Online retail biggies such as Flipkart, Snapdeal and Amazon have joined hands to raise concerns regarding tax collection at source (TCS) norms under the draft model GST law.
Online retail biggies such as Flipkart, Snapdeal and Amazon have joined hands to raise concerns regarding tax collection at source (TCS) norms under the draft model GST law. Under TCS, e-commerce marketplaces will have to deduct a portion of the amount payable to sellers on their platform and remit it to the government.
The companies said this would result in a capital lock-down of about Rs 400 crore per annum and also discourage merchants from selling online. The draft model GST law is due to be finalised at the end of this month.
“We believe we have made a significant difference to the whole ecosystem… There are hundreds and thousands of sellers online and a lot of them are entrepreneurs, some of them are offline retailers… we have come a long way in creating this ecosystem,” Flipkart co-founder Sachin Bansal told reporters here at a FICCI event.
He added that the e-commerce industry believes GST is one of the most foward-looking tax initiatives and will have a transformative impact on the sector.
“This is apart from the TCS issue. Our estimate is that at current scale, Rs 400 crore per annum of capital will be locked into the system that will not be accessible to sellers and will eat into the working capital of the sellers and will deter them from coming online and listing with us,” he said.
The three companies — which are locked in intense competition for leadership of the booming Indian e-commerce market — have come together for the first time to voice their concerns on an industry issue. They, in fact, have taken potshots at one another on social media platforms like Twitter and offline.
The companies said the TCS clause is discriminatory towards online sellers and the same does not exist in the offline retail segment. Also, in the online world, it covers those operating under a marketplace model and does not cover those with an inventory model.
The companies contended that the clause, therefore, is detrimental towards e-commerce companies that have brought in billions of dollars of investment.
You may also like to watch this
“All of us are investing ahead of scale and a lot of the investment is going into building the right infrastructure and ecosystem, in training/educating sellers and bringing them online and that attracts consumers to come to our marketplaces… This flywheel has been spinning for the last few years… when the ecosystem gets excited, a lot of other industries benefit,” Amazon India Head Amit Agarwal said. He added that the TCS would be a “dampener”.
Snapdeal co-founder and CEO Kunal Bahl said “e-commerce is vociferously for GST.” “To enable the success of these small businesses, we must do. TCS goes completely against that spirit. E-commerce is at an interesting confluence of Digital India, Make in India and Start Up India… The government should seriously look at TCS as this will be serious impediment for our industry,” he said.
E-commerce still accounts for 2 per cent of consumption and is poised grow from $20 billion to $350 billion in 10 years.
By 2021, the Indian e-commerce industry is expected to have 1.3 million online sellers with 70 per cent of them coming from smaller towns, creating 10 million new jobs.