Compliance is going to be a big challenge.

Taxing changes How the big ecommerce players and sellers are grappling with GST
Atom GST Tuesday, March 07, 2017 - 08:08

After much debate and back and forth, the final groundwork is now being laid for the Goods and Service Tax (GST), as the July 1 deadline inches closer. Touted as the country’s biggest tax reform since Independence, the GST will replace various central and state taxes, thus unifying the country under one single tax regime. While the final nuances of the bill are being drafted to be cleared in the second leg of the Parliament’s Budget session, there are some mixed responses coming from the startup world, more specifically the e-commerce industry.

There are two main points of contention over the implementation of GST. One, the mandatory Tax Collected at Source (TCS) provision, and two, the compliance with GST.

The TCS clause requires ecommerce players – online marketplaces in particular – to collect and pay a certain amount per transaction towards GST to the government. After the latest GST council meeting that was held on Saturday, the TCS levied on ecommerce players has been proposed to be capped at 1%.

While this may come as a relief to the industry, players like Amazon, Flipkart, Shopclues want TCS to be scrapped completely. Amazon India is working with the government for a favourable resolution.

Speaking to The News Minute, an Amazon India spokesperson said, “We believe GST is good for the e-commerce industry as it would eliminate hurdles in inter- state delivery and subsume the entry tax introduced on e-commerce shipments by some states. However, we remain concerned about the tax collection at source provision, which we believe has the potential to hurt the growth of the marketplaces in India at this stage when the industry is still in its infancy.”

A report in the Economic Times also mentions that according to an internal study done by Amazon India on the impact of TCS on its sellers, the TCS provision implies that online marketplaces will have to revise their systems and processes to comply with it and the expenditure for compliance will be considerable to the marketplace. This, the industry believes, may deter sellers from listing themselves on online marketplaces.

Online marketplace Shopclues also welcomes GST, which it believes will accelerate its ability to extend economic inclusion. But compliance comes as a larger burden.

“We feel that we are being asked to carry a larger burden of compliance which impacts our cost of doing business. For example, mandatory TCS collection and mandatory GST registration for online micro small business unlike their offline counterpart,” said Sanjay Sethi, Cofounder and CEO, Shopclues.com

What most ecommerce players are pointing out is the impact TCS will have on its sellers, especially those who operate low-margin businesses.

The News Minute spoke to Sanjay Thakur, president, e-seller Suraksha, a forum for online sellers who said TCS will only impact large scale sellers but will make no difference to small-scale sellers. “The only other challenge here will be filing taxes and the documentation involved with it. Filing tax returns under the GST will be a lot more cumbersome. But overall, GST will largely benefit sellers, especially those with sound financials,” he said.

Another major benefit according to Thakur is that sellers will begin receiving input VAT on goods purchased from other states once GST is rolled out. Input VAT is the value added tax added to the price when you purchase goods or services liable to VAT.

The All India Online Vendors Association (AIOVA), however, sees no impact of TCS on sellers. “TCS will not hurt sellers in anyway. These are only selfish statements being made by big ecommerce players. We believe that GST, including the TCS provision, is pro ecommerce sellers and AIOVA supports TCS and the GST bill,” a spokesperson from AIOVA said. Speaking further on the impact of GST,  the spokesperson said AIOVA is keen on GST implementation as it believes it will bring down the cost of doing business and under the GST regime, prices will come down by 4-6%.

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