New TCS, TDS system effective from today

BENGALURU: The Income Tax department  has notified guidelines on a 1 per cent Tax Deducted at the Source (TDS) for e-commerce companies and 0.1 per cent Tax Collected at the Source (TCS) for  sellers  to be implemented from October 1 onwards. However, this has raised concerns among industry stakeholders. 

Experts say that the government should consider releasing a fresh draft specifying the nature of service providers, e-commerce operator, service recipient and applicability to foreign firms.  They also say that the move may impact the cash flows of the e-commerce companies and discourage sellers.

Under fire, the IT department clarified several doubts on Wednesday stating that sellers need to collect 0.1 per cent tax from buyers on the amount received on or from October 1, 2020 only in cases where receipt of sale consideration exceeds Rs 50 lakh in a financial year. It added that in cases where TCS is higher than the tax liability of a seller, the extra amount will be refunded along with the interest.

 “A few areas in the current... regime require additional clarity (such as non-residents and its interplay with tax treaties) and an FAQ type document will be helpful. It could have been better if the withholding obligations were made effective from April 1, 2021,” said Ravi S Raghavan, Tax Counsel, Majmudar & Partners.