Amazon and Flipkart to engage with sellers, Govt over new TDS levy

E-commerce marketplaces Amazon and Flipkart are planning to discuss with their seller partners and the government on the Budget proposal to levy 1% TDS or tax deducted at source on e-comm transactions.

Both the marketplaces are currently studying the proposal and assessing its impact on their seller partners and MSMEs.

"We are studying the details, particularly how it impacts MSMEs and Sellers on our marketplace platform and will discuss further with our seller partners and engage with government and other stakeholders in due course," Flipkart spokesperson told Entrackr.

Amazon also is looking to have more clarity on the proposal, which might impact small sellers and add additional pressure on them.

Earlier on Saturday, Finance Minister Nirmala Sitharaman during her budget presentation, proposed 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,” the FM said in her Budget speech.

She further proposed that small businessmen, individuals and HUF who receive less than Rs 5 lakh and furnish PAN/Aadhaar would be exempt from the TDS norm.

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.

Meanwhile, the e-sellers' representative body All India Online Vendors Association (AIOVA), who welcomed the 1% TDS move, demanded that TDS on marketplace commission should have been removed.

"TDS on marketplace commission is a technical application of law which needs to be relooked," said the e-sellers' representative body.

As per industry observers, the new proposal will impact the cash flow for sellers and increase the cost of compliance for e-comm firms.