To collect taxes, e-commerce firms now have to register in every state in India

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  • E-commerce might be one of the most hotly-contested and burgeoning sectors in India right now, but it’s also being subjected to increased regulatory scrutiny and higher compliance costs.
  • Starting 1 October, e-commerce companies, foreign and domestic, will now have to register in every state in India in order to receive TCS.
  • The Central Board of Indirect Taxes and Customs (CBIC) has allowed foreign firms to appoint an agent to collect TCS on their behalf in states where don’t have a ground presence.

E-commerce might be one of the most hotly-contested and burgeoning sectors in India right now, but it’s also being subjected to increased regulatory scrutiny and oversight from tax officials. This will raise compliance costs for firms in the industry, which is expected to grow eight times to $200 billion by 2028.

Starting 1 October, e-commerce companies, foreign and domestic, will now have to register in every state in India in order to receive TCS (taxes collected at source), or the tax collected at the time of the sale, according to directions from the Central Board of Indirect Taxes and Customs (CBIC).

They will then have to deduct 1% of the TCS before settling payments with suppliers. This will help create a paper trail and prevent tax evasion. E-commerce firms will also have a period of 10 days after the end of a month in which to pay the government their full TCS obligations for the previous month.

The ruling applies to all e-commerce firms, regardless of whether they have already certified to collect GST as a supplier in the state. However, there is a threshold exemption for companies with an annual turnover of less than ₹2 million.

The ruling could affect foreign e-commerce firms disproportionately. They had been hoping to avail of a single registration process as opposed to multiple state registrations owing to a lack of geographical reach. However, the CBIC did allow them to appoint an agent to collect TCS in each state if they didn’t have a ground presence there. They can also registered their headquarters as their office location in these states.

While the TCS can only be collected once the agent has completed the sale, it will be calculated for the month when the order takes place. From here on in, e-commerce firms will have to provide tax officials with an electronic statement at the end of the month featuring information on all sales, returns and TCS collections. They will also have to file an annual statement on 31 December.
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