E-commerce firms to pay up to 1% tax collected at source under GST

E-commerce firms like Snapdeal and Amazon will have to mandatorily deduct up to 1% tax collected at source (TCS) while making payments to their suppliers under the goods and services tax (GST) regime which is expected to kick in from 1 July.

The model GST law, finalized by the GST council, provides for 1% TCS to be deducted by the e-commerce operators. The model law provides that every electronic commerce operator, not being an agent, shall collect up to 1% TCS, as may be notified on the recommendations of the council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Experts had raised concerns saying this would mean that a similar amount will have to be levied on inter-state movement of goods, taking the total TCS deduction to 2%. “We have included the word ‘up to’ in the final model GST law. This would mean that TCS would not exceed 1% of the sale proceeds,” an official said.

Industry has been expressing concern over the TCS provisions saying it would mean a lock-in of capital and also dissuades companies from selling through online aggregators.

E-commerce companies will also have to file returns on the TCS deductions, but in case of return of goods by the consumer, these companies will not have to deduct TCS as there is no actual sale.

The model law had defined ‘electronic commerce’ as supply of goods or services, including digital products, over electronic network. ‘Electronic commerce operator’ would mean those persons who own, operate or manage digital or electronic facility or platform for electronic commerce.