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Government defers TDS, TCS for ecommerce firms

27 June, 2017

In a relief to the ecommerce industry, the government has deferred implementation of tax deducted at source (TDS) and tax collected at source (TCS) provisions, giving more time to online platforms to prepare for collection of taxes from vendors.

“The provisions of tax deducted at source (Section 51 of the CGST/SGST Act 2017) and tax collected at source (Section 52 of the CGST/SGST Act, 2017) will be brought into force from a date which will be communicated later,” the ministry of finance said in a statement.

The notification rules that the provision of 1% TDS and TCS will be postponed for two categories of deductors – government, including local authorities, and ecommerce companies and their suppliers.
With the implementation of goods and service tax (GST) around the corner, this comes as a much-needed breather for ecommerce companies as they are exempted, for the time being, from having to deduct a part of the payments to their vendors and remit the same to the government. Ecommerce companies have been trying to convince the government to treat them as ‘platforms’ which are used by suppliers to sell products, and not ‘shops’.

“This step has been taken to provide more time for persons liable to deduct tax at source/e-commerce companies and their suppliers to prepare for the historic tax reform,” the statement said.

Vendors previously welcomed the decision to collect 1% tax at source. However, the new ruling gives them time—till the government finalises and enforces the provision of tax collected at source—for getting GST registrations.

“The persons who were liable to be registered under clause IX of Section 24 of the CGST/SGST Act, 2017 (as they were supplying goods or services through an electronic commerce operator who is required to collect tax at source under Section 52) will not be liable to register till the provision of tax collected at source is brought under force. In other words, persons supplying goods or services through an electronic commerce operator liable to collect tax at source would not be required to obtain registration immediately, unless they are so liable under Section 22 or any other category specified under Section 24 of the CGST/SGST Act, 2017,” the ministry of finance said.

The ministry of finance said the decision to defer the enforcement of this provision was taken with the objective of ensuring a smooth rollout of GST after taking into account the feedback received from the trade and industry bodies.

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Government defers TDS, TCS for ecommerce firms

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