E-commerce companies start collecting 1% tax at source from October 1st
The Finance Ministry has issued a notification stating that e-commerce companies should collect an amount at the rate of one per cent as tax collected at source (TCS) on the supplies made by them. The e-commerce companies should pay half of the amount collected to the Centre while the other half should be paid to the State where supply takes place.
The government had proposed TCS for e-commerce companies after the implementation of the Goods and Services Tax (GST). Thereafter, the Goods and Services Tax Council announced its decision that TCS will be deducted from the 1st of October. Any e-commerce business that is supplying goods on behalf of any producer is liable to collect TCS.
Tax collected at source (TCS) means that receiver of payment gathers extra money at a certain rate over and above the value of supply or purchase and gives it to the government.
The marketplace model
Abhishek Jain, Tax Partner at EY, said,
“As the law had provided a levy up to one per cent, the e-commerce industry was awaiting the release of exact rate of TCS —essentially to configure it into their system.”
The new system stipulates that the marketplace model would apply when services or goods are supplied through a portal or an application and the payment is collected by the e-commerce business. However, no TCS would be applicable if when supply is made under cash on delivery (COD) and such payment is collected on behalf of the supplier.
TCS will be applicable when the e-commerce company has an arrangement with a third party and where payment is collected by the third party. In such a case, the e-commerce company must collect TCS.
It is still not clear what is to be done when 2 e-commerce operators are involved in a single deal. Moreover, there is a problem in compliance as, according to the law, every e-commerce operator, either resident or non-resident, has to register every state. A senior official of the Finance Ministry said,
“The law does not differentiate between resident and non-resident, both will have to get registered.”
“Now, the Law Committee under GST Council is considering this matter and soon the position will be clear.”
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