Several ecommerce companies have likely missed the November 10 deadline to deposit a part of the taxes due from their sellers, now mandatory under the Goods and Services Tax (GST), because of hurdles posed by various state governments.

The ecommerce companies would likely become liable to pay interest as well as heavy penalties as a result, tax experts said.

Amazon India has informed its sellers that it was unable to implement tax collection at source (TCS) for October — the peak festival sales period for ecommerce companies this year — in as many as 12 states due to “technical issues”. Experts say the problem relates to several state governments requiring ecommerce companies to have a physical local address to be able to register themselves for depositing taxes deducted from their vendors.

Starting October 1, it became mandatory for ecommerce companies to deduct towards taxes 1% of the net sale value for each seller before paying them. ET reported last week that a number of ecommerce companies were unable to register for depositing TCS as some states have been insisting on brick-and-mortar offices within their jurisdictions. The Union government, however,has clarified that ecommerce companies can register with a head office address and are not required to have an office in each state.

As the November 10 deadline passed, an Amazon executive informed sellers on Saturday through their Facebook group that due to “technical issues” the company was not able to report TCS in Gujarat, Punjab, Goa, Bihar, Chandigarh, Chhattisgarh, Meghalaya, Assam, Himachal Pradesh, Jammu and Kashmir, Andaman and Nicobar, and Lakshadweep.

The company informed the sellers it was “working with the (Goods and Services Tax) authorities” to resolve the technical issues. Amazon did not respond to specific queries on the matter. Other firms ET reached out to, including Flipkart and Paytm Mall, did not reply. “This is a technical glitch at the (GST Network) end, since companies with a head office in one state still need to have a local address in each state where they operate to get registration,” said Bipin Sapra, partner at EY. “For ecommerce companies, this could result in interest and penalty for each day. It could also affect cash flow for sellers, especially the benefits of the festive season.”

“The main issue is registration at this point,” said Pratik Jain, national indirect taxes leader at PwC. “Many states are not giving registration to these companies without having an office, contrary to what the Central government circular said. Hence, some ecommerce companies have not been able to take registration and pay TCS. Hopefully, the government will waive off the interest for delayed payment in such cases.”

Ecommerce firms that have not deposited TCS face interest at the rate of 18% per annum on the tax amount, said tax experts. Another issue is where vendors have not registered, said experts. While some seller associations have welcomed the tax collection of 1% at source, as it would weed out fraud and unregistered sellers, several small sellers are expected to face working capital issues.

In a recent LocalCircles survey of 7,000 ecommerce sellers on the issue of TCS, 69% of the respondents said the 1% tax collection at source would hurt their businesses, and 61% said it would lead to order volumes moving from micro enterprises to small and medium enterprises and large sellers.