India’s e-commerce sector is struggling to comply with the directive to deduct tax at source on all payments made to their sellers and deposit it with the government. This is because a number of them have not been able to register for collections of tax at source (TCS) as some states are insisting that e-commerce companies have a brick and mortar office within their jurisdiction. This goes against a clarification issued in the form of FAQs by the Centre that the said registration could be done with a head office address and e-commerce players will not require a brick and mortar space in every state. The norms mandate e-commerce companies to collect tax at the rate of 0.5% each for state and central GST on payments to sellers who sell on their platforms.
The GST Council had deferred implementation of TCS/TDS for a year from July 1, 2017 till June 30, 2018. It was again put off till September 30 after the industry expressed concerns over the increased compliance burden. TCS was finally implemented from October 1. It is an anti-tax avoidance measure that seeks to create a transaction trail.
Finding itself in a fix, the industry has pitched for an extension of the deadline. If unable to deposit the tax collected last month by November 10, companies will be liable to penal provisions. Industry experts say the portal where the registration is to be done does not accept any district except those in that state although it should be enabled for all districts pan India. States where companies are facing issues include Kerala, Andhra Pradesh, Punjab, Gujarat, Chhattisgarh, Uttarakhand, Bihar, Rajasthan and Assam. Tax experts say there seems to be a disconnect between on-the-ground implementation by the states tax administration and the FAQs issued by the Centre on this issue.