Capping the TCS for the e-commerce portals
There are various kinds of taxes. The two main types of taxations, prevalent in India can be categorized as the Direct and the Indirect Taxes. GST or the Goods and Services Tax fall under Indirect Taxation.
The Goods and services Tax or the GST will be an all-inclusive tax system. It will be charged with all manufacturers, customers and the selling of any commodity. The GST will be operational under the guidelines laid down by the GST Council. The department will be headed by Arun Jaitley the current Finance Minister of the Union Government.
Earlier trends of GST on e-commerce
As the system of implementing the GST guidelines on the e-commerce sites was a new venture, the government had to face some major issues while laying down the rules. But now, they are trying to streamline the whole process for making it easier for both manufacturers and customers.
Capping the GST
A major part of the GST is the TCS or the Tax Collected at Source. It has been done particularly for the e-commerce portals. According to the recent steps taken by the government, the TCS will not be more than 1%. This has been done by capping the decision, and thus, there are no chances of it increasing in the future.
Beneficial decision for the e-commerce portals
All the reputed e-commerce portals had problems with the tax percentage they had to pay. The reputed e-commerce portals like Flipkart, Amazon, HomeShop18 and much more were losing out on the profit percentage due to the high rates of the TCS. Due to the new decision that has been taken by the government, the TCS rate has been fixed at only 1%, irrespective of the transaction. It will, in turn, assist the portals in maximizing on their rate of profit. Due to the latest reform, the amount of money that the portal owners have to pay in the form of taxes will be reduced.
Implementation of the decision
The high-placed official of the department has taken the decision that the reform will be placed in front of the Union Parliament and will be implemented accordingly during the second session of the Budget. This will be done on the 8th of March. Once the reform is placed in motion, it is expected to become operational from the 1st of June, 2017.
Bitter-Sweet Relation between the E-commerce Portals and the Government
The main issue of a rift between the owners of the e-commerce portals and the tax department has been due to the rate of taxes levied. The tax related issues came to light when the governments of the states like Karnataka, Uttar Pradesh, Gujarat, Madhya Pradesh and Bihar imposed special taxes on the e-commerce sites.
Due to this, all heads of the portals ganged up against the decision and urged the Goods and Service Tax Council to look into the matter. IAMAI was of the opinion that if nothing was done to reverse the situation, then the portal marketing industry will collapse.
A firm stand was taken by the forerunners in the e-commerce industry. They were of the opinion that the decision needs to be taken back or proper amendments must be made immediately. Thus, the implementation of the GST was urged to be called off by the online shopping portals.
Main objection of the portal owners
The portal owners all united their voice against the implementation of the TCS act. According to the rules of the act, the tax amount was to be collected directly from the online portals and not from the sellers registered on the sites. The parties, taking part in the transaction, i.e., the buyer and the seller were exempted from the burden of paying the tax.
Direct effect on the TCS
If the TCS gets implemented, then the sale from the online shopping sites might get lowered. If the tax gets implemented, the online shopping portal owners will have to increase the price of the products for maintaining a healthy profit rate. This might result in the fizzling out of the interest of the customers.
What do the online shopping portal owners want?
According to the reports, all the portal owners are urging for the complete eradication of the TCS. But the government does not seem interested in taking out the act as of now. Thus, the owners of e-commerce sites will have to make peace with the concession they have got in the form of 1% TCS.