Draft law brings all online purchases under its purview

The central government’s draft of the national goods and services tax (GST) law says all types of purchases made online will attract a uniform rate.

The tax, in lieu of local levies, will be imposed at the first point of a financial transaction. Every ecommerce operator shall, at the time of payment to suppliers, deduct the GST at a rate recommended by the GST Council.

The model law has 162 clauses and four schedules. It suggests jail up to five years and a fine for breach of the statute.

The tax collection at source system proposed for e- commerce companies would make any payment to a supplier subject to this at the notified rate. “ This will mean significant compliance burden on e- commerce companies, as many of them deal with thousands of vendors,” said Pratik Jain, leader, indirect tax, PwC India.

And, this could lead to a refund issue for many suppliers, operating on a thin margin. “ In addition, e- commerce companies will need to provide details of all supplies made through the platform,” added Jain.

The government has given clear definitions on terms such as ‘ aggregator’, ‘electronic commerce’ and ‘e- commerce operator’. An aggregator is a person who owns and manages an electronic platform and by means of the application and a communication device, enables a potential customer to connect with those providing a service of a particular kind under the brand name or trade name of the said aggregator, it states in the draft.

“There are separate provisions for contract manufacturers and ecommerce businesses, which will help bring uniformity of views across states,” said M S Mani, senior director, Deloitte in India.

The draft says an ‘ electronic commerce operator’ includes every person who, directly or indirectly, owns, operates or manages an electronic platform engaged in facilitating the supply of any good or service.

Business Standard New Delhi,15th June 2016