By Harsh Doshi
The Goods and Services Tax (GST) is all set to rollout in India from July 1, 2017. This is a major shift in the way the indirect taxes are collected in the country. With a uniform tax structure and all goods and services divided under four tax rates, the country will become a unified market.
July 1 onwards, Amazon India will be rolling out an A-Z GST guide portal for its sellers. Amazon claims the portal has positively affected 5000 sellers through the pilot programme of this guide.
GST: Boon for the sellers, headache for the marketplaces?
GST, in its functioning, is different from the VAT/Service Tax, especially when an inter-state transaction takes place. As far as VAT is concerned, when an inter-state transaction would take place, a seller had two options. He could claim a 2% tax concession under the C-Form provision (if the form was provided). Otherwise, the seller would have to pay the full tax. As far as sellers on online marketplaces go, the price on the website would be inclusive of tax. Thus, the tax would be deducted from the list price and the proceeds would then be transferred to the seller by Amazon.
Under GST, the provisions for online marketplaces have changed. This benefits the sellers in two ways. One, there is no hassle of a C-Form deduction. This implies less paperwork and formalities. Two, The seller will have to bear a tax of only 2%, thus shifting the rest of the tax burden to the marketplace. This is a major reason behind their anguish against tax deducted at source.
How will Tax Collection at Source change the status quo?
Under the GST regime, an online marketplace like Amazon will have to collect a 2% tax at source (TCS) and remit it to the Government before transferring the proceeds to the seller. In a system like this, the service provider collects the required amount of tax at the given rate from the beneficiary or the service receiver. Before passing the proceeds up the chain, this tax collected needs to be paid to the Government. This system has put a strain on the finances of the marketplaces. They will now have to keep a chunk of their working capital separate in order to remit this 2% TCS before the 10th of every month for the preceding month’s transactions. Amazon has stated that it will have to keep an amount of Rs. 400 crore annually for the same. The online marketplaces are hesitating majorly because they are already burning cash at a high rate in the current system. This additional burden will call for the better management of already strained finances.
Combating the complexities
The system of Integrated GST (IGST), along with Central GST (CGST) and State GST (SGST), for the purpose of interstate transactions, is proving to be difficult for the sellers. IGST plays a significant role in interstate transactions. The Amazon portal solves this problem by explaining the process using graphics and easy numbers. This is a good step to make sure that the convenience of the seller is given priority and awareness about the new tax system is spread among the stakeholders.
Though marketplaces other than Amazon, like Flipkart and Snapdeal, have maintained a negative opinion towards TCS, they have no other choice but to adjust with it. Taking it in the right spirit, the rolling out of a portal to guide sellers to adjust to GST is a welcome step from Amazon. Right from making changes on the face of the invoice to making tax payments to the relevant governments, the Amazon GST portal covers it all, literally making it an A-Z portal.
Featured Image Credits: Livemint