Facebook-Jio deal may see more foreign e-commerce firms flock to India

Facebook-Jio deal may not throw up any major tax issues, other than tax complexities associated with e-commerce business, said Abhishek Rastogi, partner at Khaitan & Co.
Some recent regulatory developments may have precipitated the Facebook-Jio deal. Going forward, this may increasingly prompt foreign e-commerce operators to consider setting up base in India, say legal and tax experts.

 
Pressure from the recently-expanded scope of Equalisation Levy that covers non-resident e-commerce platforms, the Reserve Bank of India’s (RBI’s) mandate that all data related to payments should be stored only in Indian systems, besides the rigours of an imminent Data Protection Law have played their part in shaping the Facebook-Jio deal, noted Tarun Jain, partner, BMR Legal.

 
The deal may not throw up any major tax issues, other than tax complexities associated with e-commerce business, said Abhishek Rastogi, partner at Khaitan & Co. The expanded scope of Equalisation Levy, as per the Finance Act 2020, is unlikely to influence the deal since most Jio platforms are likely to qualify as Indian e-commerce operator.

“It will, however, be interesting to watch the manner in which WhatsApp is integrated with these platforms and facilitates online transactions,” said Lokesh Shah, partner, L&L Partners.

 
Given the wide scope of Equalisation Levy, which also includes a facilitator such as WhatsApp service, the applicability will need to be examined based on the actual role of WhatsApp/ Facebook, Shah added.

 
Experts, however, point out that becoming an Indian tax resident could turn out to be a double-edged sword for foreign e-commerce players as it would expose the global income of such operators to tax in India.

“E-commerce operators can be expected to choose a calibrated balance between their commercial interests and tax consequences, which would depend upon their unique factual setting and extent of India operations,” said Jain.

 
Experts said the regulatory and tax implications of the deal would become clearer once the operational details of Jio’s digital e-commerce platform are known.


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