E-commerce stakeholders raise policy concerns before the GST regime begins

The Goods & Services Tax (GST) is due to come into effect by July 1 and e-commerce players, who are expecting surge in exports, feel need to expand the categories and clarity for benefit under the current export policy.

According to Co-founder of Voylla Fashion, Vishwas Shringi, the merging of central and states taxes and the complete phase out of central sales tax (CST), would reduce the cost of locally made goods and services. It will increase the competitiveness of Indian goods and give boost to e-commerce export, he was quoted as saying by IANS.

Many experts and stakeholders in the industry feel the policy required to be fine tuned. Market should be hassle-free for the sellers. At the current stage, it does not offer detail on custom process and has very limited benefits.

The policy is limited to only six categories. It does not expand to gems and jewellery or any new category. And sellers do not have clear understanding. However, there are many like Amazon India, whose spokesperson said, "GST introduction is good for e-commerce companies as GST is a destination-based tax on consumption. It will eliminate entra-state delivery."

Earlier, the GST council had set the tax rates on service at 5, 12, 18 and 28 per cent.

Prominent players of e-commerce- Amazon, Flipkart and Snapdeal had joined hands to raise concerns over tax collection at source (TCS) under the model Goods and Services Act. Under the new law, e-commerce marketplaces will have to deduct a portion of the amount payable to sellers on their platform and remit it to the government.

The firms voiced concern over capital lock-down and impact on selling as merchants would be severly hit by this. "This would deter sellers from coming online," Flipkart co-founder Sachin Bansal had said.

According to Exploring Potential of E-Commerce for Retail Exports of Indian MSMEs in Manufacturing Sector study, the total potential for business-to-consumer (B2C) e-commerce retail exports from India is estimated at approximately $26 billion, of which $2 billion can be achieved by 2020 from 16 product categories.

E-commerce major Amazon India had organised a workshop for small and medium businesses to educate them on the global opportunity, brand building, documentation, listing methodology and services. "We want to enable Indian businesses to take their Indian products to customers across the globe", Amazon spokesperson said. Its parent company, Amazon, lent around $1 billion to 20,000 merchants on its platform.

E commerce industry of India is expected to touch $17.52 billion in turnover by 2018, said a report by Associated Chambers of Commerce and Industry of India.

Stock being cleared before GST regime

Last month between May 11-18, E commerce majors Amazon, Shopclues and Flipkart gave huge discounts almost upto 80% to ensure their stock is cleared before the GST  comes into action. This happened largely on sellers insistence, as sellers fear it will result in even bigger losses if sold after July 1.

The GST, once implemented, is expected to cause losses for the retailers as the tax margins are going to be substantially higher. According to the GST laws, garments that cost less than Rs 1,000 will have five percent tax, while those that cost more than Rs 1,000 will have 12 percent tax.

According to media reports, it is upon the request of their seller partners that the online marketplaces are hosting the sale so that they can empty the current inventory. Apparently, the sellers are cautious. Although the normal practice is to keep stock in bulk and then sell it according to orders, now they are placing orders with dealers only after receiving confirmations.

Earlier, the dealers with less than Rs 20 lakh turnover were exempt from paying tax. But under GST, if they operate through the e-commerce route they will have to pay one percent tax and the prior exemption has been withdrawn.