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Implementation of GST a boon for e-commerce sector

16-January-2015
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Implementation of GST a boon for e-commerce sector

The Goods and Services Tax (GST) will finally see the light of day, and if the PM’s promise is anything to go by, it could be as early as next year. Though the benefits of common market and single taxation will be of great import to every sector; the e-commerce sector perhaps stands to gain the most from the implementation of GST.

For one thing, there will finally be some sort of a tax framework for the sector, which currently finds itself 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. The e-commerce industry, hence, is understandably upbeat about GST.

"GST will resolve many supply chain issues surroundings e-commerce and the increase in efficiency will lead to quicker deliveries. Shipment and returns across the country will be done more efficiently and with lesser paperwork.  With the tax standardized there will be no more guessing game in terms of taxes when you cross state borders so companies will also be able to execute logistic strategies, with warehousing based on strategy rather than being depended on taxes. It will also help the smaller players who might otherwise have found business too expensive. More importantly, with an uniform tax structure across India, goods can be priced and margins calculated properly without worrying about where the product is finally shipping," said Ashish Jhalani, Founder, eTailing India & ISeB.

Ashish Shah, COO of Pepperfry.com, also called GST a “fantastic” move for the e-commerce sector as it would introduce regularization and simplification of tax across the country. He agreed with Jhalani’s assessment that GST would simplify logistics and supply chain issues. “This will especially considering states like Kerala and Kolkata where B2C is cumbersome. The implementation of GST will enable us to service these States in a better manner.” he said. He further added that this will have a larger impact on ecommerce as a business as common taxation and ease of transportation of goods is what will help players expand operations and reach.

“Today Pepperfry is the largest online home and furniture marketplace given the supply chain and logistics we have established in the last 3 years. It (GST) will further boost the business and provide the right equipment to service our customers seamlessly and in a better manner,” he said.
Sundeep Malhotra, Founder & CEO, HomeShop18 feels uniform GST and tax measures will play a crucial role to make digital commerce a success story in India. According to him the benefit of the GST will be felt by not only the e-commerce platform but each member of the value chain and especially the customer.

Critics though have spoken out about the proposed GST rate, which is currently being mooted at around 26.88 per cent (12.77 per cent for centre and 13.91 per cent at state). Globally, the GST rate is between 14-16 per cent. In fact, the Thirteenth Finance Commission had suggested ait at 12 per cent. However, states have been adamantly against lowering of the rate.

“It takes time for anyone to get used to something new. Over a long run a standard rate will help,” said Jhalani. Shah also admitted that in a diverse country like India there will be different points of view but he pointed out that the issue has to been from a longer perspective and in a way that benefits the industry and customers in a large way.
 

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