Bringing significant relief to small businesses selling their wares on e-marketplaces, the Centre has decided to keep in abeyance the applicability of legal provisions pertaining to such businesses in the Goods and Services Tax (GST) regime along with requirements for e-commerce portals to deduct tax at source from sellers using their online marketplace.
“This step has been taken to provide more time for persons liable to deduct tax at source as well as e-commerce companies and their suppliers to prepare for the historic tax reform,” the finance ministry said in a statement on Monday. Barring the State of Jammu and Kashmir, the country will switch to the GST regime from July 1.
With the objective of ensuring smooth rollout of GST and taking into account the feedback received from the trade and industry, the provisions of deduction of tax at source under Section 51 and collection of tax at source under Section 52 of the central GST and State GST Acts of 2017 “will be brought into force from a date which will be communicated later”, the ministry said.
As per these provisions, e-commerce players were required to collect 1% tax at source while paying suppliers after July 1, while notified entities need to collect similar TDS for payments to suppliers for over ₹2.5 lakh.
“Persons who will be liable to deduct or collect tax at source will be required to take registration, but the liability to deduct or collect tax will arise from the date the respective sections are brought in force,” the ministry said in a statement.
The extension of timeline for TDS and TCS compliance is in line with the e-commerce industry’s requests, said a tax consultant.
“This is entirely new for indirect tax, and therefore the best way to implement would be to provide detailed guidelines with case studies,” said Divyesh Lapsiwala, tax partner at EY India. “The purpose is to track transactions and not collect tax; and therefore it is imperative that the “collectors” have clear point of view from the government.” He added that there would be no merit in later disputing with a collector why tax was not withheld correctly on the grounds of technical interpretation of provisions.
Separately, the provision of mandatory GST registration for smaller businesses with an annual turnover below ₹20 lakh supplying goods through e-commerce websites (who in turn are required to collect tax at source) is also being kept in abeyance till the TDS/TCS provisions are not enforced.
“In other words, persons supplying goods or services through electronic commerce operator liable to collect tax at source would not be required to obtain registration immediately…” the finance ministry said.
E-tailers like Paytm Mall predictably welcomed the government’s decision and said this will help them enhance their preparedness levels for ensuring complete GST compliance. “The government’s move to offer additional time for GSTN implementation will come as a relief to online sellers and consumers alike,” said Amit Sinha, COO of Paytm Mall.
Snapdeal welcomed the move. The additional time would benefit lakhs of online sellers, said a spokesperson for the e-marketplace.
Amazon welcomes move
The move will ease pressure of cash flow for sellers, Amazon said.
“This ensures business continuity for the marketplace but most importantly benefits our sellers since they don’t have to deal with pressures of cash flow at a time when they are transitioning into a new tax regime,” Amazon.in said in a statement.
(With PTI inputs)
