Under the provision, e-commerce players were required to deduct tax on payments made to their vendors from July 1 under the GST.
But, the government the has said small businesses that sell through these ecommerce platforms don't have to register themselves immediately.
Ecommerce players feared losing business as many suppliers were yet to register their operations under GST guidelines.
“This ensures business continuity for the marketplace but most importantly benefits our sellers since they don't have to deal with pressures of cash flow at a time when they are transitioning into a new tax regime," an Amazon spokesperson told ET.
Ecommerce companies will not be required to collect 1% TCS (tax collected at source) while making payment to their suppliers for goods sourced under GST, stated a finance ministry statement.
According to Central GST (CGST) and State GST (SGST) Act, notified entities are required to collect TDS (tax deducted at source) or TCS at 1% on payments in excess of Rs 2.5 lakh to suppliers of goods or services. This provision has now been kept in abeyance.
A new date for its implementation will be announced later.
"We welcome the move as it gives breathing space to marketplaces but would like to see the TCS implemented as soon as possible as it gives level playing field," the All India Online Vendors' Association (AIOVA) spokesperson told ET.