GST: E-commerce players, sellers say rates would hurt small businesses

E-commerce players and sellers on marketplace platforms say the goods and services tax (GST) rates will hurt their business.

The Confederation of All India Traders (CAIT) said there were several disparities and ambiguities in the classification of items under the GST tax slabs.

The trader body said they were not consulted before finalising the tax incidence on their sector. It now wants the government to form a high-level committee of senior officials and representatives of traders to iron out such disparities for smooth transition to the GST regime.

“Though trade and industry stands in support of GST. Regrettably, so far, no concrete steps have been taken to take stakeholders into confidence,” Praveen Khandelwal, secretary general of CAIT, said.

In the absence of any straightforward classification, e-commerce companies were unable to convince the government to treat them not as a ‘shop’ but as a ‘platform’ used by vendors to sell products. Now with e-commerce companies becoming responsible for collecting tax at source from thousands of online vendors, the amount of paperwork and compliance burden would make the jobs of online marketplaces tougher.

Under the goods and services tax (GST), this would imply that e-commerce firms deduct one per cent tax collected at source while making payments to their suppliers. This, e-commerce stalwarts such as Amazon, Flipkart, Shopclues have argued, would lock Rs 400 crore of capital belonging to their sellers every year.

“We do not agree with making marketplaces collect one per cent TCS. It is a clear delegation of the government's responsibility to corporates. It adds additional burden to already stretched resources of marketplaces, who support upwards of 500,000 MSME and SME businesses," said Sanjay Sethi, cofounder and CEO of Shopclues.