Etail­ers, Sell­ers Dif­fer Over Draft GST Clause

Seller as­so­ci­a­tions say tax col­lected at source will be ben­e­fi­cial

The Economic Times - - Disruption: Startups & Tech -

Mugdha Vari­yar & Payal Gan­guly

Ben­galuru: The top bosses of ri­val ecom­merce plat­forms Flip­kart, Ama­zon In­dia and Snapdeal found them­selves on the same page last week — more specif­i­cally on the page on the draft GST law that re­lates to col­lec­tion of tax at source (TCS) — but even while they cited the neg­a­tive im­pact on sell­ers, many on­line mer­chants are mak­ing an­other ar­gu­ment. The TCS clause man­dates on­line mar­ket­places to deduct 2% per trans­ac­tion and hand it over as col­lec­tion to­wards GST to the govern­ment un­der the Act. This does not ap­ply to re­tail sell­ers off­line.

Seller as­so­ci­a­tions such as the All In­dia On­line Ven­dors Association (AIOVA), which rep­re­sents 1,800 sell­ers, say that TCS will only hit sell­ers evad­ing taxes, and said that the is­sue of cap­i­tal block­ing on on­line plat­forms is al­ready a prob­lem for them. “The TCS clause will re­move the prob­lem of tax eva­sion among many sell­ers and the ‘un­nat­u­ral’ com­pe­ti­tion emerg­ing from it. Se­condly, since the ecom­merce com­pa­nies are al­ready hold­ing seller money, TCS will not af­fect our liq­uid­ity,” said a spokesper­son of AIOVA. The e-Com­merce Sell­ers Association of In­dia, which was ear­lier known as eSellerSu­rak­sha, says the clause will cre­ate a level-play­ing field among sell­ers. “Mer­chants with­out proper regis­tra­tion will be forced to move out. This makes a level-play- ing ground for all on­line sell­ers in terms of prod­uct pric­ing. The mer­chants who evade tax may also quit,” the seller body said.

How­ever, sell­ers do have some con­cerns over TCS. “Prod­uct re­turns in ap­parel ecom­merce range be­tween 15% and 20%. We will be re­quired to claim the TCS from the depart­ment di­rectly which is a cum­ber­some process,” said Dhi­raj Agar­wal, co­founder Cam­pus Su­tra, an on­line-first ap­parel brand. As­so­ci­a­tions such as AIOVA have also made cer­tain rec­om­men­da­tions to the GST Coun­cil on keep­ing a thresh­old limit for TCS based on the busi­ness of the on­line seller, es­pe­cially if the cur­rent VAT li­a­bil­ity for the mer­chant is less than the TCS amount. Ecom­merce com­pa­nies have said that TCS will de­ter mer­chants from sell­ing on­line and will badly hit the dig­i­tal ecom­merce in­dus­try, hold­ing up work­ing cap­i­tal. “Work­ing cap­i­tal will be hit. Also com­pli­ance is an added bur­den for ecom­merce com­pa­nies. Ma­jor­ity of the prod­ucts carry a re­turn date of 30 days and given 15-20 mil­lion trans­ac­tions per month and the re­turns, re­funds to sell­ers have to be done with ut­most care,” said a spokesper­son for pub­lic pol­icy at Ama­zon In­dia.

“With TCS, cap­i­tal will be locked away for pe­ri­ods be­tween 20-50 days de­pend­ing on the trans­ac­tion date. The sig­nif­i­cant im­pact on the cash flow will force smaller firms to seek ad­di­tional work­ing cap­i­tal or ig­nore the ecom­merce mar­ket­place al­to­gether, as it may not of­fer en­vis­aged con­ve­nience and ben­e­fits,” said a spokes­woman for Snapdeal.

Ecomm cos say that TCS will de­ter mer­chants from sell­ing on­line and will badly hit the in­dus­try, hold­ing up work­ing cap­i­tal

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