In a recent Finance Bill, the government sought to classify online marketplaces (OMs) as “Tier 1 Retailers,” subjecting all transactions performed through such platforms to a 17 percent tax.
People that own or manage OMs in the country have slammed the planned revisions to the Sales Tax Act 1990, claiming that they will drive the majority of businesses away from online sales platforms, resulting in unregistered merchants.
Experts seek end to tax on online marketplaces
The OMs want the government to distinguish between online and physical sales platforms. According to estimates, there are 17 platforms in the country that operate as “online markets,” selling a wide range of products, consumables, and secondhand items.
The seller retains ownership of the products, rather than the OMs, under the present concept for such platforms. These marketplaces also include seller ratings, making it easy for users to select the seller that offers a decent product at a reasonable price.
Meanwhile, under the current planned modifications to the sales tax, the online marketplace industry will be responsible for collecting and paying sales tax. OMs would be required to submit sales tax invoices on their accounts for all taxable products handled through their platforms under the reforms.
The registered sellers will furnish the marketplaces with sales tax invoices, which they will have to claim as input tax in their tax returns.
Due to the unregistered nature of the suppliers, OM platforms will not be able to claim input tax on invoices from unregistered sellers.