E-commerce sector welcomes GST

E-retailers welcome GST, which seems, in all likelihood, to be close to passing after positive hints in the recent Rajya Sabha session.

e4m by Abhinn Shreshtha
Updated: Aug 8, 2016 8:04 AM
E-commerce sector welcomes GST

The e-commerce sector has been the one industry vertical that has been the most excited about the GST. This is not surprising as a common tax regime would make life much easier for every e-retailer.

For one thing, there will finally be some sort of a tax framework for the sector, which currently finds it facing an identity crisis of sorts as policy makers struggle to decide whether to classify it in retail or technology. A single tax will also be of immense use in the movement of goods across state borders.

This is of significance given recent incidents when some of the biggest e-retailers in the country have found themselves on the wrong side of states’ tax machinery.  The general feeling seems to be that these incidents are being caused by an overly complex taxation system, and hence, the e-commerce sector’s enthusiasm for the passing of the GST.

Of course, there are still some knots to unravel; perhaps the most important being a decision on what the actual GST rate will be; this will be of obvious significance to different industries.

What does the passing of the GST bill mean for the media & entertainment industry?

Coming back to the e-commerce sector, we asked the heads of different e-commerce sectors to share their views on the GST bill.

Kulpreet Kaur, Co-founder of Shop Pirate Coupons, welcomed the passage of GST in the Rajya Sabha. According to him, there are still hurdles to be overcome but he called it a “great move” by the government. “For e-commerce sector, there are lots of opportunities and the best part is that now it will simplify the complicated tax structure in India. It will minimize the cascading effect of taxation issues. State to state taxing system used to affect the end users who used to end up paying more for any products. But now there will be transparency in the costs. The only issue will be the increase in the documentations work and administration costs, but I am sure e-commerce players will easily cope up with the same,” he explained.

Reacting to the passage of the GST bill, Palem Srikanth Reddy, Chairman of PTL (LatestOne.Com) said, “GST is a politico-economic milestone in the Revenue administration of India. It is a not just a step, but a leap forward. However, execution to deliver the benefits envisaged in the initiative remain a challenge, given the amount of time to implement (April’2017). As for e-commerce, particularly e-tailers, this is a positive development because the market places are able to knock off various tax components in the complex combination of services they provide through multiple legal entities, against each other.

But the inventory based e-tailers were at a huge disadvantage because the service tax component in particular was adding up at every step in form of expense with no means to recover from the customer. This will reduce  the overall cost structure of e-tailers by about 5% and make several businesses viable which were earlier struggling to break even. This could be a turning point for several e-tailers and a welcome move.”

Sameer Parwani, Founder & CEO of CouponDunia, was of the opinion that the passage of the GST would be encouraging for the sector as it would bring clarity and transparency in the space and open new avenues for e-retailers to sell goods and services across states.

“ It would be interesting times ahead with considerable changes and we look forward to see how the Government’s resolve to put in place a significant structural change will benefit all industries The ideal GST rates should be along the lines of existing tax structures so that it doesn’t hurt small businesses specifically,” he said.

Kunal Bahl, Co-Founder and CEO at Snapdeal, also agreed that the passage of the GST bill would make it easier for e-retailers  to transfer goods across state boundaries while paving the way for a unified market in the country.

Speaking about how digital commerce has already dismantled the geographical barriers in the country by enabling buyers and sellers from across India to discover and transact with each other, he said, “The draft GST model law provides for “tax collection at source” on payments to vendors selling on online market place. This will lead to working capital issues for small vendors and needs to be re-examined. This letter and spirit of the GST reforms needs to be reflected in its implementation so that the current maze of compliance requirements is not unwittingly replaced with another set of fresh hurdles. A robust IT backbone and well-developed supporting infrastructure is crucial to successful implementation of GST. We are hopeful the central and the state governments will co-operate for quick and complete implementation of the GST.”

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