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PMO to address complaints by ecommerce companies

Ecommerce companies say they only facilitate sales and are not sellers themselves so they should only face service tax

Policy Pulse
Publish Date: Oct 26 2016 10:59AM | Updated Date: Oct 26 2016 10:59AM

PMO to address complaints by ecommerce companies

The Prime Minister’s Office is looking in to the matters that were raised by ecommerce companies. Etailers complaints that the current rules are too restrictive which force to imminent the draft of a longer-term plan for the key job generating sector by a NITI Aayog committee. 


A meeting of top officials was held at the PMO to discuss a range of issues including taxation, marketplace curbs and the offline-online conflict.  “There are a number of issues confronting the sector, including foreign investment, taxation,” said a government official. “The idea was to take a stock.”


The government has already set up a committee under NITI Aayog chief executive officer Amitabh Kant to review the ecommerce policy and issues faced by companies.  PMO was drawn into the matter after ecommerce players approached several departments with multiple issues. 


The Department of Industrial Policy and Promotion (DIPP) had issued a press note in March laying down a new foreign direct investment (FDI) framework for ecommerce aimed at creating a level playing field vis-à-vis brick and mortar businesses.


It allows 100% FDI in the marketplace model through the automatic route but such entities are not allowed to influence prices by offering discounts. Moreover, a single vendor cannot account for more than 25% of sales on an online marketplace. 


On the other hand, offline retailers met finance minister Arun Jaitley last week to press their case and raise the issue of unfair competition from online players through what they described as predatory discounting. 


The ecommerce companies say they only facilitate sales and are not sellers themselves so they should only face service tax. States such as Uttar Pradesh even require consumers to file declarations with the state VAT department for goods above Rs5,000. 


The NITI Aayog committee is expected to submit its report in a month’s time, spelling out a clear framework and bringing about predictability in the overall sectoral policy. Morgan Stanley estimates India’s ecommerce market will swell to $119 billion by 2020. 


The government sees ecommerce as having a huge potential for job creation by providing market access to small entrepreneurs and businesses that would find setting up physical retail establishments too expensive.