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GST on E-com sector unites all to ask for help from FICCI

Updated on: Jul 13th, 2021


5 min read

The latest news from the Indian e-com sector is that traditional rivals Amazon, Flipkart, and Snapdeal have united together to approach FICCI (Federation of Indian Chambers of Commerce and Industry) and present a joint front against the proposed GST.

Representatives from these companies had met with a panel of state finance ministers in August, 2016, when they asked for exemption from GST, stating that they were only ‘service providers’ giving a ‘platform’ to vendors. They also reported that their main source of revenue is advertisements (for which they already pay a service tax), and not taxes.

Panel chairman and West Bengal Finance Minister Amit Mitra had asked the representatives to put their demands in writing and submit a tax structure they would be happy with, noting that the issue of tax exemption for the e-commerce sector may turn into a “political hot potato” if the vendors were asked to pay taxes on their goods, but the intermediary was not.Amazon, Flipkart, and Snapdeal are expected to be supported by other companies such as Paytm, Zomato, and Grofers in their joint representation to FICCI.

Their presentation will touch upon the cons of ‘tax collection at source’, which can be a sore point between vendors and e-commerce sites. The representatives, along with FICCI members, will also meet officials from the Finance Ministry as well as the Niti Aayog in the hopes of finding common ground.

India Inc. and the GST model law

Do read our coverage of the impact of GST on e-com sector in detail here. Under the model GST law, there are certain provisions that have not gone down well with the e-com leaders in India. These are:

  • No threshold for GST registrationWhile all other businesses have a threshold limit, e-com sellers are required to register under GST sans any such provisions.

    Click here to read more about threshold limits under GST. 

  • No Benefit under Composition Scheme: The government has introduced a composition scheme under GST law which aims to reduce the burden of compliance for small and medium businesses. Under this scheme, businesses will have to file returns on a quarterly basis and pay taxes at nominal rates up to 2%. Again, e-com sellers do not have this provision either.

 To know more about Composition Scheme, Click here.

  • Registration in each individual state: E-com sellers will now have to get registered in every state to which they are supplying goods. This does not apply to other small and medium businesses.
  • Tax Collection at Source: It will now be mandatory formarketplace operators to deduct a percentage amount as the GST liability of seller and deposit it with government. This mechanism is being termed as “Tax Collection at Source (TCS)” under  the GST law. Eventually the marketplace seller will have to file monthly returns to claim the credit of TCS collected by the marketplace operator. This will also impact the liquidity and cash flow of these sellers.

Get GST-ready with ClearTax

Some experts say that a unified GST might actually help the IT industry, as it will stop states from imposing arbitrary taxes on e-com sector. Case in point, the states of Uttarakhand, Bihar, and Assam, which imposed a 10% entry tax on online purchases back in May, 2016. While the jury debates, you can take the actions necessary for your business to be GST-compliant before time runs out. Some of the key points that should be kept in mind are:

  1. Get your enrollment done on time. To read more about the enrollment process and its relevance, Click here.
  2. Plan your logistics and warehousing requirement carefully. To read our detailed guide on impact analysis on logistics and warehousing, Click here.
  3. Adopt such platforms, technologies which will enable your business to be GST-compliant. Click here to get all updates and access a pool of GST Calculators.

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Quick Summary

Amazon, Flipkart, and Snapdeal have joined forces to request FICCI for GST exemption, citing they are only service providers. They criticize GST provisions, like no threshold for registration and no benefit under Composition Scheme. The e-com industry fears the new Tax Collection at Source mechanism. They plan to present a unified front with other companies, like Paytm and Zomato, to negotiate with government officials.

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