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India 2% e-commerce withholding GST Oct 2018

  • Sep 14, 2018 | Richard Asquith

India 2% e-commerce withholding GST Oct 2018

Indian e-commerce marketplaces are to be required to withhold up to 2% (to be confirmed) of the GST payments on sales by third party retailers. The split payments measure is being introduced to help reduce online GST fraud.

The new requirement is obliging major marketplaces, resident and non-resident, to GST register in all Indian states to report and comply.

Tax Collected at Source 2% split payment

Tax Collected at Source (‘TCS’), will be made up of 1% for Central GST and was confirmed by the Central Board of Indirect Tax and Customs this month. It is expected that states will match this with a further 1% for their intra State GST to give a combined 2% GST withholding.

Details of how marketplace will report and pay the TCS are still not available. TCS is a means of collecting income tax in India under the Indian Income Tax Act of 1961. Any payment covered under these provisions shall be paid after deducting prescribed percentage. It is managed by the Central Board for Direct Taxes and is part of the Department of Revenue managed by Indian Revenue Service . It has a great importance while conducting tax audits. Assessee is also required to file quarterly return to CBDT. Returns states the TDS deducted & paid to government during the Quarter to which it relates.

Spilt payments to curb e-commerce VAT fraud

India's introduction of 'split payments' on its GST is becoming increasingly popular across the world. Many countries in South America have required credit card companies to withhold some % of VAT paid on transactions. The EU has been investigating it recently as a potential solution to help reduced the estimated €5billion of e-commerce VAT fraud in the region.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.