While this would not impact consumers in terms of final pricing of products on e-commerce platforms immediately, the new 1% TDS would make sellers work around their working capital arrangements—to buy or source goods to sell online. “The tax at 1% is required to be deducted on the gross amount of such sales or service or both,” says the finance bill. It is not clear if these norms are expected to impact restaurants on online food delivery platforms like Zomato and Swiggy and service professionals on platforms like Urban Company (till recently UrbanClap).
This will not be applicable to those with an annual gross sale of less than Rs 5 lakh, provide their furnish their PAN or Aadhaar to the e-commerce operator. For those over gross sales of over Rs 5 lakh, this TDS would be deducted at 5% if they do not furnish their PAN or Aadhaar number.
“Working capital will be affected due to this. We had supported 1% tax collection under GST despite marketplace opposition and we had recommended application of 1% TDS under the Income Tax Act as inserted today as section 194-O. However, we had also sought relaxation from the technical application of section 194H due to which we have to deduct TDS on marketplace services and claim back from marketplaces. The new provision would be welcome only with the relaxation of existing provisions,” said a spokesperson of All India Online Vendors Association, which represents a group of small online sellers.
While an Amazon India spokesperson said that they are studying the matter, Flipkart declined to comment at the time of going to press.This method will definitely hurt the sentiments of online retail as most of the sellers operate of 2-3% Net profit, Subsequently it will add to more compliance of TDS refunds.