Mumbai: To clamp down on fast-growing e-commerce companies and curb tax evasion in online businesses, the Government is going to levy TDS (tax deduction at source) of 1% on all online deals from October 1. Although it was announced by Finance Minister Nirmala Sitharaman in the General Budget on February 1, 2020, but because of the COVID crisis, the budget was passed without debate in Parliament. Therefore, the government had decided to implement some direct and indirect tax amendments from October 1 instead of April. The decision of 1% TDS on e-commerce sales is also important among them. This tax will be levied on the products and services sold by e-commerce companies. This 1% tax will be levied on purchase and not only on sale.
Not getting revenue on online sales of billions of rupees
Experts believe that by imposing 1% TDS on e-commerce sales, the government is trying to hit two targets with one stone. One, the government wants to curb income tax evasion in e-commerce sales and secondly, it also wants to clamp down on dumping of goods from China and online sales without paying taxes. Over the years, mobile phone accessories, small electric and electronics products have been imported in huge quantities from China and these products are being sold openly on Indian markets as well as on e-commerce portals. But the government could not get any tax on the income of billions of rupees online sales of these Chinese products. Therefore, the government has imposed 1% TDS on them.
10,000 crore tax evasion feared
At present, there was no tax on the sale of goods by all e-commerce companies. Due to which there was a huge amount of tax evasion and the figure for tax evasion can be more than 10,000 crores. Many importers who ship goods from China are opening firms and bank accounts under different names and selling them through e-commerce companies, but they are not paying income tax on these earnings. But now from October 1, they will have to provide PAN and Aadhaar numbers for TDS deduction. With which their earnings will come on the radar of the Income Tax Department.
Prohibition on tax evasion
The Industry experts said that this is the right step of the government and this will prevent tax evasion through e-commerce channels and the government’s revenue will increase. Now all types of e-commerce transactions will attract 1% TDS. In which TDS will be deducted on goods sold to e-commerce companies. Also, the services of operators offering services like hotels, airlines, tour-travel will also be applicable. Not only this, people who sell their old goods through OLX, car portal, etc., will also have to provide PAN and Aadhaar card number. They too have to deduct TDS. Those who do honest business have no problem with this, they can deduct TDS and take its setoff. But the problem of tax evaders will increase.
Cat’s support, Ficci’s opposition
When the 1% TDS was imposed on e-commerce, both the top trade and industry federations ‘Cat’ and ‘Ficci’ clashed. While it was supported by the trade federation ‘CAT’, citing it as being in the interest of 70 million merchants of the country, industry organization ‘FICCI’ opposed it and said that it will affect the development of e-commerce sector. So it should be withdrawn. Major companies in the e-commerce sector, Amazon and Flipkart, also demanded that the government withdraw this. Cat says that most of the big online companies are trading billions of rupees in India, but they are also showing huge losses. Because of which the government is not receiving any income tax revenue from online companies. On the other hand, the business of crores of small traders of the country is decreasing due to increasing online business.
