New Delhi: E-commerce companies will have to deduct 1% tax collected at source (TCS) before making payments to their suppliers from 1 October. The Finance Ministry on Thursday notified TCS at the rate of 0.50% of the net value of intra-state sale of goods made by traders through e-commerce portals. States too are expected to notify levying 0.50% state GST (SGST) on intra-state supplies.

The central government had last week notified 1 October as the date for implementing the TCS provision in the new indirect tax regime. The law provided for levy of up to 1% TCS. EY Tax Partner Abhishek Jain said, “As the law had provided a levy up to 1%, the e-commerce industry was awaiting this release of the exact rate of TCS --essentially to configure it into their system."

The provisions for tax collected or deducted at source was kept in abeyance in the GST regime so far in order to give relief to businesses. Enforcing the provision is expected to improve tax compliance.