Hearing pleas from eCommerce portals and small businesses who are selling their products online, Govt. of India has decided to postpone implementation of GST for them.
This means that 1% Tax Collected at Source will not apply for eCommerce portals from July 1st, which is the roll out date for GST pan-India.
This should give huge relief to online vendors, who were in a fix ever since GST Council mandated them to collect 1% tax for every online transaction.
This reprieve for online vendors and eCommerce portals has been provided to give more time to them, in order to adjust and prepare for the new tax regime.
In a statement issued by Finance Ministry, it was said: “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 time to prepare for the historic tax reform..”
Earlier, Assocham had strongly objected to the vague definitions & rules mentioned for eCommerce portals, and the ambiguous nature of the new tax collected at source for e-commerce vendors. E-commerce vendors have already requested Govt. of India to exempt them from GST, as the new tax rules seems a bit harsh for them.
At that time, Finance Ministry had reminded them about billion dollar valuations, and the profits made by them.
Now, What Next For Ecommerce Portals?
With this recent exemption from GST, eCommerce portals can now sit with the online vendors and formulate a strategy to cope with the 1% TCS rule, which has only been postponed, not cancelled.
Under Section 52 of the central and state GST Acts, eCommerce portals are required to collect 1% tax from online shoppers (tax collected at source), for every online transaction and pay to the Govt.
When that merchant pays GST later, then this tax payment will be credited back under tax collected at source.
Now, the issue is, eCommerce portals are stating that online vendors should charge this 1% extra tax, and then provide the same to the eCommerce portals; because for a platform like Amazon or Flipkart, it would be very difficult to track each and every transaction.
This has caused some friction between eCommerce portals and online sellers, this will raise the price of every product, and no one knows who will bear the cost of this: the end user, the online vendor or the eCommerce portal which is providing the platform for the same.
As of now, the e-commerce portals or the online vendors (having revenues less than Rs 20 lakh) need not register themselves under GST for the collection of 1% tax, until further notifications are received from the finance ministry.
E-commerce portals have welcomed this decision. Amazon India said, “This will benefit small businesses 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,”
We will keep you updated as more details come in..