E-tailers shed rivalry to voice GST concerns

Arch rivals  Amazon, Flipkart and Snapdeal have formed a united front for the first time to raise concerns over the coming Goods and Services Tax (GST), which they fear could hurt their businesses.

The founders of Indian e-commerce firms Flipkart and Snapdeal,  Sachin Bansal and Kunal Bahl, will join Amit Agarwal, the India head of their fierce rival Amazon, which has been grabbing their market share, to voice their concerns on GST to the government.  

They have sought help of trade body Ficci, with members who are from traditional sectors, whose business have been disrupted by the new economy firms. Joining these in the representation would be other players, such as Paytm, Grofers and Zomato, among others. 

Taking a cue from old economy, established e-commerce unicorns have finally decided to form a united front to discuss with the government. According to sources, interestingly, it was Ficci which, as a pre-condition, told the start-ups that the only way the industry body would represent them is if they come with their demands together.

“Ficci has always worked as a representative of a sector as a whole. Whenever we approach the government, it is for the whole sector and not just one firm. We told the e-commerce players that if they want to use our platform to voice their concerns they would have to come out as a united front,” said a senior official at Ficci.

Sources said international consultancy firm KPMG in India had been assigned the task of carving out the representation, as well as a presentation of which would be made public on Thursday. The e-commerce bosses would be talking about tax at source and why it would be extremely harmful to business.

“As per GST, we would have to calculate, collect tax from every single seller on our platform and then submit it to the government. The whole process would increase our liabilities as we would have to spend a lot of man hours and money for calculating tax. This would be death knell to our business. We hope that the representation helps us and the government find common grounds and find a better solution,” said a top boss at one of the three major e-commerce players.

According to e-commerce companies, the calculation of GST and collecting tax should be done by the government and companies should not be asked to do it.

While it has been decided that the e-commerce bodies along with members from Ficci would be meeting the government officials, the date has not been finalised yet. 

“In all probability, there would be separate meetings with officials in the finance ministry as well as Niti Aayog,” said an executive in one of the e-commerce firms.

Experts believe the major pain point would be tax collection at source, which would create a rift between sellers and e-commerce firms. “Tax collection at source is not there for any other sector, why only for e-commerce? According to the GST Bill, any payment made to a supplier would be subject to tax collected at source at the notified rate. This may disrupt the relationship between sellers and e-commerce firms,” said a senior analyst.

For e-commerce platform operators

  • Tax collection at source will be a compliance hazard, especially in cash-on-delivery scenarios
  • IT and other systems will need to be tweaked to ensure compliance with the strict disclosure requirements prescribed under the model legislation
  • For actual suppliers of goods and services: Tax collection at source may enhance tax costs since many such suppliers do not pay VAT/entry tax or service tax as on date
  • Since the threshold of liability for GST would not apply on such suppliers, small-scale/start-up suppliers may suffer

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel