In a temporary relief to online marketplaces including Flipkart and Amazon, the government has decided to defer implementation of a provision that required e-commerce players to deduct tax on payments made to their vendors from July 1, under the new Goods and Service Tax (GST) regime.
The move will give breather to marketplaces whose large chunk of transactions come from small vendors. Such small vendors are yet to register their operations as required under GST guidelines.
Additionally, the government also gave more time to small vendors selling on an e-commerce marketplace to register with the GST Network. It is likely to announce a new date for Tax Collected at Source (TCS) implementation later next month.
“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 to a leading financial daily.
E-commerce marketplaces welcomed the decision, saying it would ease the cash flow position of vendors.
However, they want complete abolition of one per cent TCS. According to the Central GST (CGST) Act, the notified entities (online marketplaces) are required to collect TDS (Tax Deducted at Source) at 1 per cent on payments to suppliers to goods or services in excess of Rs 2.5 lakh.
“This step has been taken to provide more time for persons liable to deduct tax at source/ecommerce companies and their suppliers to prepare for the historic tax reform,” mentioned a statement from government.