Sellers differ from e-commerce giants on GST. Here’s their version

The top players in the Indian e-commerce sector have united against some drafts in the Goods and Services Tax (GST) legislation such as collection of tax at source. Even while they cited the negative impact on sellers, many online merchants are speaking on the contrary.

According to the tax at source clause, it is mandatory for online marketplaces to deduct 2% per transaction and hand it over as collection towards GST to the government under the Act.

This, however, does not apply to retail sellers offline.

Seller associations like the All India Online Vendors Association (AIOVA), which represents 1,800 sellers, feel that TCS will only hit sellers evading taxes, and also said that the issue of capital blocking on online platforms is already a problem for them.

"The TCS clause will remove the problem of tax evasion among many sellers and the 'unnatural' competition emerging from it. Secondly, since the ecommerce companies are already holding seller money, TCS will not affect our liquidity," a spokesperson of AIOVA, told ET.

The e-Commerce Sellers Association of India, which was earlier known as eSellerSuraksha, says the clause will create a level-playing field among sellers.

"Merchants without proper registration will be forced to move out. This makes a level-playing ground for all online sellers in terms of product pricing. The merchants who evade tax may also quit," the seller body told ET.

On the other hand, sellers do have some concerns over TCS.

"Product returns in apparel ecommerce range between 15-20%. We will be required to claim the TCS from the department directly which is a cumbersome process," Dhiraj Agarwal, cofounder Campus Sutra, an online-first apparel brand, told ET.

E-commerce companies feel that TCS will deter merchants from selling online and will badly hit the digital ecommerce industry holding up working capital.

"Working capital will be hit. Also compliance is an added burden for ecommerce companies. Majority of the products carry a return date of 30 days and given 15-20 million transactions per month and the returns, refunds to sellers have to be done with utmost care," a spokesperson for public policy at Amazon India, told ET.

"With TCS, capital will be locked away for periods between 20-50 days depending on the transaction date. The significant impact on the cash flow will force smaller firms to seek additional working capital or ignore the ecommerce marketplace altogether, as it may not offer envisaged convenience and benefits," a spokeswoman for Snapdeal, told ET.