New Delhi: Budget hotels and small-scale vendors registered on e-Commerce sites such as Airbnb, Flipkart and Amazon will have to pay tax upfront under the goods and services tax (GST) regime when they receive payments, even if they fall in the exempted category.

That’s because all vendors registered on such sites will be liable to 1 per cent tax collected at source. GST is on its way to being rolled out on July 1 with most goods and services having been slotted into their respective slabs by GST Council last week.

The objective to impose 1 per cent on these sites is to capture all transactions in the e-Commerce space and not allow anything to slip through the cracks.

All e-Commerce players are bound by law to deduct tax from registered vendors whenever there is a sale, irrespective of whether the seller is liable to pay tax or not. They will withhold 1 per cent whenever the payment is made to the seller. The GST Council has decided to exempt hotels with room tariffs up to Rs 1,000 per day as also a number of household goods.

Those below a turnover threshold of Rs 20 lakh are also exempted under GST. They will have to claim refunds subsequently from the tax department. “If anyone does not have a liability, they can claim a refund,” said an official.

“As very few sellers fall within the Rs 20 lakh bracket this is not a big worry for us. We have also welcomed the tax rate. The areas which need clarification are what happens in case of a return. Also, stock transfer is a matter of concern for us as,” said a spokesperson of the All India Online Vendors’ Association (AIOVA), a group of 2,000 sellers.

Tax experts said this would put small vendors at a disadvantage as their working capital will get blocked.

“In transactions through an ecommerce operator, the compliance shall increase in the GST regime, more so for small service providers,” said Bipin Sapra, partner, EY. Sapra said vendors will have to get registered to claim refunds of the tax collected at source by the e-Commerce operator.

Source: Economic Times