Industry body IAMAI Thursday termed the provision of 'Tax Collected at Source' (TCS) for e-commerce players as an "unfair liability imposition" on the sector, noting that it will create operational challenges.

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E-commerce companies have been mandated to deduct one per cent TCS before making payments to their suppliers with effect from October 1.

"With the government notifying the provision part of section 52 of the central GST Act ... The provision of Tax Collected at Source (TCS) for e-commerce is an unfair liability imposition on the sector...This will create operational challenges," the Internet and Mobile Industry of India (IAMAI) said in a statement.

The association pointed out that online marketplaces, as recognised by the IT Act 2000, are intermediaries only providing a technological platform and "are not actually engaged in the act of retail trade". 

"Mandating technological platforms to collect GST for retail activities undertaken by sellers on-boarded on their platform is a contradiction of the intermediary role played by such platforms; and a forceful imposition of undertaking tax liabilities for activities beyond their remit," it asserted. 

IAMAI argued that any service provider of certain category of service should not be burdened with tax liabilities of other forms of services, even though the former may facilitate sales.

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"TCS will create compliance burdens for MSME/petty producers conducting businesses online. Start-up online marketplaces now face greater challenge to onboard MSME sellers on their new platforms because of the mandatory registration for online sellers as mandated due to TCS," it said.