GST: TCS clause will hit jobs, growth, say e-commerce firms

Sanjeev Sharma

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Tribune News Service

New Delhi, February 9

Industry body, Ficci and e-commerce majors — Flipkart, Snapdeal and Amazon — have protested against the discriminatory nature of the “Tax Collection at Source” within the ambit of Model GST Law, which they said presents an existential challenge for the e-commerce marketplaces.

The Tax Collection at Source (TCS —Section 56) clause under the GST draft model law, mandates e-commerce marketplaces, to deduct 2% of the transaction value and submit it to the government. According to Ficci, as an estimate, this clause would lead to locking up about Rs 400 crore of capital per annum for the e-commerce sector. In addition, it would result in a loss of an estimated 1.8 lakh jobs, putting a halt to the growth and investments in the sector.

Ficci said there is a need to find out alternatives which could be employed to ensure that regular information on tax is made available to the government, without jeopardising the business model and future growth prospects of the nascent e-commerce sector.

Didar Singh, secretary general, Ficci, said subjecting the sector to a major compliance at such an early stage will not only result in slowing it down but also deter the benefits that e- commerce fosters in terms of employment creation and giving a boost to both the manufacturing and services space by providing an apt platform. “Moreover, this clause is discriminatory towards online sellers as it does not exist in the offline retail segment,” he said.

Kunal Bahl, co-founder and CEO, Snapdeal, said the proposal of tax collection at source, directed only at e-commerce marketplaces, in the Draft Model GST Law, will hurt lakhs of small sellers by making online sales expensive and cumbersome for them.

He said the proposal, while adding needless complexity for the sellers, provides no benefit to the tax authorities and will lead to duplication of information followed by the need for its reconciliation.

Sachin Bansal, co-founder and executive chairman, Flipkart, said the TCS clause would lead to blockage of around Rs 400 crore of working capital into the system, and will discourage sellers to come online.

Bansal said the government needs to set a level-playing field as the clause was not pertinent to the offline retail segment.

“The Central and the state governments need to find out alternative ways to address the situation and the e-commerce platforms may give a self-declaration about the taxes being reimbursed by the sellers. Some of the states namely Kerala, Rajasthan and Delhi are already doing the same. I’m sure the clause will be removed in the greater benefit of the Indian digital space as a whole,” Bansal said.

Amit Agarwal, Country Head, Amazon India, said: “However, we remain concerned about the TCS provision, which we believe, will negatively impact the growth of marketplaces at a stage when the industry is still in its infancy”.