Online ecommerce players suffering from GST blues

Online ecommerce startups are stepping up efforts to cajole the government of India to change a clause in GST which mandates 2% of the transaction value be deducted as collection toward tax collection at source (TCS). Interestingly, all 3 major competitors i.e. Amazon, Flipkart and Snapdeal had come together to tender their above request during an FICCI conference. The TCS clause mandates online marketplaces to hand over 2% of transaction amount towards GST to the government under the Act. However, this policy does not apply to retail seller offline. As per the players, the new guideline will require them to revise their internal payment processes and systems to comply with the new rule which will lead to higher processing costs too. Also, they contend that TCS will negatively impact the working capital of small sellers, including the categories with low-profit margins such as grocery.

However, the association of online sellers have a totally different opinion on TCS, and are in fact supporting the initiative. The All India Online Vendors Association (AIOVA), a representative body of sellers across different marketplaces, shared their views against Amazon’s stance and said that “We support the TCS clause. Amazon wants to remove the TCS clause as it will hurt the tax-evasive model of Cloudtail. We have been approached by Amazon many times asking us to request the GST Council to remove this provision but sellers have given full support to the provision. Till now, marketplaces were only making statements on behalf of the seller without reaching out to them. Amazon is the first to actually discuss this matter with sellers. We have already written to the GST Council that we welcome this provision and any plan to remove this provision will be against sellers’ interests.”