Etailers break into sweat over GST Law; Will reach out to Govt

The much-awaited GST Bill was baking in the oven for a really long time. It was on every etailer’s Union Budget 2016 wish list. Now that the proposed draft is out, reactions have started pouring in.

Tax-at-source will hurt sellers, etailers allege

Ecommerce leader Flipkart has gone on record to say that while they welcome the new law, they are concerned that the point related to deduction of tax-at-source in the draft will hurt small and medium sellers.

According to the Indian marketplace, on one hand, it will bring uniformity when it comes to ecommerce taxation framework, on the other hand, sellers that are surviving on small margins and low-priced products will be burdened.

Flipkart said in its statement,

“A specific proposal in the draft law relating to tax collection at source will prove to be detrimental to lakhs of small and medium sellers who do business on ecommerce platforms. This clause, which is not applicable to offline sellers, will hurt the working capital requirement for these sellers as they work on small margins to provide affordable rates to consumers.”

But sellers say, their tax liability is unchanged

Indian Online Seller published a news report yesterday where sellers’ body AIOVA asserted that the proposed GST draft would have little effect on their tax liability. AIOVA said,

“The proposed draft does not levy any new tax… Earlier we used to deposit the amount ourselves, now a part of that will be deducted by ecommerce companies. This will not impact selling in anyway.”

Another issue – BOGO sales, freebies may attract GST tax

FDI ecommerce law has (almost) put an end to heavy discounts. Legal experts feelthat the proposed GST law might bring down online sales even further as BOGO (buy-one-get-one) sales and free samples may attract tax as well.

Prateek Jain, tax consultant at PwC says,

“Any form of direct or indirect GST on free supplies could have a significant impact on the sales & marketing spend of companies, specifically those dealing in consumer products.”

Etailers will discuss the issues with government

With hope to get some solution, ecommerce companies are planning to approach the government. According to a news report, etailers will communicate their concerns through Internet and Mobile Association of India (IAMAI). IAMAI has asked Flipkart, Snapdeal and Paytm among others to give them a list of issues to be presented to the government.

Is increased accountability the real issue?

The compliance burden will fall directly on e-tailers, if the proposed GST draft is implemented. And that seems to be the real pain point for most ecommerce companies.

Sudipta Bhattacharjee – Principal, Advaita Legal believes,

“Strict information disclosure requirements have been cast upon electronic platform operators. While in a way this leads to a certainty of taxes and saves such operators from the vagaries of state entry tax laws they currently face, it will be a massive compliance burden for such operators to track, collect and deposit GST liabilities of suppliers using the platform of such operators.”