Ecommerce, which started off with baby steps a decade ago, is now one of the fastest moving consumer-based industries. With the marvelous growth curve that it has shown so far, exhibiting not a linear but geometric progression regarding growth, it has attracted a number of taxes.
Now, for the taxman, any source of revenue is more than welcome; but the different heads of taxes that are being levied on the Ecommerce industry, have proven to be more of a snag than an encouraging factor in the growth of the industry itself.
Goods and Services Tax – GST
Keeping in mind these factors, the Lok Sabha passed the Goods and Services Tax bill in August 2016. This bill primarily targets at integrating all the different taxes under one fold, making it hassle free and profitable for both; the taxman as well as the players of the Ecommerce industry, including the suppliers and operators.
GST is a fairly new concept and has created quite a stir since its announcement. The bill that has been a trending topic at all major discussion forums, business meets, and even coffee shops have been attracting a plethora of questions and doubts. To address these questions, Finapolis, a monthly investment magazine organized an event on the GST bill. The panel discussion threw light on the various aspects of the Indian economy, and on GST for different verticals.
C Parthasarathi – Chairman of the Karvy group started out with how GST is going to be the next game changer after the liberalization of the Indian Economy in 1992. He introduced the gathering to the panel moderated by journalist Mr. Kinshuk Nag, who reinstated that GST is going to be the most revolutionary step in the fiscal sector in the last 20 years.
Mr. Tirumalai, one of the best and senior-most tax consultants of Hyderabad, also happens to be an expert on GST and other budget related subjects. He called the GST bill in India an experiment where although a majority of the goods and services were falling under the fold of the bill, there were certain key goods and services sectors which aren’t; for instance, constructions, petroleum products, alcohol, etc. Calling it a dual GST, where the center and the state were to take equal shares from the tax collected under the bill, he went on to explain further, whether GST can be successfully incorporated, or whether there would be more bottlenecks while trying to implement the bill in India; as Finance Minister Arun Jaitley had mentioned during the budget. In this regard, he addressed the scenario of a multiplicity of tax rates for goods and services in the GST bill in India, which is unlike other nations that have GST. He pointed out that this was another experimental facet of the GST bill in India. He also raised the concern of the possibility of inflation owing to the implementation of GST.
Mr. Ramakrishna Rao, an IAS officer and the principal secretary of Finance for the Telangana government, shed light on the perspective of the state government when it comes to GST; whether the fiscal powers of the state were increased or curbed. Interestingly, he also spoke about the inside debates of various state governments regarding different policies being brought to the table and the insightful sensibilities of the Union Finance Minister, which has of late led to decisions being made by unanimity rather than on a voting basis. Calling the GST meeting between the center and state governments, a remarkable example of fiscal federalism at work, he explained how within a short period, decisions were taken after debating over the thorny issues related to GST. A total of 9 taxes are being subsumed under GST, and an annual growth of at least 14% per annum is on the cards for the state government.
Mr. Subramaniam, a professor from ISB and an expert on Finance, gave a broad overview of the GST from an economist’s perspective to the audience before addressing the nature of the bill in India and its duality. He mentioned how GST would lead to a drop in transaction costs, thereby improving the mobility and efficacy of the functioning of transactions, especially those related to the movement of goods across borders. Talking about the importance of GST in ironing out issues like tax evasions and sick companies with rich promoters, he was more content to have a so-called ‘incomplete’ or dual GST over no GST. In his words – “Let the camel come under the tent first, then we will bring the camel in as well.”
Mr. Santosh Sonar, Executive Director of Indirect Taxes with KPMG Mumbai, and also an expert on the subject had a similar take on GST. Furthermore, he also expects the excluded sectors to be brought under GST in the future.
Ecommerce and GST
Coming to E-commerce, Professor Subramaniam mentioned how GST would result in a substantial growth on the supply side of the E-commerce chain. This combined with the aftermath of Demonetization that has led to a massive rise in the use of net banking, credit and debit cards, as modes of payments, has also fostered a preference for Ecommerce amongst the masses, both rural and urban. This in turn, has made E-commerce a vital industry in the whole big picture of the GST bill. The streamlining and subsuming of all the related taxes under one head will also help smoothen the entire process of Ecommerce, hence enabling the industry to grow better in efficiency as well as economically. This makes online commerce of goods and services an attractive option to explore for suppliers and operators, alike.
Mr. Sonar also mentioned how under GST law there is no entry barrier to the movement of goods being purchased via Ecommerce, hence further helping the Ecommerce sector to flourish. Mr. Sonar further quoted that Ecommerce is an entity that facilitates transactions. Speaking for the other category of Ecommerce companies, which have their own brands and products, he mentioned how the various taxes like service tax being charged from the sellers and buyers would come under GST.
On a concluding note, the panel discussion broadly covered all aspects of GST and how the bill will affect the various industries and the taxmen of India. The panel was informative, insightful and surely of good use for people looking forward to exploring new business avenues.