'GST clause on TCS a growth deterrent for marketplace model'

Faced with the 'tax collection at source' clause of GST, e-commerce companies today said the provision could act as a major stumbling block to growth of the "marketplace" model and spell trouble for working capital of small vendors.
E-commerce players will be required to deduct a certain percentage of the amount paid to the seller by the consumer for goods and/or services purchased by them through the platform, as tax collection at source (TCS).
The sellers can get this adjusted against their final tax liability.
However, small business owners, who usually operate with thin margins, may face working capital crunch due to this system, discouraging them from operating through these online platforms, said analysts.

They added that maintaining details of such tax deducted for each month and for each supplier would be a mammoth task for players like Flipkart, Amazon and Snapdeal that have thousands of merchants on their platform.
Snapdeal co-founder and CEO Kunal Bahl said the issue needs to be "re-examined" and that "letter and spirit of the GST reforms need to be reflected in the implementation so that the current maze of compliance requirements is not unwittingly replaced with another set of fresh hurdles".

Terming the the provision as "discriminatory", industry body Nasscom said it can potentially render such e-commerce marketplace "unviable".

"This is likely to negate the beneficial impact of e-commerce on lakhs of small businesses in the country by compelling them to seek refunds compounding their working capital problems," it added.
EBay India V-P and MD Latif Nathani said the government should not mandate pure-play online marketplaces to "front" compliance, disclosures and reporting obligations.
Flipkart, the largest e-commerce company in the country, said the passage of GST is expected to give a major boost to e-commerce in India.
Sreedhar Prasad, Partner (E-Commerce) at KPMG India, said under the 'destination-based consumption tax' concept, e-tailers will have to adapt to a new model wherein the state where the package is delivered gets the respective tax for the sale and not from where the order is booked.

"It would be interesting times ahead with considerable changes to the ERP systems of e-commerce players to accommodate the requirements of GST," he added.
Mahesh Jaising, Partner at BMR & Associates, said the destination-based consumption taxation will ensure all states get their share of revenue basis actual consumption.