Ecommerce Sellers Count on Cash-flow Gains from GST Cut

Sellers, brands and some restaurants operating across online commerce platforms expect to see cash flow benefits from a recommended reduction in tax collected at source (TCS) made by the Goods and Services Tax (GST) council, a variety of online merchants and business owners told ET.

The council on Saturday recommended that the TCS collected by electronic commerce operators, which includes platforms operating in segments in ecommerce, quick commerce and food delivery, be reduced from 1% to 0.5%.

Sellers on ecommerce and quick commerce platforms, especially those with smaller teams, often let the tax credits incurred through TCS pile up for a considerable amount of time before cashing out, as the process of redeeming such credits can be cumbersome, a home and kitchen products seller active on Amazon and Flipkart said.

“The change won’t be so significant as to o impact profitability, but it will meaningfully help with freeing up cash flow that we can reinvest into the business… that is a huge boost for businesses like ours that operate on single-digit percentage net margins” the seller added. Due to the cumbersome nature of filing for returns, the tax credits that are incurred through TCS often end up sitting with the government for a long period of time without any interest, which means a small opportunity cost is also incurred on that amount, said Gaurav Sarda, chief financial officer at beauty and personal care product firm Pureplay Skin Sciences, which runs the Plum brand.

With a reduction in TCS, brands that have a higher exposure to online platforms will benefit more. “For us, about 60% of the business comes from online channels, so the decrease in TCS could make up for, say, the cost of a small to mid-sized marketing campaignnot very substantial, but still helpful,” Sarda added.

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