The uniform TDS on e-commerce transactions is creating major challenges for the small sellers conducting business via e-commerce platforms. IAMAI stated that while it understands that it was an important move on part of the Government for better monitoring and realization of taxation, it has led to unforeseen consequences hurting SME sellers.
IAMAI had earlier shared with the authorities an illustration that suggests for merchants who have a turnover of up to INR 1.25 crore, the 1% TDS under the new provisions would exceed their total tax liability, resulting in an unnecessary refund position or in other words, create cash flow and working capital concerns for small businesses. Consequently, IAMAI has appealed to the Authorities in its recent Pre-Budget Memorandums to reduce the rate of TDS to 0.25% from 1%, which will help achieve the tax trail without creating the unintended cash-flow concerns.
Given the COVID related economic slowdown, e-commerce platforms have proven to be a crucial lifeline for small scale and MSME sellers, who do not have the marketing or logistics bandwidth for wider outreach and are now using ecommerce platforms to sell across the country. Unfortunately, the TDS, over and above the pre-existing TCS under GST now means that such sellers conducting business over e-commerce platforms have a considerable amount of their total revenues locked up under tax claims.
IAMAI reiterates that forcing small businesses into prolonged tax refund claims for release of critical revenues is perhaps unwarranted under the present circumstances, and expresses optimism that its appeal will be given due consideration in the Budget 2021 announcements.