Rival ecommerce firms together oppose model GST law

Arch rivals Amazon, Flipkart and Snapdeal on Thursday together sought changes in draft Goods and Services Tax laws related to tax collection at source (TCS) which, they said, if implemented could affect Rs 400 crore worth of business for them every year.

“Rs 400 crore worth of capital per annum will be locked up and will not be accessible to sellers that will straightaway eat into the working capital of sellers and deter them from working with ecommerce companies,” Flipkart co-founder and executive chairman Sachin Bansal said at a Ficci event ahead of February 18 GST Council meet, which is expected to clear model GST laws to enable its passage by Parliament.

Ecommerce companies are extensively covered under the revised model GST law. The new law seeks that ecommerce operators deduct TCS while making payments to their suppliers. The proposal seeks to increase their compliance burden as they have to deduct 2% TCS and deposit it to the government. The onus of collection of taxes is solely on ecommerce companies under the new law.

This, the ecommerce companies say, will discourage sellers, affect the cash flows. Bansal said, the new laws would be a dampener for the sellers, especially if they know that their working capital is going to be stuck in the online selling mode.