IAMAI Warns That Failure To Bring GST Will Destroy Ecommerce Sector in India – Will GST Pass This Budget Session?

By Mohul Ghosh On Feb 27, 2016

Rs 1 lakh crore worth of Indian ecommerce sector faces extinction in India, if the proposed Goods and Services Tax Bill (GST Bill) is not passed in the Lok Sabha this year. This warning has been issued by Internet & Mobile Association of India (IAMAI), three days before Finance Minister Arun Jaitley will announce the Union Budget 2016-17 in Parliament.

Subho Roy, President of IAMAI has said, “Right now we have 5-6 states troubling the industry, if the GST doesn’t get passed in the Parliament, we will have all issues with all 28-29 states,”

GST Bill is the ‘One Nation One Tax’ proposal, which will replace several layers of taxes which an entrepreneur needs to pay in-order to do business across India. By implementing the GST bill, the whole tax structure can simplify, greater transparency can come in and overall, business sector will improve.

This historical GST Bill has been passed in Rajya Sabha, but is struck in Lok Sabha, where Congress and other opposition parties are demanding some amendments. Finance Minister Arun Jaitley has already said, that he “hopes” Congress is able to find the advantages of GST Bill, and let it pass.

Glimpse of Troubles Without GST

Without GST, conducting intra-state business is close to walking on fire.

For instance, in UP, ecommerce portals have stopped delivering products which are priced more than Rs 5000, which is bleeding ecommerce sector as 40-50% of orders originate from Tier 2/3 cities.

PayTm founder Vijay Shekhar Sharma has clearly said on this hard situation, “We have force ourselves to stop delivery in UP, at the end everybody loses,”

Meanwhile in Uttrakhand, Govt. has imposed a ridiculous tax of 10% on ecommerce transactions, which is creating an unfair advantage for local traders.

Last year, Jabong, Flipkart and others were fined Rs 54 crore for tax evasion in Kerala, and this fine came out only because huge confusion exists related to tax structure for ecommerce firms.

The same tax issue erupted in Karnataka as well, where Amazon was fined by Tax authorities as there are no clean cut guidelines. The issue was resolved when Karnataka Govt. intervened, and asked the tax men to go easy.

IAMAI has clearly said that only GST can help the ecommerce industry to become mainstream in India; else, the industry will die.

In a statement, IAMAI said, “GST will help the digital industry business model flourish by providing uniformity in tax rates and regulations across the country. This will help doing business in India easier, allow free-play to market dynamics and allow deeper penetration of these services,”

PM Modi had promised that GST Bill shall be passed by April, 2016 as the focus is on promoting business and entrepreneurship. We hope that a common referendum is held by various political parties, and GST Bill is passed in this budget session.

We will keep you updated as more details come in.