ST draft law brings all online purchases

under its purview

The tax, in lieu of local levies, will be imposed at the first point of a
financial transaction.

The central government’s draft of the national goods and services tax (GST) law
says all types of purchases made online will attract a uniform rate. 
The tax, in lieu of local levies, will be imposed at the first point of a financial
transaction.

Every e-commerce operator shall, at the time of payment to suppliers, deduct the
GST at a rate recommended by the GST Council. 

The model law has 162 clauses and four schedules. It suggests jail up to five years and
a fine for breach of the statute. 

The tax collection at source system proposed for e-commerce companies would make
any payment to a supplier subject to this at the notified rate. 

“This will mean significant compliance burden on e-commerce companies, as many

of them deal with thousands of vendors,” said Pratik Jain, leader, indirect tax, PwC
India. 

And, this could lead to a refund issue for many suppliers, operating on a thin margin.
“In addition, e-commerce companies will need to provide details of all supplies made
through the platform,” added Jain. 

The government has given clear definitions on terms such as ‘aggregator’, ‘electronic
commerce’ and ‘e-commerce operator’. 

An aggregator is a person who owns and manages an electronic platform and by

means of the application and a communication device, enables a potential customer
to connect with those providing a service of a particular kind under the brand name
or trade name of the said aggregator, it states in the draft. 

“There are separate provisions for contract manufacturers and e-commerce

businesses, which will help bring uniformity of views across states,” said M S Mani,
senior director, Deloitte in India. 

The draft says an ‘electronic commerce operator’ includes every person who, directly
or indirectly, owns, operates or manages an electronic platform engaged in
facilitating the supply of any good or service.