Amazon, Flipkart get breather as govt puts tax collected at source on hold

More time also given to small firms selling on e-commerce marketplace to register with GST Network

The government has given relief to e-commerce majors such as Amazon, Flipkart and Snapdeal, putting on hold a provision to deduct a one per cent tax collected at source (TCS).

It also gave more time to small entities selling on an e-commerce marketplace to register with the Goods and Services Tax (GST) Network.

E-commerce entities welcomed the decision, saying it would ease the cash flow position of vendors but added that they wanted abolition of the one per cent TCS.

"The provisions of tax deducted at source and tax collected at source will be brought into force from a date which will be communicated later," went an official statement. And, that those liable to collect at soruce were liable for registration but the liability to collect would arise from the date the respective sections were brought into force.

Section 52 of the Central GST Act and State GST Acts deal with tax collected at source and requires all e-commerce companies to do so if supply of goods or services on their platform is in excess of Rs 2.5 lakh.

"We welcome the decision to keep the TCS provisions in abeyance. This ensures business continuity for the marketplace but most importantly benefits our sellers, since they don't have to deal with pressures of cash flow at a time when they are transitioning into a new tax regime. We are grateful to the government for acceding to the request of the industry which is still in its infancy," an Amazon India spokesperson said.

A senior vice-president of a Delhi-based e-commerce company said the real relief would only come if TCS was done away with.

The government's justification is that they can't track each and every vendor of an e-commerce marketplace and this tax is needed to do this. It was reduced to one per cent from the earlier proposal to levy up to two per cent.

With Section 52 not notified, nor has the linked Section 24 (i), giving relief to small vendors on e-commerce. This section requires vendors with annual turnover of even less than Rs 20 lakh or if they don't have any inter-state supplies to register. Elsewhere, companies with turnover up to Rs 20 lakh are not required to register in the GST regime.

“This step has been taken to provide more time for persons liable to deduct tax at source/e-commerce companies and their suppliers to prepare for the historic reform,” the official statement further read.  

Amit Sinha, COO - Paytm Mall said his company has undertaken several measures to ensure complete GSTN-compliance, and this added time will help it further enhance its current solution.

ClearTax Chief Executive Archit Gupt says these companies have been facing a lot of difficulty in ensuring all their sellers understand GST and register for it. “Not all of them had an existing registration under the current regime and some are fairly small entrepreneurs, with turnover of a few lakhs. In the initial days of GST, this will be a significant relief to these companies which were struggling to bring sellers onboard by July 1,” he said.  

Amit Maheshwari of Ashok Maheshwary and Associates said the government has excluded smaller dealers from registration to minimise the registration workload.

GSTN had re-opened registration for assessees on Sunday.