Amazon and Flipkart get breather as govt delays implementation of a key GST provision

The Indian government has granted the requests of the e-commerce players like Amazon and Flipkart to extend the implementation of the new Goods and Service Tax. In a bid to give e-commerce giants more time to settle their affairs, the government has temporarily delayed the enactment of TCS (tax collected at source), a provision that required e-commerce players to deduct tax on payments made to their vendors from July 1, under the GST.

Though this rule will benefit e-commerce players, it would require small retailers to register themselves with the government and many sellers are yet to do that. Hence, online vendors feared losing business in the initial days of GST.

An Amazon spokesperson told ET, "This ensures business continuity for the marketplace but most importantly benefits our sellers since they don’t have to deal with pressures of cash flow at a time when they are transitioning into a new tax regime."

Moreover, small businesses with revenues under Rs 20 lakh have got an extension to their GST registration deadline. This allows them the time to consult tax firms, accumulate funds, and install required tax calculation processes.

The finance ministry said, "Based on the feedback received from trade and industry, the government has decided to postpone the provision relating to TDS (Section 51) and TCS (Section 52) of the CGST/State GST Act 2017, with the objective of ensuring a smooth rollout of GST."

Though the rule has been delayed, it will be implemented on a later day. In February, top online retailers had joined forces to express their concerns over TCS, claiming that it would result in a capital lock-down of about Rs 400 crore per annum and discourage merchants from selling online.