Union Budget 2015: E-commerce sector encouraged by GST & Make In India boost

Union Budget 2015: E-commerce sector encouraged by GST & Make In India boost

Author | Abhinn Shreshtha | Tuesday, Mar 03,2015 8:37 AM

Union Budget 2015: E-commerce sector encouraged by GST & Make In India boost

FM Arun Jaitley’s Budget 2015 might not have been the big bang announcement that people were expecting it to be but it did offer a glimpse of the direction the government wants to set the country on. Some pronouncements, including an expected GDP of over 8-8.5 per cent this financial year, further heightened the sense of optimism seen since the beginning of the year.

Union Budget 2015: GST to be implemented by 2016; estimated GDP to be between 8- 8.5%

For e-commerce players, there was nothing specific to write home about but the government’s reiteration of its commitment to implementing GST as soon as possible, (April 2016 is the set target), will be welcome.

A spokesperson for Amazon India labelled the focus on development of infrastructure and the commitment to GST as "encouraging". "We believe both are key to ease of doing business by enabling and streamlining the movement of goods and services as this will enable us to effectively transform the lives of our customers, both, consumers and sellers. Customers can enjoy quick, easy, convenient access to a wide selection of products from across the country; and sellers, especially small and medium businesses, can grow profitably by serving customers across the country,” said the spokesperson.

Sameer Parwani, CEO and Founder of CouponDunia said budget expectations had been met. He, however, added that it is not a quick fix to the existing problems but represents first steps in the right direction.

“Firstly, there is a definite move towards GST, which was largely anticipated and expected. The hike in Service Tax rates is also an indication of implementation of GST. That Royalty and FTS rates have been reduced from 25 per cent back to 10 per cent come as a relief to the industry. The budget is also positive in general for the corporate sector with government committing to bringing down corporate tax level to 25 per cent in four years,” said Parwani.

Increase in service tax is probably to bring the rate closer to rates expected under GST: Sudhanshu Vats

Pranay Chulet, Founder & CEO, Quikr, however, opined that while the budget lays out more plans for long term growth for the e-commerce industry, more clarity was required on the short and medium term plans. "The plans for GST are still 2-3 years away, but we are happy to see the governments’ push to digital since India will see a growing number of internet users in the coming years,” he said.

The e-commerce industry is also buoyed by the Finance Minister's promise to continue investing in infrastructure and energy development. “The proposed investments on power and infrastructure projects will help e-commerce companies reach to a customer base, which is today unserviceable,” said Ashish Jhalani, Founder of eTailing India and ISeB.

“The budget has given a major boost to infrastructure development allocation for roads and railways sector by building an additional 1 lakh kilometre roadways network. This will enhance logistical outreach and strengthen delivery capabilities by allowing faster movement of goods,” agreed Sundeep Malhotra, Founder & CEO of HomeShop18. 

The FM's decision to incentivise debit and credit card transactions to propel India on the path of becoming a cashless society was also met with applause. Amrish Rau, MD of Citrus Pay, highlighted proposals, which he said would will provide a boost to electronic payment transactions, online commerce and PoS. " A similar approach helped Korea to move to almost 60 per cent cashless transactions in retail. This will help the GDP by almost 0.5-1 per cent over the next few years," he explained. This is interesting as the FM has already announced that he sees the country becoming cashless in the near future.

Jhalani opined that these incentives would prove important especially as the growth of e-commerce has sometimes been limited by the dependence on the cash-on-delivery model. Consumer-friendly measures like incentivising credit and debit card transactions will augment receptivity to online transactions, thereby benefiting the industry, agreed Malhotra. “The government’s intention to nurture sectorial growth is showcased positively through both the emphasis on a liberal system to raise global capital and creating a single clearance window for ease of doing business,” he added.

E-commerce players keen for the govt to bring reforms in GST

Another facet of the budget that was met positively was the allocation of Rs 1,000 crore to the Make in India initiative. “The allocation of Rs 1000 crore to encourage start-up incubation and enterprise will further augment growth and sustainability, thereby, leading to employability and economic growth. Also, with positive initiates like cut in corporate tax from next year, emphasis on Skill India, we are optimistic on the implementation roadmap of the budgetary announcements,” explained Malhotra. Quikr's Chulet also liked the Rs 1,000 crore allocation to SETU, which he said would help the growth of young start-ups and entrepreneurs.

Praveen Sinha, Founder and MD of called the budget "mild" but said it managed to create an air of euphoria. Highlighting the good points, he said that it provided the necessary thrust to the small and medium scale enterprises and equipped them with essential resources to grow their businesses. "The move was in complete tandem with the government’s ‘Make in India’ campaign," he added.

Some of the tax reforms proposed in the budget also seem to be with the end aim of making India a suitable destination to attract foreign investment while still providing a boost to homegrown industry. " A big push to technology has been given by the government with its decision to reduce the tax on royalty and fees for technical services from 25 per cent to 10 per cent apart from setting up a 'startup fund' for technology based start-ups with an initial corpus of Rs 1,000 crore. However, judicial implementation of these funds would finally create a difference for the sector. I sincerely await how these funds are allocated in the long term," agreed Sinha.

He also welcomed decisions to reduce the corporate tax to 25 per cent, something he said will make India a "competitive destination for investment".

"While the government's decision to hike service tax rate to 14%, from 12.36% has been a disappointing move, at the end of the day there are many other decisions such as reduction in excise duty in certain cases to promote domestic manufacturing once again will give boost to industries in India." he added.

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