With goods and service tax (GST) only a few days away, every merchant, business is working towards adopting the new tax regime. But there is some good news for merchants selling goods on ecommerce platforms.
According to a report in Mint, these merchants and companies supplying goods and services to various government agencies are getting more time to prepare for a system of tax collected at source (TCS).
This comes after the government deferred the enforcement of this requirement under the GST regime that kicks in from midnight Friday.
In an official statement, the government said that the requirement of collecting up to 1% tax from buyers of ecommerce sites and a 1% deduction of tax when payments are made to supplier by central, state or local self-governments will be brought into force from a date which will be communicated later.
These are requirements that have been specified in the central and state GST laws.
Section 52 of the central and state GST Acts says e-commerce platforms have to collect up to 1% of the value of the supplies made to consumers at source and pay this to the government.
‚ÄúThis step has been taken to provide more time for persons liable to deduct tax at source and to give e-commerce companies and their suppliers time to prepare for the historic tax reform,‚ÄĚ said the statement.
Mint reports that this decision also gives sellers on ecommerce platforms some relief in terms of getting GST registrations. They need not get GST registration until the tax collected at source provision is enforced.
Put in place with the idea of keeping track of the quantum of sales on ecommerce platforms, ecommerce firms need to pass on payments for goods and services sold to merchants who will get credit for the tax collected at source while paying GST.
However, there were several apprehensions, sply where merchants were unclear if this tax collected at source would be refunded in case the product is returned by the customer.
In the case of companies who sell goods and services to a government department, they may not have any final tax liability at all. This makes the TCS provision to such entities redundant.
According to the Mint report, the quantum of public procurement, a key function of government, is huge and accounts for about 30% of India‚Äôs gross domestic product, according to a paper on the subject by the Competition Commission of India. The global average is 15%, according to the commission.