Budget 2016: Expectations From E-Commerce Sector
The Indian e-commerce sector has moved from infancy to maturity. According to Gartner, India represents a $7 billion e-commerce market, growing at more than 40% every year. However, some of the tax and regulatory issues continue to plague the sector, making it difficult for e-commerce players to operate in the existing system. Needless to say, the sector is grappling with pre-dated laws that are not suitable for existing and future requirement of the sector. And this is a concern both at the central as well as state legislation level.
The e-commerce and startup sector in India has high expectations from the Union Budget 2016-17 that is likely to be presented by Finance Minister Arun Jaitley on February 29. The online commerce players are looking forward to a clear stand on the laws and regulations related to the Online Commerce industry.
Simplifying tax structure
Online commerce players expect that the government will be focused on promoting e-commerce, innovation and entrepreneurship. They believe, a speedy implementation of Goods & Services Tax (GST) will help e-commerce companies rationalize supply chains by addressing taxation issues as promised in the Union Budget of 2015. This will further help the industry players to curb the impediments in services like Cash on Delivery”.
“We hope the government will present a futuristic tax policy that will address the complications of the current tax structure. We hope that the GST roadmap will be shared in this year’s budget,” said Kiran Murthi, CEO, AskmeBazaar.com. He added that e-commerce firms would look forward to an ecosystem devoid of red-tapism, paving the way for greater ease in doing business and creating the ground for ‘Innovation’ & ‘Entrepreneurship’.
One of the major challenges for e-commerce players is the diverse VAT rates for products across states. This also includes diverse local levies and documentary requirement on delivery of goods states, thereby causing diversion of trade, adding further woes to the supply chain and distribution model of these players.
Anurav Rane, CEO of PlanMyMedicalTrip.com mentioned, “Being a startup, the amount of direct and indirect taxes we pay, handicaps us from expanding at our true potential. We are hoping for an exemption from all these taxes in the upcoming budget.”
As per the government guidelines, Rane believes the sector is also overburdened by the tremendous amount of paperwork every month. “We expect the centre to undo the tedious documentation process so that we can save on precious time and expend our energies on building the business in stead. The government should also strategies on improving the purchasing power of customer-enabling organisations like ours to allow us in improving the overall quality of service,” he said.
Anupam Tulsyan, Co-founder & MD, Peachmode.com explained, ”As an e-commerce company we are expecting easy taxation across states. As an e-commerce firm, we cannot ship COD shipments to kerala because of kerala govt rules. Now on unstitch material in Bihar they are putting sales tax above Rs 2000. For e-commerce companies which sells across states. Delhi has introduced DVAT for e-comm companies as compulsion. it creates lot of problems. Either GST comes soon or taxation improves.”
According to Rajiv Kumar, Founder & CEO, StoreHippo.com, “Exemption of the angel tax (that taxes the capital receipts) will help the industry, especially when financing from banks and VCs is unavailable. Even the tax rates for the investors should be rationalized, as they also take a risk by investing in startups. Favorable policy regulations like ease of compliance and tax exemptions will boost the sector and contribute to favourable growth of the economy.”
Startup India, Standup India funding
E-commerce players believe that ecommerce startups continue to face the challenge of access to capital. Kumar mentioned that a dedicated Corpus of Funds announced by the government under Startup India action plan will definitely help the players in the online commerce industry also, as many players struggle with funds in the initial stages. However, he cautioned that the Government must make sure that the funds are judiciously allocated so that there is uniform distribution across different industry sectors. Also, there should be limit on funds allocated to one startup.
Pankhuri Shrivastava, Co-Founder & CMO, Grabhouse too emphasized on removing angel tax and exempting startups from direct and indirect taxes that she believes will go a long way in assisting startups to get a foothold in the market. Most of these companies run on bootstrap funding initially and waiving off service tax for a period of 3 years will build the risk-taking ability for startups in their nascent stages.
Focusing specifically on the online real estate space, she said that the execution of initiatives like smart and connected cities which deploy technology at the heart of their existence would be paramount. “We have always believed that technology will be key to resolve India’s real estate issues and we hope this budget will help make this dream possible at a faster rate,” she added.
Saahil Goel, Co-Founder & CEO, Kraftly.com states that the sector hopes that the GST system will be introduced at the earliest as this would reduce the cost of inter-state movement of goods, and ease the documentation requirement for small merchants. “As an e commerce company we are expecting easy taxation across states. For example Delhi has introduced DVAT for e commerce companies as a compulsion. This creates a lot of problems, especially for start-ups. We are looking forward to a positive response from this union budget for start ups and emerging entrepreneur,” he said.
The market place model currently in place in online retail has possibly been at the forefront of tax battles at the central and state level. Manu Agarwal, Founder & CEO, Naaptol said, “There is still a lot of ambiguity with respect to the taxation laws for marketplace companies like ours. I expect this budget to give some clarity on it. Additionally there should be more plans of development of infrastructure. Our industry relies heavily on imports and having good infrastructure and logistic muscle like larger ports and transit systems will help us to get goods faster for our customers.”
According to Chirag Haria, CEO, Aarogyam Energy Jewellery, the e-commerce sector in India is moving at a superlative speed today so there should be proper utilization of India Post Rural Network with incentives on Cash on Delivery (COD) orders in Rural India, this will help increasing rural spending.
Experts are pinning hopes on the government initiatives like “Make in India”, “Startup India Initiative”. As Vipin Pathak, Co-founder and CEO, Care 24 commented, “To realize these dreams, the budget has to support at monitory, infrastructure and policy level. We are expecting a further easy FDI investment norms, licensing and startup support (tax, documentation, licensing, legal). Entrepreneurs should feel protected and supported on ground level to make actual difference.”
Technology at the helm
“There should also be fund allocation for speedy technology improvement and skill development of India Post for proper encash of e-commerce boom. The upcoming budget should also announce Income tax Benefits for individuals / trust investing in Gold Monetization Scheme to bring down Gold Imports. The upcoming budget should also increase Excise Duty exemptions from 1.5 crore to 5 crore which will encourage small scale manufacturing and prevent black marketing,” he stated.
As per the suggestions made by NASSCOM, startups, especially those in the online space, must be exempted from direct and indirect taxes including MAT, a move that would reduce compliance burden and also cash outflows.
R. Chandrashekhar, President, NASSCOM said in a statement, “Policy regulations like ease of compliance, reliance on self-certification instead of audits, tax exemptions forstartups will allow entrepreneurs to devote their time, energy and resources to build upon their innovative ideas.”
Going by expert expectation in the e-commerce sector, the need of the hour is perhaps a holistic policy with an apex regulatory body that could oversee the implementation of a business-friendly environment for this sector to thrive and flourish.
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