We’re not shops, but platforms: E-tailers voice concerns over GST clause

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For online marketplace in India, TCS is major concern govt has not given any clarity on

In the absence of any straightforward classification, e-commerce companies are finding it hard to convince the government to treat them not as a ‘shop’ but as a ‘platform’, which vendors use to sell products.
Under the goods and services tax (GST), this will imply that e-commerce firms will have to deduct one per cent tax collected at source while making payments to their suppliers. This, e-commerce stalwarts such as Amazon, Flipkart, Shopclues, and Snapdeal have argued, will lock Rs 400 crore of capital belonging to their sellers every year in the GST regime.
For the online marketplace in India, tax collection at source (TCS) is a major concern the government has not given any clarity on.
Tax is collected by the seller from the buyer at the time of sale of a specified category of goods. Applied to e-commerce, this means that every e-commerce operator would have to collect tax at source out of the amount payable to the supplier of goods and services and such collection is reported to the government.  In the much-awaited goods and services tax (GST) regime, TCS, which is only for e-commerce companies, has been a point of pain for them. Some industry experts say that while the one per cent tax cap is fine, the problem is with compliance. They argue that e-commerce companies are enablers and should not be treated as shops, which sell what they buy and are taxed accordingly.
“What the industry is saying is that they are not shops but platforms. TCS would increase a lot of compliance, a lot more disclosures would have to be made and costs would be high as the volume of data would increase. The intention of the government is right and one per cent TCS is fine. Having said that, it would mean increase in compliance for the sector,” said Amarjeet Singh, Partner, Tax, KPMG in India. But many e-commerce companies say that the TCS concept is flawed and setting the tax rate would not solve any problem.
“The GST is a welcome piece of tax legislation and accelerates our ability to extend economic inclusion to the masses of India. But 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 counterparts,” Sanjay Sethi, co-founder and CEO, Shopclues.com.
Also, in the online world, TCS covers those operating under a marketplace model and not those with an inventory model.
“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,” said Amit Agarwal senior vice-president and country head, Amazon.
The TCS would be a “dampener”, he said.
Source: http://www.business-standard.com/article/economy-policy/we-re-not-shops-but-platforms-e-tailers-voice-concerns-over-gst-clause-117042501508_1.html

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