POST GST IMPLEMENTATION, E-COMMERCE COMPANIES WERE WORRIED ABOUT THE SUBJECT OF TCS

INTRODUCTION

India’s e-commerce market is estimated to possess crossed Rs. 211,005 crores in December 2016 as per the study conducted by the web and Mobile Association of India.

The uprising of Electronic Commerce in India has also resulted within the conception of online marketplaces. A Marketplace is an e-commerce platform owned by the E-commerce Operator like Flipkart, Snapdeal and Amazon. a number of the features of a marketplace model are:

• Marketplace enables third-party sellers to register and sell online on their platform.
• Marketplace charges a subscription fees/ commission on sale value from listed sellers.
• Third-party sellers under this model gain access to a bigger customer base, registered with the marketplace.
• Customer on the opposite hand gain access to multiple sellers and competitive prices for desired products.
• Items purchased on such marketplaces are either shipped by Merchant/Third-party seller directly or through the fulfilment centre managed by Marketplace Operator.

Government has also allowed Foreign Direct Investments under such a model to market e-commerce marketplace business model in India.

Marketplaces have provided retailers with a further channel of sales and reach which was unimaginable for an offline seller. Major marketplaces claim to possess lacs of sellers affiliated with their platform with many SKUs. While the number of sellers and their business has increased significantly, GST has specifically haunted marketplaces and has begun with rules & regulations specific to the present segment.

POST GST IMPLEMENTATION, E-COMMERCE COMPANIES WERE WORRIED ABOUT THE SUBJECT OF TCS

OTHER SELLERS WERE NOT WORRIED ABOUT ECOMMERCE SECTOR

Under India’s old legal system, it had been complicated to sell products across state lines. whenever you probably did, you had to affect a spread of various taxes and therefore the complicated paperwork that went with them. for little businesses that didn’t have the budget to pay a tax professional, the likelihood of additional sales was simply not well worth the hassle. This meant your ability to grow was limited by where you lived.

The new legal system has eliminated all of the confusing interstate taxes and replaced them with one tax. With GST, you'll sell to customers in your own state and in other states, all without fear about multiple taxes. As a result, you've got the chance to sell products to customers across India or round the world. It also gives you the prospect to compete with big corporations. Although that sounds intimidating, it’s great for you and your customers. After all, as a little business, you'll be ready to offer more flexible quantities, more personal service, and other perks which will draw shoppers faraway from bigger suppliers. As a result, GST makes it easier to grow your business without taking over an additional tax burden.

HOW HAS TCS AFFECTED ECOMMERCE DEALERS

Under the new tax regime, marketplace operators are mandatorily required to deduct a percentage amount because the GST liability of the vendor and deposit it with the govt . This mechanism is being termed as “Tax Collection at Source (TCS)” under the GST law. Eventually, the marketplace seller will need to file a monthly return under GST to say the credit of TCS collected by the marketplace operator. this may also impact the liquidity and income of those sellers.

While all the marketplace operator has already completed the first-level analysis of the impact of GST on their operations, marketplace sellers are still unaware of those rules. the necessity of the hour is to stay themselves conscious of the changes that are getting to come. Also, such sellers should now start planning their transition strategy for the GST regime.

With the inclusion of retail entrepreneurs within the ambit of GST and therefore the introduction of specific provisions for e-commerce companies, certain areas of GST will impact the e-commerce sector.

Every company in India, be it a multinational company or a small/medium enterprise, is gearing up for the implementation of GST. The e-commerce sector would imitate in its preparation by that specialize in provisions specific to the present sector within the GST law. The success of the e-commerce sector is essentially hooked in to the increasing number of retail entrepreneurs, who fall within the unorganized retail sector category. the govt has included such players within the ambit of GST with an intention of broadening the assets and has introduced specific provisions for the e-commerce companies.

It is mandatory for all e-commerce operators to gather tax at the speed of two per cent as TCS on internet value of sales made by suppliers through e-commerce operators. Such TCS has got to be deducted in each state and deposited accordingly. This brings in significant compliance challenges to sellers and should discourage sales through the marketplace model. However, this might not be applicable for inventory-based models, where the e-commerce operator makes the sale from its own inventory. The key purpose of this provision is to encourage compliances under GST and supply a mechanism for the govt to trace suppliers who sell through e-commerce operators.

Increase in compliances for e-commerce operators

The e-commerce operators should report all supplies made by the vendor and therefore the TCS collected thereof on a monthly basis. The sales reported by the e-commerce operator will need to match with the sales declared by the supplier himself at the top of each month, and any difference are going to be added to the turnover of the supplier and consequently be susceptible to discharge GST on such additional turnover. The e-commerce operator has got to report the product/service code and therefore the applicable rates for every item-level individually. this needs them to map every sale done by the dealer and ensure TCS is deducted at the proper value. The implementation of compliance is cumbersome for both e-commerce operator and therefore the supplier. Additionally, the e-commerce operators will need to register in each state and file the reports separately on a monthly basis. This process increases the challenges in compliance and costs of running the business.

Bottom Line

As we see, the GST law may have a negative impact on the e-commerce sector. as long as the e-commerce sector in India is one among the foremost rapidly advancing sectors and therefore the government is vigorously promoting digitised economy, the introduction of such cumbersome compliances cringes the expansion of this sector. The statutory framework introduced by the govt should be towards the advancement of business instead of creating obstacles. The GST law should provide an enabling environment that encourages e-commerce operators and suppliers within the run-up to at least one of the most important tax reforms within the country, the market is abuzz with new rules and guidelines about the products and Services Tax (GST)