TDS on e-com transactions ‘unnecessary papercut’

The proposed levy of 1 per cent tax deducted at source (TDS) on ecommerce transactions, announced in the Budget this year, could impact the working capital of small businesses, said Amit Agarwal, country head of Amazon India, on Wednesday.

He was speaking at the 14th India Digital Summit of the industry body Internet and Mobile Association of India, where he is also the chairman.

“Just look at the recent Budget. There is an introduction of tax collected at source. These seem like harmless papercuts, but they impact the working capital of small businesses. If you look at how businesses have to register at each and every stage in the country to do business, this is just an unnecessary papercut,” said Agarwal.

He added that a lot more can be done if the country focused on removing friction in business transactions.

Agarwal was talking about t he Budget proposal to introduce a new section in the Income Tax Act.

Experts have said that the proposal has the potential to affect working capital of e - commerce companies and reduce cash flows for e-sellers. Some have pointed out that the TDS will lead to cash being stuck with the government in the refund system.

In the Budget, the explanation for the proposed levy said the e-commerce operator, defined as an entity owning, operating or managing the digital platform, will have to deduct 1 per cent TDS on the gross amount of sales or service or both.

This provision will not apply in cases where the seller ’s gross amount of sales during the previous year through e-commerce operator is less than ~5 lakh and t he seller has f urnished his Permanent Account Number or Aadhaar.

Given the wide definition, the proposal will impact not just e-commerce marketplaces but also all kinds of digital businesses such as Oyo, U ber, Ola, Urban Company, Makemytrip, Myntra,

“THERE IS AN INTRODUCTION OF TAX COLLECTED AT SOURCE. THESE SEEM LIKE HARMLESS PAPERCUTS, BUT THEY IMPACT THE WORKING CAPITAL OF SMALL BUSINESSES. IF YOU LOOK AT HOW BUSINESSES HAVE TO REGISTER AT EACH AND EVERY STAGE IN THE COUNTRY TO DO BUSINESS, THIS IS JUST AN UNNECESSARY PAPERCUT” AMIT AGARWAL Country head, Amazon India

Zomato, Swiggy and so on.

Both Amazon and Walmart-owned Flipkart have said they would reach out to the government for clarifications on the proposal, given it has a direct impact on the sellers and medium and small enterprises listed on their platforms.

At the event, Agarwal also spoke about the importance of skilling, grassroot entrepreneurship, driving equal opportunity through greater women’s participation in the workforce, better use of artificial intelligence-backed solutions, and the need for having stability and predictability in policies.