The draft model of the Goods and Service Tax (GST), which has brought under its ambit e-commerce transactions, has been largely welcomed by the industry, but concerns have been raised over the issue of managing tax collection at source.
Under the draft law, any payment which is made to the suppplier by an e-commerce player would be subject to tax collection at source at the notified rate. This could become a troublesome issue for e-commerce players as they deal with a large number of vendors for supply and it is likely to increase the compliance burden.
While welcoming the draft model of the GST law, home-grown e-commerce major Flipkart also raised this point of concern. “A specific proposal in the draft law relating to tax collection at source will prove to be detrimental to lakhs of small and medium sellers who do business on e-commerce platforms. This clause, which is not applicable to offline sellers, will hurt the working capital requirement for these sellers as they work on small margins to provide affordable rates to consumers,” a Flipkart spokesperson said.
This draft provision may also lead to a refund situation for many suppliers who operate on a thin margin. In addition, the e-commerce companies will need to file a statement providing details of all supplies made through e-commerce platform.
However, GST draft law is expected to bring much needed clarity for this burgeoning industry, but the sector has also sought consultative approach with the authorities to ensure that the new regulations are in sync with these new-age technology transactions.
The current indirect tax regime with both the Centre and states levying taxes on the e-commerce industry has created a certain degree of ambiguity, leading to disputes largely due to a lack of understanding of the sector. Given that e-commerce companies like Amazon, Flipkart and Snapdeal operate at the all-India level with complex business structures, the GST regime is likely to iron out the various tax imbroglios.