Goods and Services Tax (GST) is becoming a common enemy of all e-commerce firms, and the mere mention of GST is doing something which no-one could have ever done: Uniting them, and forcing an alliance.
India’s largest commerce player Flipkart, World’s largest e-commerce company Amazon and India’s 3rd largest e-commerce firm Snapdeal has joined forced and appeared on a common platform to oppose the existing regulations under GST draft bill.
As GST laws are being finalised, and most probably an announcement would be made by this month end, e-commerce portals are becoming increasingly anxious about its implementations, and its reactions which will further lower their profits, and make things worse for them.
This combined opposition to existing GST regulations came from Amit Agarwal, who is heading Amazon India, Sachin Bansal, Flipkart’s co-founder and Kunal Bahl, Snapdeal’s CEO and co-founder, during a press conference conducted by The Federation of Indian Chambers of Commerce and Industry (FICCI) in New Delhi yesterday evening.
The main contention of these e-commerce portals was that, if GST is implemented in this original form, then e-commerce industry in India will come to a standstill.
As per FICCI’s official tweets, Sachin Bansal said, “Tax evasion can be avoided by sharing of information (that we’re already doing with states)”
Meanwhile, Amazon’s Amit Agarwal said, “Tax collection at source is an exception created for online. (It isn’t for offline): Amit Agarwal,”
Interestingly, Sachin Bansal had taken initiatives to form a lobby of all Indian e-commerce firms to fight the strategic lobbying by offline retailers against them; and Amazon India was not invited to be part of this lobby. However, when it comes to GST and a uniform tax structure, there is no discrimination as even a foreign company like Amazon has been included in this forum.
It seems that level playing conditions for Indian e-commerce firms, and a uniform tax structure across India are entirely different things; and when it comes to profit, then there exists no Indian or foreign company.
Why Are E-commerce Firms Afraid of GST?
The bone of contention here is tax collection at source (TCS), which GST has made mandatory for all e-commerce portals. As per the GST Council, this move will introduce a uniform tax regime for all e-commerce portals and will remove the ambiguity of the same.
However, the issue with this move is that TCS has to be collected by e-commerce portals, and not Govt.; and this is causing sleepless nights for them.
There are more than lakh vendors and sellers on each of these platforms, and their count is increasing every single day. E-commerce portals will be required to spend an insane amount of money, time and resources to monitor the TCS for each of their sellers.
Thus, this additional burden will reduce their profits and will slow them down.
Meanwhile Govt. is insisting that they have millions of businesses to take care of, and since e-commerce portals are already registering small businesses and sellers, they can maintain TCS activity in a better way.
In August last year as well, several e-commerce portals from India had vehemently opposed GST due to the same reasons. At that time, Govt. had asked them to remember about their billion dollar valuations.
Interestingly, there was a time when associations like IAMAI was saying that failure to bring GST will destroy e-commerce in India, and Assocham had termed GST as brahmastra for this industry.
We will keep you updated as more details come in regarding the issue of TCS and e-commerce portals in India.