E-commerce sellers will pay 2% tax at source in GST
E-commerce giants like Amazon, Flipkart and Snapdeal are trying to convince the government to scrap from the final Goods and Services Tax draft, the 2% tax that e-commerce marketplaces collect from sellers on their platform.
The government hasn't announced any change in its stand. Even seller bodies support the tax, saying that it will only affect tax-evading vendors.
GST: No tax respite for online giants
What is this tax in debate?
Tax Collected at Source (TCS) from Section 56 clause in the proposed GST draft (expected to be rolled out on July 1) mandates e-commerce marketplaces to deduct 2% of the transaction value and submit it within the 10th of next month with supporting proofs.
Why are the companies against this tax?
Sachin Bansal, Flipkart's co-founder and group chairman said the sellers would take the business offline once they discover that their capital will get locked if they sell online.
Kunal Bahl, CEO and co-founder, Snapdeal felt the tax would "hurt lakhs of small sellers by making online sales expensive and cumbersome".
These companies feel the tax will especially discourage new entrepreneurs from the online markets.
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FICCI joins hands with protesting companies
On February 9, e-commerce companies and the FICCI issued a statement protesting the tax, claiming it would block crucial capital for 25-50 days. They claim it has cumbersome reporting provisions, would lock up about Rs 400 crore capital annually and scrap 1.8 lakh jobs.
How does the tax collection process work?
On behalf of the suppliers, e-commerce companies have to deposit the TCS with the government within ten days from the last day of the specific month in which the tax has been collected.
These companies also have to submit an electronic statement containing TCS details of their various suppliers. These entries have to match the returns filed by the suppliers to enable refunds/claims.
What are the seller groups saying
Seller associations such as the All India Online Vendors Association (AIOVA) , which represents as many as 1,800 sellers, say that the TCS will only hit sellers evading taxes. Discouraging such merchants will improve level-playing ground for other players.
The companies anyway lock seller money so capital blocking is already a problem.
However, they are worried about the cumbersome process for tax claims.
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