The Internet and Mobile Association of India on Monday called upon the government for immediate removal of tax collected at source and the newly implemented tax deducted at source on e-commerce players.
The IAMAI, which represents mobile and internet based firms, termed the move illogical and against natural justice, especially for online travel aggregators.
It said that the tax collected at source (TCS) and the tax deducted at source (TDS) imposed by the government are "short sighted measures" and will impact long-term health of the industry, given that the COVID-19 pandemic is adversely impacting businesses.
"The present mandate of collecting TCS and TDS on all e-commerce aggregators is unjustified as all such forms of withholding taxation only passes the liability of tax collection and reporting on platforms who are not subject to the actual taxation and thereby undermines their intermediary rights," the IAMAI said.
Under TDS rules, e-commerce companies are required to deduct 1 per cent tax on the gross amount of sales or service or both, and for TCS deduct 1 per cent tax before making payments to suppliers.
The IAMAI said that the TCS and TDS flaws are compounded in case of the online travel aggregators (OTAs) who have to bear the entire burden of such deductions on their own, leading to severe cash constraints.
It said that while OTAs are mandated to collect and deposit TCS at time of transaction, the International Air Transport Association (IATA) registered airlines do not allow air travel agents to retain such amounts from their payment due to system difficulties and commercial reasons.
"Thus, OTAs now have to discharge TCS liabilities out of their pocket every month whereas airlines discharge GST liability when they receive the payment against the tickets sold. For TDS, OTAs will have to bear the burden monthly while airlines will reimburse only once OTAs have raised TDS certificate, which is done quarterly," the IAMAI said.
The industry body said that the reconciliations process around TCS and TDS result in blockage of the significant amount of funds of the OTAs.
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"TCS and TDS may be easy ways to shore up revenues on part of the government, but the global corona pandemic has shown that such short-sighted measures hurt the long-term health of the industries," the industry body said.
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