The Finance Ministry may extend the date for depositing Tax Collected at Source (TCS) for e-commerce companies. October is the first month for collection of TCS, and deposits have to be made by November 10.

“Since it is the first month of implementation, there could be some teething problem. The best option could be extending the date for compliance,” a Finance Ministry official told BusinessLine . Some e-commerce companies are facing problem in registration and may not be able to pay TCS by the due-date. In the absence of any TCS credit, the supplier will end up paying the entire tax liabilities on supplies made through e-commerce companies.

Faced with this challenge the companies approached the Finance Ministry last week for help.

With effect from October 1, e-commerce operators have been instructed to deduct 1 per cent TCS before making payments to suppliers. According to the directions issued by the Central Board of Indirect Taxes and Customs (CBIC) , all e-commerce operators need to register themselves in every State where their suppliers are located for collection of TCS and foreign companies can appoint an ‘agent’ on their behalf for securing such registration.

Physical presence

Initially, the concern was whether the e-commerce operators require a physical presence in all the States. The government, vide FAQ (frequently asked questions) dated September 26, clarified that the e-commerce operator may declare the head office as its place of business for obtaining registration in that State or Union Territory where it does not have a physical presence, so that the registration application is accepted in time. Companies alleged that despite these clarifications, the directions are not being followed practically.

It has been alleged that Kerala denied registration application of some of the companies while applications are still pending in States such as Andhra Pradesh, Punjab, Chandigarh, Uttarakhand, Rajasthan, Bihar, Assam, Jharkhand, Orissa, Madhya Pradesh, Gujarat and Chhattisgarh.

Meanwhile, another Finance Ministry official said there is a way available in the present system. “There are lines for the address. Just mention the address in these lines with pin code. Then go for jurisdictional State and pin code. Choose a State and mention any pin code of the State, the registration process will be completed,” he said.

Experts’ take

Antita Rastogi, Partner (Indirect Taxes) at PwC, said although the government has issued clarification, at the field level the e-commerce companies that are not present in a particular State are facing a challenge in obtaining registration. If the date is not extended, it will lead to a situation where without the fault of the e-commerce companies they would be required to pay interest as and when they are issued registration, even if they have applied on time.

According to her, surprisingly in a few States the field officers are ignorant of the circular issued which allows the address of head office in another State to be given in the registration application and consequently they have rejected the application. “Clearly here the e-commerce companies are not at fault and would face unintended consequences. An immediate action is required whereby the registration is granted from the back-end,” she said.

MS Mani, Partner at Deloitte India, said e-commerce companies are expecting the GSTN facility permitting State-wise registration for TCS purposes to be modified immediately or the due date for payment be extended. “Since this is the first month for payment of TCS , it is essential for both e-commerce companies and the government to get it right, even if it means a delay,” he said.

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