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

30-June-2014
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E-commerce players keen for the govt to bring reforms in GST

With the Union Budget around the corner, like many other sectors, e-commerce players we spoke to want the GST (Goods & Services Tax), that has been considered an economic version of “development hell” for years, to be reformed. The GST is just a long list of tax reforms which the e-commerce industry wants introduced to help the fledgling sector grow even faster, while improving investor sentiment and reviving demand.

For example, Viren Malhotra, an SME scale-up specialist, wants retrospective tax amendments to be removed, along with tax reliefs on investment, accompanied by generally expedited clearances for investment projects. To help revive demand, Malhotra suggested, “Reduction in excise duty rates and specific initiatives on job creation would help revive demand. From the perspective of the e-commerce industry, the implementation of GST would help them significantly in setting up their logistics infrastructure at strategic locations. This would help them save costs which would be passed onto the end consumer.”

Praveen Sinha, Co-founder and MD of Jabong.com, also agreed that one rate for services/ sales of goods and then implementation/ closure within timelines would help in the growth of e-commerce. “The e-commerce industry is in an early stage, but it has huge potential for generating employment for thousands of people in India,” he said.

Another need, according to him, is for impetus to be provided to infrastructure development and logistics, which is the backbone of the e-commerce industry. Explained Sinha, “Logistics is the backbone of industrial development of a nation. Good logistics is not only critical for business at access markets in a huge country like India, but also provides employment to a very large number of unskilled and semi-skilled youth. The growth potential of India coupled with suitable incentives (encouraging entrepreneurship and investment etc) from the Government can help usher India into the 10 per cent growth rate club.”

Another major issue in front of policy makers this year will be the issue of FDI in e-commerce and whether it should be allowed or not. This is a divisive issue. Many of the larger Indian e-commerce players have been opposed to FDI in e-commerce, fearing the influence of players like Amazon, etc. The Confederation of All India Traders (CAIT) has also been vocal about its opposition to FDI in the retail sector. The Government, for its part, has always been opposed to FDI in multi-brand retail and this does not seem likely to change. However, their position when it comes to e-commerce is less clear.

When asked about her thoughts on the FDI issue, Swati Bhargava, Co-founder and CEO of Cashkaro.com said, “This will be a welcome move as a stronger online retail sector will drive manufacturing and add to economic recovery. It will also spur competition as global brands like Walmart, Macy’s, Tesco, and Amazon can start selling in India vis-à-vis having a marketplace model. This means better prices and larger impetus to attract more first time shoppers. In the long run, it will also boost global investor confidence, perhaps attract investment in more verticals leading to further industry innovation.”

Malhotra pointed out that availability of domestic capital for investment in growing sunrise sectors is limited. According to him, FDI in B2B segment of e-commerce should be allowed. Sinha was a bit hesitant to commit. He agreed that for the growth of the industry, “it is imperative that investment is enabled”, whether through domestic sources or via FDI. However, he did admit that there are valid concerns. “This has to be approached to create a win-win situation for all. Business can be enabled and we can achieve much higher growth and employment in our country if the investment infrastructure is further enabled,” he maintained.

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