 "GST draft law: E-commerce firms to approach govt for seeking relief")
E-commerce companies are likely to approach the government to seek relief from some of the proposals contained in the draft Goods and Services Tax (GST) law. According to sources, major e-commerce players plan to approach the government via sectoral bodies such as the Internet and Mobile Association of India (IAMAI) to discuss the various pain points. Sources said IAMAI has asked its various members, including major e-commerce players such as Flipkart, Snapdeal and Paytm, to give a list of the various issues they have with the draft. After collating these, the plan is to approach the government next week.
A Flipkart spokesperson said on Wednesday that a specific proposal in the draft law relating to tax collection at source would be detrimental to lakhs of small and medium sellers who do business on e-commerce platforms. "This clause, not applicable to offline sellers, will hurt the working capital requirement for these sellers, as they work on small margins to provide affordable rates to consumers," the Flipkart executive said.
The company, however, welcomed the release of the draft law, as it reiterates the government’s commitment to have a uniform legislation.
Most companies in this space say the compliance burden is being put on e-tailers, as they have thousands of vendors and sellers. “In addition, small sellers will have cash flow issues, as they will have to claim refunds for tax paid on input, which e-tailers will not be able to account for,” said a senior official of an e-commerce company. He added the present system of information returns in many states is more suitable, as e-tailers are only intermediaries. “The information returns can be used by the government to tally returns filed by the sellers,” he added.
Sellers associations such as the All India Vendors Association (AIOVA) have welcomed the draft law. “This tax or levy on e-commerce transactions is only a deduction of indirect taxes from the payment that sellers receive from marketplaces. It will not have any impact on sales or prices. It will only increase the compliance requirement of e-commerce companies who are currently not filing any transaction data at a central level. This deduction will be credited to us in our tax return and can be adjusted against our tax liability or we can claim refund,” said a spokesperson of AIOVA.
Sachin Goel, chief executive, HomePunch.com, also welcomed it. "Until recently, Indian e-commerce had no tax clarity to regulate the online trade. GST tax reforms will not only simplify the tax laws but will make it easier for retailers and online market places to trade freely in the online space,'' he said.
According to experts, tax collection at source will be a compliance hazard, especially in cash-on-delivery scenarios. “Strict information disclosure requirements have been cast upon electronic platform operators. While in a way this leads to a certainty of taxes and saves such operators from the vagaries of state entry tax laws they currently face, it will be a massive compliance burden for such operators to track, collect and deposit GST liabilities of suppliers using the platform of such operators,” said Sudipta Bhattacharjee, principal at Advaita Legal.
He added for taxi and autorickshaw aggregators, enforcing tax collection at source on their drivers could lead to demands for grossing up from the drivers, apart from the compliance hazards. “Enforcing such tax collection might be difficult in scenarios where the riders are paying the drivers in cash after their ride,” added Bhattacharjee.
CONTENTIOUS ISSUES
For e-commerce platform operators
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Tax collection at source will be a compliance hazard, especially in cash-on-delivery scenarios.
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IT and other systems will need to be tweaked to ensure compliance with the strict disclosure requirements prescribed under the model legislation.
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For actual suppliers of goods and services
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Tax collection at source may enhance tax costs since many such suppliers do not pay VAT/entry tax or service tax as on date.
- Since the threshold of liability for GST would not apply on such suppliers, small-scale/start-up suppliers may suffer.
