Amazon and Flipkart demand roll back of new TDS levy

Terming the new TDS levy proposal made during Budget as detrimental to online sellers, e-commerce companies Amazon and Walmart-owned Flipkart have requested the government to reconsider.

"It would cause irreparable loss to the entire industry with increased compliance burden and lead to reduced trading activity," a Reuters report quoted a presentation by FICCI on behalf of e-comm firms.

Third-party online sellers have also expressed concern over the proposal, saying that it will be extremely detrimental to the growth and sustenance of their platforms.

Entrackr's queries to Amazon and Flipkart seeking a response on the development remained unanswered until the publication of this report.

The development takes place following a proposal in the budget of a new tax levy at the rate of 1% on all e-comm transactions.

“In order to widen and deepen the tax net, it is proposed to provide that e-commerce operator shall deduct TDS on all payments or credits to e-commerce participants at the rate of 1% in PAN/Aadhaar cases and 5% in non-PAN/Aadhaar cases,” Finance Minister Nirmala Sitharaman had said in her budget speech of Feb. 1.

In the budget, the government had also for the first time defined an e-comm operator and an e-comm participant.

According to the Budget memorandum, an e-commerce operator is defined as any person who owns, operates or manages digital or electronic facility or platform for electronic commerce and is a person responsible for paying to an e-commerce participant.

Whereas an e-commerce participant is defined as a person resident in India selling goods or providing services or both, including digital products, through a digital or electronic facility or platform for e-commerce.

The proposals will come into effect from April 1, 2020.

The tax would also apply to ride-hailing firms such as Ola and Uber and online food delivery platforms including Zomato and Swiggy.

Entrackr's queries to all the above-mentioned firms for comments remain unanswered.

Soon after the announcement,  Amazon and Flipkart had engaged with sellers and stakeholders to assess the impact of the proposal.

Industry experts had also said that the new tax levy will hamper the cash flow for sellers and increase the cost of compliance for e-comm firms.