Amazon, Flipkart and ShopClues are partnering with taxation experts ahead of the GST roll-out on July 1 to make sellers GST-compliant.
E-commerce vendors will have to pay the one percent TCS (tax collected at source) upfront but smaller vendors could be impacted negatively, as it may hold up their working capital against input tax credit.
Certain provisions under the GST regime could make it difficult for small merchants to continue selling online. The one per cent TCS puts pressure on players in the small and medium segment from a cash flow standpoint.
Compliance for large sellers such as WS Retail for Flipkart and Cloudtail for Amazon India would only require them to migrate from the VAT (value added tax) system to GST but smaller sellers have raised concerns over the complex process for registering for GST identification numbers or filing returns. Such small sellers are largely servicing low ticket size categories such as handicrafts, fashion, household supplies, etc.
Out of the 15 to 20 billion dollar gross merchandise value clocked by the e-commerce industry annually, small-scale vendors constitute about 20 to 30 per cent of the total transaction volume.
Lack of GST-preparedness among small sellers is expected to hit this portion of the e-commerce companies in the near term.