Will Budget 2016-17 Boost Ecommerce Momentum?
According to the Assocham report, e-commerce industry is set to reach $38 Billion mark in 2016, that’s a quantum jump of 67% from $23 Billion revenues in 2015. The sector is rapidly pacing ahead with remarkable dynamics, thanks to the increased penetration of internet and mobiles. However, in order to keep up with the pace, people of this sector are highly anxious about the Government’s next move on various issues concerning the sector. So far, the blueprint laid out is quite positive for the e commerce industry but the current tax structure of VAT, Excise, CST, Service tax etc. are looming on the growth trajectory due to its complications. This sector is in need of clear & confident stand by the government on the rules & regulations affecting momentum of e-commerce.
Let us see what all are the expectations by the online community from the Union Budget 2016-17 on 29th February:
Expectation on Tax Structure:
Implementation of GST (Goods and Service Tax): This tax reform, which is considered the most important indirect tax reform since 1947, will levy uniform taxes on the goods and services across the country. This will make India a uniform market and bring in the economic integration.
All the other taxes like excise, sales, CST, VAT, entry tax or octroi will be included under one umbrella of GST.
How will it help e-commerce sector?
Effect: This sector is sure that implementation of GST will rationalise supply chain across country and boost the entrepreneurship & innovation which currently faces hurdles like on COD (Cash on Delivery) ,variable VAT etc.
According to IAMAI (Internet and Mobile Association of India) – Various states levy different taxes on sellers on the ecommerce marketplaces. Most of these sellers are micro, small and medium businesses which are scattered throughout the country. Now these sellers due to difference in the taxes by different states are finding difficult to do business and grow, hence they need a common rate with transparency.
Subho Roy, President of IAMAI said that – “Right now we have 5-6 states troubling the industry, and if GST is not implemented, we will have issues with all the other states. And in that scenario, only 2-3 major players of ecommerce will be able to survive.”
On the same note, Vijay Shekhar Sharma, CEO of Alibaba referred that Paytm had to forcefully stopped delivery in important markets like Noida and Ghaziabad as it is state’s law that order exceeding Rs. 5000 cannot be delivered.”
According to Kunal Behl – CEO and Co-Founder of Snapdeal – “The movement forward in indirect taxes will help align taxation with contemporary business models and help resolve varying interpretations of VAT/CST and service tax, which complicate the operating environment.”
Vishwas Shirangi – founder of Vyolla.com said – “We have been contributing to Govt. initiative like ‘Make in India’ by developing manufacturing facilities and generating employment in the Gems & Jewellery segment. So we hope from this budget a raise in custom duty and drop in excise duty on imitation jewellery, boosting our business with other countries.”
Expectations on Accessibility to Funds:
A dedicated corpus of funds announced by the Government under Start-up India plan is a great initiative and will definitely build the momentum for the ecommerce players, as most of the start-ups are struggling with the funding. Many had to shut down operation due to lack of funds. But the concern is that those funds should be uniformly distributed across different industry sectors.
Many ecommerce players are also insisting on allowing 100% FDI in this sectors which will help to stay at forefront in the competition. They asserted by saying that foreign investors can make strategic investment in small online retailers and on the development of logistics.
Expectations on Infrastructure:
Logistics is very crucial arm of e-commerce. This industry relies on imports and its distribution across the country, for which there is requirement of well-developed infrastructure like bigger ports and transit system for speedy transportation. FDIs can play part in boosting better logistic systems.
To tap the rural market, there should be proper utilisation of India Post with incentives on cash-on-delivery in rural parts of the country. Proper funds should be allocated for India Post to upgrade to current technologies.
In order to promote entrepreneurship and innovation in our country, there has to be conducive ecosystem which includes transparent tax structures, infrastructure and allocation of funds. As said by R. Chandrasekhar, President of NASSCOM in a statement that “Policy regulations like ease of compliance, reliance on self-certification instead of audits, tax exemptions for start-ups will allow entrepreneurs to focus and devote time, energy and resources to build upon their innovative ideas.”