With the government notifying the provision part of section 52 of the central GST Act, the Internet and Mobile Industry of India (IAMAI) has said that the provision of Tax Collected at Source (TCS) for e-commerce is an unfair liability imposition on the sector. According to IAMAI, this will create operational challenges.
IAMAI has also pointed out that online marketplaces, as recognized by the IT Act 2000, are intermediaries only providing a technological platform and are not actually engaged in the act of retail trade. Mandating technological platforms to collect GST for retail activities undertaken by sellers on-boarded on their platform is a contradiction of the intermediary role played by such platforms; and a forceful imposition of undertaking tax liabilities for activities beyond their remit. Any service provider of certain category of service should not be burdened with tax liabilities of other forms of services, even though the former may facilitate sales.
TCS mandates all sellers to register under GST even if they are under the income threshold offered under GST. Thus, TCS will create compliance burdens for MSME/ petty producers conducting businesses online. Start-up online marketplaces now face greater challenge to onboard MSME sellers on their new platforms because of the mandatory registration for online sellers as mandated due to TCS.
There are also concerns over the technical aspects of online filing of TCS and whether the GSTN infrastructure is equipped to handle the kind of traffic that will be generated with TCS filing.
IAMAI has said that the concerns of the industry have been repeatedly placed before the authorities through various fora. However, there has not been any conducive response from the tax authorities on any of the concerns raised by the industry.
An immediate notification with less than a month for compliance is too short a notice for businesses to implement the provision. IAMAI would like to highlight that implementation of TCS requires not only adjustments on behalf of technology platform providers, but also adjustments for the numerous on-boarded sellers who conduct their businesses over these platforms. Forceful implementation of TCS without proper clarity will create chaos for the seller community and will be a major roadblock for e-commerce transactions.