The Ministry of Finance has delayed the provisions related to TDS (Tax deducted at source) and TCS (Tax collected at source) for ecommerce players. The move is made in a bid to ensure the smooth rollout of GST. The government has deferred the implementation of tax deduced at source (TDS) and tax collection at source (TCS) provisions for two categories of deductors — government, including local authorities, and e-commerce companies and their suppliers.
E-commerce companies are not required to collect one per cent TCS while making payment to suppliers under the GST regime. According to the Central GST (CGST) Act, notified entities are required to collect TDS (Tax Deducted at Source) at one per cent on payments to suppliers to goods or services in excess of Rs 2.5 lakh. This provision has been kept in abeyance.
Based on the feedback received from trade and industry, the government has decided to postpone provision relating to TDS (Section 51) and TCS (Section 52) of the CGST/State GST Act 2017, with the objective of ensuring smooth rollout of GST.
Small businesses — those with turnover less than Rs 20 lakh — will also not be required to register themselves under the GST for selling goods or services through e-commerce portal.
In other words, persons supplying goods or services through electronic commerce operator liable to collect tax at source would not be required to obtain registration immediately.
As per a notification issued on Monday, the government said that the provisions of “TDS (Section 51 of the CGST/SGST Act 2017) and TCS (Section 52 of the CGST/SGST Act, 2017) will be brought into force from a date which will be communicated later.”
This comes as a relief to ecommerce players as they will not be obligated to collect tax on payments to vendors from July. The goods and services (GST) tax is scheduled to roll out on July 1, 2017.
The government said that the step was taken after taking feedback into consideration. The step will provide more time for entities liable to deduct tax at source/ecommerce companies and their suppliers to prepare for GST.
The notification further said, that the “Persons who will be liable to deduct or collect tax at source will be required to take registration, but the liability to deduct or collect tax will arise from the date the respective sections are brought in force.”
On the other hand, the “Persons who were liable to be registered under clause (ix) of Section 24 of the CGST / SGST Act, 2017 (as they were supplying goods or services through electronic commerce operator who is required to collect tax at source under Section 52) will not be liable to register till the provision of Tax Collection at Source is brought under force.”
The notification means that those supplying goods or services through ecommerce who were initially liable to collect tax at source, will now not be required to obtain GST registration immediately. This relaxation may not apply if they are liable under Section 22 or any other category specified under Section 24 of the CGST / SGST Act, 2017.
The ecommerce players have been gearing up for GST for a long time. Enterprise software pioneer Zoho launched its GST-compliant finance suite, Zoho Finance Plus, in Chennai in April 2017. Ecommerce majors, Flipkart, Amazon India, and Snapdeal collectively opposed tax collection at source (TCS). They even raised concerns about the GST. The government has finally given them some relief by delaying implementation of TDS and TCS provisions under GST.