Finance Ministry to introduce new e-commerce tax regulations from October 1

By

Isabelle Crossley

Published
Sep 21, 2018

Starting from October 1, e-commerce businesses will have to deduct one percent tax collected at source (TCS) before paying their suppliers, as part of a directive by the Ministry of Finance.

On September 20, the Ministry of Finance announced that 0.5 percent TCS must be paid on intra-state sales of goods made by traders using e-commerce sites. Livemint reported that state authorities are also expected to enforce 0.5 percent tax on the net value of goods that cross state lines.

The Union Government had already set the date for the new tax’s implementation as October 1 last week. The Goods and Services Tax (GST) previously did not inforce provisions for deducting TCS as a way of giving relief to businesses that were struggling with GST tax increases over the previous Value Added Tax (VAT) system in some areas. However, the government has decided to implement TCS now.

One outcome that the government is hoping for with the new TCS is an improvement in tax compliance among businesses. The stress on intra-state fees could also encourage more local trade. However, it is not yet clear whether the TCS will fluster e-commerce businesses and whether or not this will affect their pricing.