Ahead of GST rollout, TDS for online sellers deferred
Merchants selling goods through e-commerce platforms and companies supplying goods and services to various government agencies have got more time to prepare for a system of tax collected at source with the government on Monday deferring enforcement of this requirement under the goods and service tax (GST) regime which is kicking in from midnight of Saturday.
The requirement of collecting upto 1% of tax from online shoppers by e-commerce companies and a 1% deduction of tax when central, state or local self governments make payments to suppliers specified in central and state GST laws, will be “brought into force from a date which will be communicated later,” said an official statement here.
“This step has been taken to provide more time for persons liable to deduct tax at source and to give e-commerce companies and their suppliers to prepare for the historic tax reform,” said the statement.
In the case of e-commerce, Monday’s decision also gave merchants relief in terms of getting GST registrations. They need not get GST registration until the tax collected at source provision is enforced. Section 52 of the central and state GST Acts says e-commerce platforms have to collect upto 1% of the value of the supplies made to consumers at source and pay to the government.
The merchant, to whom the e-commerce firm need to pass on the payment for goods and services sold, will get credit for the tax collected at source, while paying his GST liability. The idea was to keep track of the quantum of sales that take place in online platforms, not a revenue raising measure. But merchants had many apprehensions including whether this tax collected at source will be refunded in case the product is retuned by the customer, a common practice in online shopping.
Online retailer Amazon welcomed the move. “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. We are grateful to the government for acceding to the request of the industry which is still in its infancy,” said a statement from a spokesperson for Amazon.
In the case of public procurement, it is possible that the supplier of goods and services to a government department, may not have any final tax liability at all, which makes the provision to deduct tax at source from payments to such entities redundant. Bipin Sapra, tax partner, EY, called the deferment a welcome step which will make the transition easier.