Revoke TDS deduction for e-Commerce firms: IAMAI
- The Internet and Mobile Association of India (IAMAI) has suggested to the government that the Tax Deducted at Source (TDS) applicable for all product and service e-Commerce firms be revoked immediately.
- TDS was introduced through Section 194-O of the Income Tax (IT) Act under the Finance Act 2020 and mandated a deduction of 1% for all e-commerce platforms.
- According to the association, any form of withholding taxation only creates cash flow irregularities for businesses and that in turn locks in precious working capital for the small-scale sellers.
- The association said that it shared some calculations with the officials highlighting that for small sellers who are conducting business via e-commerce platforms, TDS will invariably result in excess tax deduction leading to a long cycle of refunds by the end of the fiscal.
- Reconciliation of ITC (Input Tax Credit) has proved to be a major challenge under GST and imposing TDS for direct taxes risk replicating that challenge on the direct tax front. All such complications raise compliance burden for small sellers and make digital platforms unattractive to conduct business for them.
- IAMAI stated that the objective of properly identifying online transactions and tax assessments is done successfully via the TCS (Tax Collected at Source) mechanism and a transparent mechanism of data sharing between CBIC and CBDT can help reconcile revenue collection between the two departments without having to impose additional burdens on businesses in the form a new levy.
- IAMAI also pointed out that online marketplaces are recognized as digital intermediaries by law and platforms that only facilitate sellers and buyers to interact are not actually engaged in the act of buying or selling goods. Given the platforms are neither the payee, nor the recipient of the payments, asking platforms to collect and deposit taxes for the sellers undermines their intermediary role.
- The association has appealed the government that in wake of the present economic slowdown that is proving to be a major challenge for most businesses, any such form of additional levy that creates compliance and working capital challenges may be well avoided.
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