Vendors face pressure on working capital as e-commerce platforms, PSUs delay tax payments

MUMBAI: A government move to extend the timeline for depositing tax deducted at source (TDS) and tax collected at source (TCS) is creating cash flow problems for several vendors that sell goods on e-commerce platforms, according to tax experts.

The government recently allowed e-commerce companies and public sector undertakings — which normally deduct TCS and TDS on supplies — to file returns by August end.

When a vendor sells a product on an e-commerce platform, it is subjected to TCS, which can be set off against future goods and services tax (GST) liability. TDS, on the other hand, applies in situations where companies have to deal with the government.

Since many vendors who sell goods through e-commerce platforms were setting off the TCS against their GST liability, they are facing problems now, the tax experts said.

For instance, if a vendor sold goods worth Rs 100 to a customer through an e-commerce platform, 1% was withheld. The vendor would only get Rs 99, while the e-commerce company would deposit one rupee with the government. In return, the vendor could knock off that one rupee from his GST dues.

Now that the date for remitting that one rupee with the government has been extended, most e-commerce companies and PSUs are delaying payments, resulting in vendors having to cough up the amount from their own pockets.

“The relaxation in payment of TDS/ TCS has provided some compliance relief for e-commerce companies, PSUs etc but has entailed significant cash flow concerns for vendors/sellers on e-commerce platforms. Most of these vendors/ sellers have been in talks with PSUs and e-commerce companies to file returns on time and not avail benefits of these deferrals, to preclude potential cash flow concerns for them,” said Abhishek Jain, tax partner at EY India.

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This has come at a time when companies and vendors are struggling with liquidity issues due to the Covid-19 pandemic induced economic crisis.

“While the quantum of TDS – deducted by government agencies, and TCS – deducted by e-commerce aggregators, may not be very high, any delays in filing returns will make it difficult for contractors and vendors to adjust the GST deducted. In the prevailing situation of working capital stress, this is becoming a matter of concern,” said MS Mani, partner at Deloitte India.



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