eCommerce firms like Snapdeal and Amazon will have to deduct 1 percent tax collected at source while making payments to suppliers under the GST regime which is expected to come in from July 1.
Model Goods and Services Tax law, finalised by the GST Council, provides 1 percent TCS to be deducted by e-commerce operators.
Model law provides electronic commerce operators who are not agents should collect one percent TCS as notified on the recommendation of the Council of net value of taxable supplies made by other suppliers where the consideration with respect to the supplies should be collected by the operator.
Experts have expressed concern that a similar amount will be levied on inter-state movement of goods taking TCS deduction to 2 percent.
"We have included the word 'up to' in the final model GST law. This would mean that TCS would not exceed 1 per cent of the sale proceeds.
Industry has been expressing concern over the TCS provisions saying it would mean a lock-in of capital and also dissuades companies from selling through online aggregators.
E-commerce companies will also have to file returns on the TCS deductions, but in case of return of goods by the consumer, these companies will not have to deduct TCS as there is no actual sale.
The model law had defined 'electronic commerce' as supply of goods or services, including digital products, over electronic network.
'Electronic commerce operator' would mean those persons who own, operate or manage digital or electronic facility or platform for electronic commerce.