Small e-comm vendors will have to pay GST upfront

Small-scale vendors registered on ecommerce sites such as Airbnb, Flipkart and Amazon will have to pay tax upfront under the goods and services tax (GST) regime when they receive payments, if they fall in the exempted category.

The reason being all vendors registered on such sites will be liable to 1 per cent tax collected at source. GST is on its way to being rolled out on July 1 with most goods and services having been slotted into their respective slabs by GST Council last week. The objective to impose 1 per cent on these sites is to capture all transactions in the ecommerce space and not allow anything to slip through the cracks.

All ecommerce players are bound by law to deduct tax from registered vendors whenever there is a sale, irrespective of whether the seller is liable to pay tax or not. They will withhold 1 per cent whenever the payment is made to the seller. The GST Council has decided to exempt hotels with room tariffs up to Rs 1,000 per day as also a number of household goods.

Those below a turnover threshold of Rs 20 lakh are also exempted under GST. They will have to claim refunds subsequently from the tax department.

Arepresentative of the All India Online Vendors' Association (AIOVA) pointed out saying that as very few sellers fall within the Rs 20 lakh bracket this is not a big worry and the areas which need clarification are what happens in case of a return. The Tax experts further commented saying that these changes would put small vendors at a disadvantage as their working capital will get blocked.

BipinSapra, partner, EYsays that in transactions through an ecommerce operator, the compliance shall increase in the GST regime, more so for small service providers. Sapraalso commented that the vendors will have to get registered to claim refunds of the tax collected at source by the ecommerce operator.