Even though the Goods and Service Tax (GST) Council has decided to halve — and cap — the tax on firms who use the platform offered by e-commerce players like Flipkart, Amazon and Snapdeal to sell their goods, the resistance to the tax obligation and onus of collecting it hasn’t waned.
E-tailers, who require to collect the tax (TCS) at source — at 1% of the sale value as per the latest decision of the council — find the paperwork cumbersome. Therefore, they suggest that instead of assigning the job of tax collection to them, the taxman could collect it directly from the firms concerned using the data provided by e-tailers. And small firms who use the e-commerce platforms fear that they could practically be made to pay tax which they are actually exempt from, if the model proposed by the council is implemented.
Under GST rules, firms with annual turnover of up to R20 lakh are exempt from GST (in case of North-Eastern and hill states, the limit is lower at R10 lakh). However, it will be difficult for e-commerce players to distinguish between the exempt firms and others while deducting tax, industry sources said.
“There is a lot of fear that smaller sellers may not want to sell online, if TCS is implemented, as e-commerce portals are supposed to deduct 1% from all sellers irrespective of the turnover posted by a seller,” said Archit Gupta, CEO and founder, ClearTax.com.
Addressing a press conference here last month, Sachin Bansal, executive chairman and co-founder, Flipkart, said e-commerce firms share data with authorities on a regular basis on how much tax was due from each seller using their platforms. He added that three states — Kerala, Delhi and Rajasthan — get regular report from e-tailers on tax dues of firms to the extent of their use of the latter’s facilities.
According to industry estimate, R400 crore per annum of working capital of firms could get locked with the implementation of TCS. The size of the Indian e-commerce market — in terms of the value of the transactions on the portals — is estimated to be $20 billion.
While the government believes that TCS practice will help improve tax compliance, e-commerce players argue compliance could be ensured without making them do the unproductive paperwork. “E-commerce sales are already being tracked through information returns, which are being submitted by marketplaces to state governments. Hence, the new move will make the process more cumbersome, especially for small sellers,” said a senior industry executive working for a top major e-commerce portal.