The Internet and Mobile Associates of India(IAMAI) said that the tax deducted at souce (TDS) application for all product and service ecommerce firms needed to be revoked by the government. TDS, Which was introduced by through Section 194-0 of the Income Tax (I-T) act under the Finance Act 2020, mandated the deduction of 1% for all e-commerce platforms.
According to the association, withholding such taxation created cash flow irregularities for business and small-scale-sellers.
Its shared some calculation some highlighted that for the small sellers conducting business via ecommerce 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 Crredit) has proved to be a major challenge under GST and imposing TDS for direct taxes replicating the challenge on the direct tax risk replicating that challenge on the direct tax front, IAMAI noted. All such complications raise compliance burden for small sellers and make digital platforms unattractive to conduct business for them, it added.
The Association 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, 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 burdens on businesses on the form a new levy.
It 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 deposited taxes for the sellers undermines their intermediary role, it further stated.
The Association suggested to the centre that the wake of the present economic slowdown that is proving to be a major challenge for most businesses, any such form of additional levy could be avoided.
