E-commerce firms such as Flipkart, Amazon and Snapdeal have gained relief for three months from the government in the matter of Tax Collection at Source (TCS).
The tax, which is designed to improve compliance mechanism, is to come into effect from next week.
Under this provision, e-commerce platforms have to collect the tax from those selling goods on their sites. It is an anti-evasion measure to keep track of transactions.
This will mean tax deduction and deposit of 1 per cent on every payment made to a vendor whenever goods are sold.
Entities have to deduct upto 1 per cent state GST and 1 per cent central GST on intrastate supplies of up to Rs 2.5 lakh. The provisions are aimed at checking tax evasion as TDS/TCS leaves an audit trail.
According to tax experts, this will require all vendors of e-commerce operators (ECOs) to be registered. This will also enable GSTN to allow credit to vendors for the GST collected by the ECO.
It needs to be debated first before being implemented. Besides, the centre and the states will also have to put in place administrative machinery to ensure the deductors are registered with them.
Earlier in May, Amazon, Shopclues and Flipkart gave huge discounts (upto 80 per cent) to ensure their stock is cleared before the GST comes into action. This happened largely on sellers insistence, as sellers feared it would result in even bigger losses if sold after July 1.
The GST, once implemented, is expected to cause losses for the retailers as the tax margins are going to be substantially higher.
Earlier, the dealers with less than Rs 20 lakh turnover were exempt from paying tax. But under GST, if they operate through the e-commerce route they will have to pay one per cent tax, as the prior exemption has been withdrawn.
The development was reported by ET.