Ecommerce The 25% cut in tax deducted at source on ecommerce participants will make ecommerce more attractive for sellers and the cut in TDS on their commissions will provide them with more working capital immediately, tax experts said.
Last Updated: May 15, 2020, 08.03 AM IST
NEW DELHI | BENGALURU: The 25% cut in tax deducted at source on ecommerce participants will make ecommerce more attractive for sellers and the cut in TDS on their commissions will provide them with more working capital immediately, tax experts said.
Online sellers and ecommerce marketplaces, however, said the relaxations announced by finance minister Nirmala Sitharaman on Wednesday would not lead to any substantial immediate benefit for them.
They welcomed the TDS rate reduction on commissions from 5% to 3.75%, but said TDS on sales – introduced in this year’s budget to bring more online sellers and service providers under tax net – will lock up liquidity and add to their compliance costs, and should be removed altogether.
The government will start charging TDS on ecommerce participants from October 1.
“Reduction in TDS rates (on commissions) will help the cash flow situation for merchants, although they will need to pay taxes at regular rates while depositing advance tax,” said Gouri Puri, partner at law firm Shardul Amarchand Mangaldas & Co.
Ecommerce operators will still need to meet the compliance burden of withholding tax although at lower rate, she said.
Rohinton Sidhwa, partner at Deloitte India, said TDS reduction from 1% to 0.75% would make ecommerce platforms more attractive for sellers as they will pay a lower rate, that too for only half of the ongoing financial year, to the tax authorities.
“The reduction in withholding taxes across the board is probably a recognition that income of most taxpayers stands reduced due to the shutdown due to Covid-19,” he said.
Ecommerce players, virtually without any business for almost two months, said TDS on ecommerce should have been withdrawn altogether.
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