Tax Breather for Ecomm Cos for 3 More Months
Rollout of tax collection at source was deferred to July 1; implementation after systems fully ready
India proposes to defer the implementation of tax collection at source (TCS), a move that will give a breather to Amazon, Flipkart and other ecommerce service providers. “It has been decided to defer it for three months,” said a senior government official aware of the development. Online platforms have to collect the tax from those selling goods on their sites while making payments for goods sold.
The tax, designed as a measure to improve compliance by helping to track such transactions, was to come into effect on July 1. Ecommerce platforms, which have multiple sellers with small turnovers, have been wary of the provision, fearing an increase in the compliance burden. Their lobbying had already led to the tax being deferred by a year, just days before the goods and services tax (GST) rollout on July 1 last year.
Experts Favour Deferral
It was expected that the provisions would become effective from July 1, especially after some state governments issued directives to their GST departments asking them to gear up for its implementation. While the GST regime is regarded as having stabilised, it was felt the imposition of TCS could lead to a heavy burden on the GST Network (GSTN). The government is keen that systems are fully prepared to handle the added transactions before implementation.
The TDS/TCS provision mandates that notified entities have to deduct up to 1% state GST and 1% central GST on intrastate supplies of up to Rs. 2.5 lakh. TDS stands for tax deducted at source. In the case of interstate supplies of over Rs.2.5 lakh, TDS will be 2% integrated GST. These provisions are aimed at checking tax evasion as TDS/TCS leaves an audit trail.
For ecommerce platforms, this will mean tax deduction and deposit of 1% on every payment made to a vendor whenever goods are sold. For effective implementation of the provision, states and the Centre will also have to put in place administrative machinery to ensure the deductors are registered with them. Tax experts also favour deferral. “The provisions for tax collection at source require all vendors of electronic commerce operators (ECOs) to be registered and GSTN to be able to allow credit to the vendors for the GST collected by the ECO,” said Bipin Sapra, partner, EY. “These are intricate processes and need to be debated and tested before they can be implemented and hence due time should be given to all involved before they are brought in force.”
The Economic Times, 25th June 2018, New Delhi
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