The model GST law has proposed significant changes in taxation of e-commerce business wherein firms like Flipkart and Snapdeal will have to deduct TCS (tax collected at source) while making payments to their suppliers.
Explaining the changes in the provision, experts said the proposal will increase the compliance burden on e-commerce operators as they will have to deduct 2 per cent TCS and deposit it with the government.
The measure, Nangia & Co Director Rajat Mohan said, will not increase the incidence of taxation on consumers as the supplier will get tax credit for the TCS.
The model GST law provides for 1 per cent TCS and a similar amount will have to be levied for inter-state sale of goods under the IGST.
Mohan further said in case of return of goods by the consumer the e-commerce companies will not have to deduct TCS as there is no actual sale.
The draft model GST law, however, did not provide any definition of aggregators saying that that the government would later come out with a notification specifying which type of businesses would be covered under the word 'aggregator'.
Aggregators mainly include Ola, Uber, Urban Clap which works as a platform for providing transport and other services. The TCS provision will not apply on aggregators.
The E-commerce companies will also have to file returns on the TCS deductions.
The model law has defined 'electronic commerce' as supply of goods or services including digital products over electronic network.
'Electronic commerce operator' would mean those persons who own, operate or manage digital or electronic facility or platform for electronic commerce.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)