Sellers on Flipkart, MakeMyTrip, Amazon to benefit from lower TCS

The announcement to cut TCS was made in the 53rd GST Council meeting last Saturday.
Sellers on Flipkart, MakeMyTrip, Amazon to benefit from lower TCS

NEW DELHI: Suppliers, who sell their goods and services through platforms like Amazon, Flipkart, MakeMy Trip and Yatra, will benefit from the cut in TCS (tax collected at source) rate from 1% to 0.5% in terms of having more working capital to operate their businesses. However, only those businesses which are not very profitable or are in their initial phase will get the advantage, say experts.

The announcement to cut TCS was made in the 53rd GST Council meeting last Saturday.

“Purpose behind levying TCS is to track flow of money to raise tax base. This is levied at early-stage transaction on sale of goods, services, or certain high-value transactions and can be claimed as a credit by taxpayers. Loss-making businesses and start-ups will get relief of having more cash in hand,” said Asish Philip, Partner at Lakshmikumaran & Sridharan.

Philip advocated for more cut in TCS to achieve objective of helping working capital challenges. He said it could be reduced to 0.1% or two tier approach will help in ease of doing business. Experts say notified services provided by restaurants, app-based cab platforms like Ola and Uber, exempt from TCS, won’t be impacted.

“Multiple items of mass consumption are chargeable to 5% GST like packaged tea and coffee (non-instant), edible oils (vegetable, mustard), packaged and branded rice/wheat flour/other cereals, sugar and jaggery, milk, cream, yoghurt, packed paneer, sanitary napkins, handloom products like sarees, bedsheets, other textile, and printed books/children’s colouring books will feel respite,” said Rajat Mohan, executive director-GST, MOORE Singhi.

He said implementation of the proposal doesn’t introduce new complexities in reporting and compliance for e-commerce operators and suppliers. As per Smita Singh, Partner, S&A Law Offices, this is a rate cut, so compliance is not going to change much. Karthik Mani, Partner, Indirect Tax, BDO India, said, “Suppliers should ensure they maintain record of sales and returns effected via each platform and perform monthly reconciliation with the amount received as credit in ECL balance to avoid discrepancies in records kept by supplier and sales reported by them in GSTN portal.”

Mahesh Jaising, Partner, Deloitte India, expects increased onboarding of sellers by the ecommerce platforms due to this development. “Lower TCS rates will provide suppliers with a cost-effective channel to reach a broader market,” he said. Ashok Kumar Batra, Chair, Indirect Tax Committee, at PHD Chamber of Commerce and Industry, said this decision would support digital economy and enhance ease of doing business.

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