The country’s top three e-commerce firms – Amazon, Flipkart and Snapdeal – on Thursday came together for the first time to voice concern over a Tax Collection at Source, or TCS, clause for online marketplaces under the draft GST law. The move, they cautioned, could lead to capital for sellers getting blocked and result in almost two lakh people losing their jobs.
The proposed clause, which mandates that e-commerce marketplaces deduct a portion of the amount payable to the supplier of goods or services and remit it to the government, would risk locking up about ₹400 crore of capital per annum for small sellers, the firms pointed out.
In addition, they warned that it would lead to loss of an estimated 1.8 lakh jobs, threatening growth and investments in the sector.
As an alternative, the companies suggested they could share data on the sellers and their tax liability with relevant authorities.
Currently, e-commerce firms submit tax compliance data periodically to State authorities in Delhi, Kerala and Rajasthan.
“We believe we have made a significant difference to the whole ecosystem,” Flipkart co-founder Sachin Bansal said at a FICCI event. “There are hundreds and thousands of sellers online and a lot of them are entrepreneurs, some of them are offline retailers... we have come a long way in creating this ecosystem.” The e-commerce industry views GST as a forward-looking tax initiative that would have a transformational impact, he added.
“This is apart from the TCS issue. Our estimate is that at current scale, ₹ 400 crore per annum of capital will be locked into the system that will not be accessible to sellers and will eat into the working capital of the sellers and will deter them from coming online and listing with us.”
It was pointed out that this clause is discriminatory towards online sellers as it does not exist in the offline retail segment. Blocking capital, they said, will disrupt the cash flow, thus making it difficult for sellers to generate profits, especially for small sellers with a turnover in the range of ₹ 50 lakhs to ₹ 10 crore per annum.
Snapdeal co-founder and CEO Kunal Bahl said that the proposal not only adds needless complexity for the sellers, it also does not provide any benefit to the tax authorities and will lead to duplication of information followed by the need for its reconciliation.
“It is a measure, which goes against the spirit of making India digital and improving the ease of doing business in the country. We are positive that the government will address this crucial concern,” Mr Bahl added.
Terming TCS as a “dampener”, Amazon India Head Amit Agarwal said, “All of us are investing ahead of scale and a lot of the investment is going into building the right infrastructure and ecosystem, in training/educating sellers and bringing them online and that attracts consumers to come to our marketplaces... This flywheel has been spinning for the last few years... when the ecosystem gets excited, a lot of other industries benefit.”
