Amazon, Flipkart seek more time to implement new TDS levy

After asking the government to reconsider the new TDS levy proposal made during Budget, e-commerce companies Amazon and Walmart-owned Flipkart have now requested the government to allow them more time to upgrade their systems to implement the proposal.

Both the companies have made a presentation to the government and requested the date for implementation to be at a later time, according to an ET report. 

The e-commerce firms said they need to upgrade their IT system to collect 1% tax deduction at source (TDS) from sellers,  said the report quoting a senior government official.

Last week, the Federation of Indian Chambers of Commerce and Industry (FICCI) on behalf of e-comm firms had in a presentation said that the newly introduced levy would cause irreparable loss to the entire industry with increased compliance burden and lead to reduced trading activity.

Third-party online sellers also said that the tax would be extremely detrimental to the growth impacting the cash flow and sustenance of their platforms.

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

"We are engaging with the government, sellers on our marketplace and others in the industry on the TDS provisions. Our sellers have voiced concerns that the deduction creates an unlevel playing field and will impact their cash flows and working capital. We worry that this would impact SMBs and their participation in the digital economy. We are however committed to compliance, and are seeking clarifications from the government. Once these clarifications are received, building compliance requires substantial changes to seller and customer facing invoicing systems. Based on our prior experience with TCS, we expect it will take time to make necessary changes", said Amazon spokesperson in a response to Entrackr’s query.

Flipkart is yet to comment on the development.

On February 1, Finance Minister Nirmala Sitharaman in her budget speech proposed 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.

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

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