Ecommerce TDS to impact working capital of small businesses: Amit Agarwal, Amazon India

Startup industry leaders and investors came together to ask the government to reconsider announcements around taxation norms for startup ESOPs (employee stock ownership plan) and TDS (tax deduction at source) for ecommerce companies.

The 1% TDS, to be levied by ecommerce platforms on online sellers, will impair the working capital needs of small merchants, Amazon India head Amit Agarwal said in his speech at the India Digital Summit organised by IAMAI (Internet and Mobile Association of India) on Wednesday. He is also the chairman of the industry body.

As part of the budget this year, the union government said that ecommerce operators will be required to deduct 1% TDS on the gross amount of sale of products or services, or both.

"In order to widen and deepen the tax net, it is proposed to provide that ecommerce operator shall deduct TDS on all payments or credits to ecommerce participants at the rate of 1% in PAN/Aadhaar cases and 5% in non-PAN/Aadhaar cases,” finance minister Nirmala Sitharamam said in her budget speech.

“Just look at the most recent budget. There is an introduction of tax collection at source. These seem like harmless papercuts but really impact the working capital of small businesses,” Agarwal said.

Earlier this week, Flipkart and Amazon had said that they would speak to the government for clarity on the provision.

The move will also require ecommerce players to revise the terms of agreement with sellers on the platform for compliance and deduct tax on payments collected by them directly on the gross value of product and services.

Launch of complaint council

The India Digital Summit also saw the launch of a grievance redressal council by online curated content providers. The signatories to the Digital Curated Content Complaint Council include Hotstar, Voot, Jio and SonyLiv. 

Notably, Netflix, which was a signatory to IAMAI’s self-regulation code released in June 2019, was absent from the grievance redressal committee. However, all the OTT (over-the-top) content providers are likely to be regulated under the Intermediary guidelines (Amendment) Rules, which may be released in two weeks. 

“The intent of this initiative is to offer the consumer a platform to air grievances, make informed choices and allow platforms freedom to create content. This is done with the intent of promoting creativity, enhancing commerce, and building consumer confidence and trust,” a statement shared by IAMAI said.