E-commerce vendors will have to pay the 1% TCS (tax collected at source) upfront but smaller vendors could be impacted negatively, as it may hold up their working capital against input tax credit.
Amazon, Flipkart and ShopClues are partnering with taxation experts ahead of the GST roll-out on July 1 to make sellers GST-compliant. E-commerce vendors will have to pay the 1% TCS (tax collected at source) upfront but smaller vendors could be impacted negatively, as it may hold up their working capital against input tax credit. Pratik Jain, partner and national leader of indirect tax at PwC India, pointed out that certain provisions under the GST regime could make it difficult for small merchants to continue selling online. “Ideally, TCS should be at a very nominal rate. The 1% TCS puts pressure on players in the SME segment from a cash-flow standpoint,” he added. Compliance for large sellers such as WS Retail for Flipkart and Cloudtail for Amazon India would only require them to migrate from the VAT (value added tax) system to GST but smaller sellers have raised concerns over the complex process for registering for GST identification numbers or filing returns. Such small sellers are largely servicing low ticket size categories such as handicrafts, fashion, household supplies, etc.
According to industry estimates, from $15-20 billion gross merchandise value clocked by the e-commerce industry annually, small-scale vendors constitute about 20-30% of the total transaction volume. Lack of GST-preparedness among small-sellers is expected to hit this portion of the e-commerce companies in the near term. “Sellers who drive the larger share of the volume have already registered but some sellers from the SME segment will pull back in immediate effect to the GST implementation, but the impact will not last too long,” said Aditya Sengupta, co-founder and CTO, Instamojo.“Through regular interactions with our sellers, we observed that a lot of them were concerned about nuances of GST. Thus, we partnered with ClearTax to help them file and reconcile their tax returns conveniently and transition seamlessly through GST,” said Gopal Pillai, director & GM, seller services, Amazon India, on its collaboration with ClearTax.