The draft model law on goods and service tax (GST) has proposed bringing all online buying within the purview of the proposed levy. The move will end uncertainty over tax on purchases from e-commerce sites.
Introduction of GST will provide clarity on where the tax is levied, as the entire burden moves from the point of production to the point of consumption. In recent months, states such as Karnataka and Uttar Pradesh have imposed levies due to pressure from brick-and-mortar retailers but the legislation seeks to bring parity. For instance, UP recently imposed an entry tax on purchases from e-commerce sites.
In a note, consulting firm PricewaterhouseCoopers said the draft bill, released for public comment after a meeting of state finance ministers with Arun Jaitley in Kolkata on Tuesday, has proposed tax collection at source for e-commerce, which will mean that any payment made to a supplier would be subjected to the provision at a notified rate. The draft will form the basis for the final law incorporating some of the changes suggested by experts. It will help provide clarity and the rationale for introducing some of the provisions in the landmark indirect tax reform measure.
Experts said the inclusion of e-commerce under the ambit of the tax will pose a huge burden on these companies. “This will mean significant compliance burden on e-commerce companies as many of them deal with thousands of vendors. Further, this may lead to refund situation for many suppliers who operate on thin margin. In addition, e-commerce companies will need to file a statement providing details of all supplies made through this platform,” said Pratik Jain, indirect tax leader at the consulting firm.
In any case the government is proposing to cast the net wider by including several more players within GST. Instead of a threshold of Rs 1.5 crore for central excise, the draft bill has proposed a Rs 10 lakh as threshold and any unit, service provider or retailer above the floor will be required to register and will be subject to tax.
The proposed legislation also seeks to end uncertainty on software as intangibles will be considered as a “service”. Similarly, work contracts will also fall within the service segment and will ease life for the infrastructure sector.
GST, which has been in the works for a decade, is seen as one of the most important tax reform initiatives post-independence, but is stuck in Parliament due to opposition from Congress. On Tuesday, finance minister Arun Jaitley met state finance ministers to thrash out a consensus on some of the contentious issues and the government hopes to introduce the Constitution amendment bill to implement the tax in the monsoon session of Parliament.
Tyler Pitlick Jersey