When the proposal to float GST Bill was initiated by the Finance Ministry, ‘TDS’ (Tax Deducted at Source) also became the centre of attention. While online marketplaces didn’t want the burden of TDS on them, seller associations were happy that it would bring in more accountability. This also resulted in a heavy discussion & confusion over it. Hence, Indian Online Seller (IOS) published a detailed article on why online sellers should care about TDS, which helped many merchants to understand the basic concept and their tax liabilities.
With the basics taken care of, sellers thought that the hard part is over. But many have realized now that the process of getting TDS reimbursement from marketplaces isn’t as easy as they thought.
The TDS reimbursement process
If you drop by at IOS regularly, then you must have read the report on how Flipkart refused to refund sellers’ TDS. The etailer informed sellers that due to delay in filing the claim, they won’t be able to reimburse the TDS amount for FY 2015-16. But sellers cried foul and said Flipkart is manipulating deadline and facts to cheat sellers.
Since then Flipkart has sorted out its process; at least according to online seller Karan Duggad. He reveals to IOS that Flipkart’s TDS reimbursement process is very easy. Besides the Bansals-led company, Snapdeal and Amazon have also made it easy for sellers to claim the refund. But Paytm and Craftsvilla still lag behind.
Speaking about Craftsvilla, Duggad says,
“Craftvilla’s process is very poor. They will not pay if you are late for the quarter, which will surely happen with the small vendor.”
And on Paytm he shares,
“Paytm has complicated the TDS reimbursement process. And ultimately don’t pay. They will ask many questions and invoices. And I believe if you do not have a dedicated person for the reply (then) you have to forget the tds payment!”
The process followed by Amazon, Snapdeal and Flipkart is very similar to each other. Here it is:
- The etailers first request the sellers to pay the TDS to the Government against the commission and other fees charged
- Then sellers are asked to get hold of the Form 16
- After this, sellers are asked to contact seller support team, create a new case for the reimbursement and attach a scanned copy of form 16/TDS certificate
- In case of Amazon, sellers need to contact the support team through their panel
- In case of Flipkart, sellers can send the TDS certificate to its team via email or direct mail
- In case of Snapdeal, sellers can click the tab directly on its seller panel and claim TDS refund
- After reviewing the claim, the marketplaces reimburse the TDS amount in the impending payment cycle, if the claim is approved/accurate
This a standard process followed by most of the ecommerce companies. What complicate the matter are the unnecessary demands of few of the online players. Like Duggad mentions above, Paytm and Craftsvilla make it difficult for sellers to claim their refund by asking for a host of invoices/documents or manipulating the cut-off for filing request like Flipkart used to do.
Whether these complications are created by online marketplaces because of lack of structure/knowledge or it is a deliberate attempt to thrust the complete responsibility on sellers & government (and remove their accountability), is still not clear.
Two of the most common problems related to this issue that sellers struggle with are:
- Online marketplaces not disbursing the TDS amount on time
The TDS amount that a seller is supposed to get runs into thousands and sometimes lakhs of rupees. This money is crucial to maintain the working capital balance of every seller’s business. More so, for small sellers who don’t have much money in hand. Therefore, a delay in reimbursing the amount can prove to be detrimental for small vendors’ businesses.
Online marketplaces have billions of funds in their account to absorb losses. But vendors can’t sustain without working capital even for 3 months and hence they are often forced to take loans. Therefore, etailers need to speed up the process so that sellers’ cash flow doesn’t get affected.
- The ambiguity over TDS categories for ecommerce
According to online seller Ankit listed on sellers’ body All India Online Vendor Association, the different TDS categories for ecommerce are:
- 94C: contract – shipping charges, logistic charge paid to online marketplaces and advertisement charges paid to online marketplaces at 2%
- 94H: commission/brokerage – all commission paid to online marketplace at 10% up to 31st May 2016 and at 5% from 1st June 2016
According to Ankit, the problem starts when the nature of transactions mentioned in the online marketplaces’ invoices fall in different categories. To support this fact, he explained that while Amazon’s business support fee falls under 94H, Flipkart’s shipping charges comes under 94C. This applies to almost all the players, which causes a great deal of confusion.
The need of the hour is to introduce tax laws to overlook the ecommerce industry, to try & limit all the marketplace fees in one category and remove the ambiguity from the TDS categories for online sellers.
What can sellers do?
Until the GST Bill comes into full effect or marketplaces fine tune the TDS reimbursement process at their end or proper ecommerce centric laws are in place, sellers please wear the responsibility cap and do the following:
- Keep all the invoices and maintain records for payment reconciliation
- Make note of the deadline and file the claim on time so that marketplaces’ have no excuse to reject your claim
- Pay TDS on time to the government so that you can get the TDS certificate as and when required
- Reach out to your personal tax advisor, chartered accountant or hire one to understand the various criteria for filing TDS
- Don’t give up on your money; pester online marketplaces until you get your rightful TDS payments
- Use a third-party’s service to do all the above on your behalf
Sellers, please comment below, if you have more tips and tricks for other sellers.