The indirect tax department has clarified that e-commerce companies need not collect one per cent tax collected at source (TCS) from the service providers with an annual turnover of up to Rs 2 million under the goods and services tax (GST) regime, infuriating online players, which have vendors selling only goods.
The Central Board of Indirect Taxes and Customs (CBIC), infrequently asked questions (FAQ) for TCS, said a person supplying services through an e-commerce platform was exempted from obtaining compulsory registration provided his aggregate turnover does not exceed Rs 2 million in a financial year.
“Since such suppliers are not liable for registration, e-commerce operators are not required to collect TCS on supply of services being made by such suppliers through their portal,” said CBIC.
The decision has annoyed e-commerce players with product vendors. A spokesperson of ShopClues said there is no level playing field. For e-commerce services, there is an exemption, but for products being sold through e-commerce sites, there is none and the supplier needs GST registration, he said.
“We urge the government to do away with this mandatory registration requirement (for e-commerce platform selling products) for the level-playing field with offline space as well as with services e-commerce. Such measures also discourage artisans, tiny businesses, small retailers, etc, to sell through e-commerce platforms,” he said.
Abhishek Jain, partner at EY, said this exemption should be expanded to products as well. Since there is no requirement for registration for those selling offline products, e-commerce players are put at a disadvantageous position, he said.
TCS at the rate of one per cent (0.5 per cent for state and the Centre each) was introduced from October 1 this year, more than a year after GST was introduced.
There was also an issue of registration in states where e-commerce players have businesses but do not have a physical presence. The CBIC clarified that each state and Union Territory has indicated one administrative jurisdiction where these e-commerce operators will register.
In a separate FAQ, the CBIC said e-commerce operators who could not register themselves for GST but have already collected TCS, can show the amount collected while filing the first return form GSTR-8.
The clarifications come after e-commerce companies faced troubles in deducting TCS and depositing it to the government.
The CBIC had earlier said e-commerce companies — domestic or foreign — would have to register themselves in each state, UT, as the obligation for collecting TCS will be there for every intra-state or inter-state supply.
Foreign e-commerce operator, which does not have a physical presence in a particular state or UT, were asked to appoint an agent on his behalf for TCS registration.