companies: pursuit of profit right click: pmo steps in to solve …€¦ · india’s ecommerce...
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Companies: Pursuit of Profit
New Delhi: The Prime Mini-ster’s Office is looking toaddress complaints by ecom-merce companies that thecurrent rules are too restric-tive pending the drafting of alonger-term plan for the keyjob-generating sector by aNITI Aayog committee.
A meeting of top officialswas held at the PMO onThursday to discuss a rangeof issues including taxation,marketplace curbs and the of-fline-online conflict.
“There are a number of is-sues confronting the sector,including foreign invest-ment, taxation,” said a go-vernment official who atten-ded the meeting. “The ideawas to take a stock.”
The government has alreadyset up a committee under NITIAayog chief executive officerAmitabh Kant to review theecommerce policy and issuesfaced by companies.
The PMO was drawn into thematter after ecommerce play-ers approached several depart-ments with multiple issuesand in the absence of a single
nodal ministry.
BRICKS AND MORTARThe Department of Industri-al Policy and Promotion(DIPP) had issued a press no-te in March laying down anew foreign direct invest-ment (FDI) framework forecommerce aimed at crea-ting a level playing field vis-à-vis brick and mortar busi-nesses. It allows 100% FDI in
the market-place modelthrough theautomatic ro-ute but suchentities arenot allowedto influenceprices by of-fering disco-unts. Moreo-ver, a singlevendor can-
not account for more than25% of sales on an onlinemarketplace.
On the other hand, offline re-tailers met finance ministerArun Jaitley last week topress their case and raise theissue of unfair competitionfrom online players throughwhat they described as preda-tory discounting.
TAX ISSUESTaxation has emerged as amajor irritant for the ecom-merce sector along with rest-rictions imposed by state go-vernments.
States like Gujarat have impo-sed a separate entry tax on go-ods sold on online portals whi-le others want to impose valueadded tax on top of the Centre’sservice tax.
The ecommerce companiessay they only facilitate salesand are not sellers themselvesso they should only face servi-ce tax. States such as UttarPradesh even require consu-mers to file declarations with
the state VAT department forgoods above .̀ 5,000.
The NITI Aayog committee isexpected to submit its report ina month’s time, spelling out aclear framework and bringingabout predictability in the ove-rall sectoral policy.
Morgan Stanley estimatesIndia’s ecommerce marketwill swell to $119 billion by2020. The government seesecommerce as having a hugepotential for job creation byproviding market access tosmall entrepreneurs and bu-sinesses that would find set-ting up physical retail estab-lishments too expensive.
Right Click: PMO Steps into Solve Ecomm’s GrouseHigh-level meeting held to discuss taxation, marketplace curbs & offline-online feud
Policy PuzzleMULTIPLE PROBLEMS
Govt sees huge employmentpotential in ecomm
Committee set up to chart a course to resolve issue
Government wants to address issues it can even beforecommittee sends its report
Multiple restriction on marketplace to provide level-playing field with brick-&-mortar format
States have levied multiple taxes while GST will bring a cash tax
100% FDI al-lowed in market-place model of ecomm
QUICK FIX
Taxation hasemerged as amajorirritant forecommercesector along withrestrictionsimposed bystate govts