The Centre and states are likely to impose a 0.5 per cent tax collected at source each on sellers of products on e-commerce websites such as Flipkart and Amazon under the goods and services tax (GST) regime.
This proposal would be taken up at the two-day meeting of the GST Council, starting Thursday in Srinagar. The tax will be collected by the e-commerce marketplaces: they will deduct one per cent while paying the sellers.
E-commerce players had earlier opposed a provision in the GST law to impose a two per cent tax —one per cent by the Centre and states each — deducted at source. The new indirect tax regime is expected to be rolled out on July 1.
“The tax collected at source will only help trace who is doing the transaction through an e-commerce portal. It is a measure to make such portals accountable,” said a senior government official, adding the tax could also be zero but states were not in favour of that.
The model GST law, approved by the Council, provides for up to one per cent tax collected at source. The final levy needs to be approved by the Council.
The Integrated GST law has a provision for up to two per cent tax collected at source for inter-state transfers. The industry has opposed this, claiming it would result in locking capital and dissuading companies from selling through online portals.
E-commerce companies also need to file returns on the tax collected at source. If consumers return goods, the tax will not be collected.
The model GST law has defined e-commerce as supply of goods or services, including digital products, over electronic networks.
People who own, operate or manage digital or electronic facility or platform for electronic commerce are defined as “electronic commerce operators”.
For the government, the tax collected at source will help check tax evasion by enabling collection and information at source.
However according to the industry, it will suppress cash flow, as they already operate under thin margins. Flipkart in March said around Rs 400 crore of working capital would get locked-up annually.
