Tax collection: New mechanism for registration of e-comm operators

E-commerce operators will find it easy to register for Tax Collected at Source (TCS) in various States and Union Territories, even if they do not have a physical presence there.

According to the revised Frequently Asked Questions (FAQ) released by the Central Board of Indirect Taxes and Customs (CBIC), “Each State/UT has indicated one administrative jurisdiction where all e-commerce operators having business (but not having physical presence) in that State/UT shall register. The proper officer for the purpose of registration of ECOs has also been notified by each State/UT.”

However, there is still no clarity on interest and penalty in case of TCS collected in October, but could not be deposited due to the problem in obtaining registration.

The law makes it mandatory for e-commerce operators to obtain registration in every State and Union Territories where they have business but no physical presence.

The earlier FAQ (dated September 26) prescribed 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 on time. Companies alleged that despite these clarifications, the directions are not being followed on the ground. It has been alleged that in States such as Kerala, Andhra Pradesh, Punjab, Chandigarh, Uttarakhand, Rajasthan, Bihar, Assam, Jharkhand, Orissa, Madhya Pradesh, Gujarat and Chhattisgarh it is still pending. Now, with the clarification in the latest FAQ, the problem is likely to be resolved.

With effect from October 1, e-commerce operators have to deduct 1 per cent TCS before making payments to suppliers. According to the directions issued by the 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. Some of the companies collected TCS, but could not deposit the same as they were not registered.

According to the law, late deposit of tax will attract interest at the rate of 18 per cent, besides a penalty of ₹10,000 or amount collected as TCS, whichever is higher. The FAQ said, “e-commerce operators, who have been unable to obtain registration in the month of October, 2018 but have already collected TCS for the said month, may furnish the details of TCS collected in the month of October, in the first return in FORM GTSR-8 to be filed after obtaining registration.” However, there is no word on waiver of interest or penalty.

Anita Rastogi, Indirect Tax Partner at PwC, said some procedural clarification emerges from this updated FAQ. However, the moot question on interest and penalties is still unresolved. “Since the delay in getting registrations is not due to the fault of the e-commerce operators, the government should consider waiver of interest and penalty,” she said.

COMMENT NOW