMAI

Even as ecommerce companies operating in India do the groundwork for October 1 — the date they need to start implementing the government’s new provision of tax collected at source (TCS) — the Internet and Mobile Association of India (IAMAI) has raised objections against the move, calling the tax an “unfair liability” imposed on the sector.

In a statement, the IAMAI said that online marketplaces, as recognised by the IT Act 2000, are just intermediaries that provide a technological platform and are not actually engaged in the act of retail trade.

“Mandating technological platforms to collect Goods and Services Tax (GST) for retail activities undertaken by sellers on-boarded on their platform is a contradiction of the intermediary role played by such platforms; and a forceful imposition of undertaking tax liabilities for activities beyond their remit,” the IAMAI said.

The development comes on the heels of the government’s directive to both Indian and foreign ecommerce companies to start collecting tax at source from October 1, 2018.

Under this rule, the notified entities will have to deduct up to 1% state GST and 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.

In the wake of this directive, ecommerce players have also requested the government to provide a single-registration system instead of multiple state registrations as the latter would increase their compliance costs.

However, the government still maintains that ecommerce companies need to register in every state separately.

The directive is aimed at keeping a check on tax evasion as tax deducted at source (TDS) and/or TCS will leave a trail of transactions that can be tracked.

The IAMAI added that the directive for ecommerce companies to implement TCS will also make it mandatory for all sellers to register for GST even if they are under the income threshold. “Online marketplaces now face a greater challenge to onboard MSME sellers on their new platforms because of the mandatory registration for online sellers as mandated due to TCS,” said the statement.

It said the government notification came with less than a month for compliance, which is too short a notice for businesses to implement the provision. “Forceful implementation of TCS without proper clarity will create chaos for the seller community and will be a major roadblock for ecommerce transactions,” the IAMAI said.

Update: September 22, 2018, 10:05 AM

The Finance Ministry notified TCS at the rate of 0.50% of the net value of intra-state taxable supplies made through the ecommerce portals by other suppliers in the Central Tax law. States too would follow suit and notify levy of 0.50% SGST on intra-state supplies.