Uniform GST will lead to a better economy

Uniform GST will lead to a better economy

By 2020, Indian internet market will be the largest segment worth $100 billion.

The Dollar Business Bureau

The e-commerce sector is the fastest growing segment in terms of revenue and shipments. By bringing in revenues it keeps the taxmen happy. But the tax laws in the country have not been upgraded to check a spiraling business based on the ‘cloud’.

Firstly e-commerce companies have over time grappled with a complex framework of excise, VAT/CST or service taxes. And the proliferate indirect tax laws have been of no help. They have been more of a hindrance rather than a help for the e-commerce industry.

Secondly there is no clarity with regard to categorizing the e-commerce industry. Do their offerings come under ‘services’ or ‘goods’? Should these offerings be charged under VAT or CST or do they come under service tax?

Thirdly there has been marked confusion and chaos on the paperwork needed for goods transported from one state to another. There are differing way-bills, statutory forms, road-permits and the recent imposition of local registration requirements.

Lastly the tax laws provide no clarity on tax documentation or taxation pointers on transactions conducted via e-wallet, COD, gift vouchers etc.

The absence of such laws and regulations has led to diverse practices being followed by the e-commerce sector. Currently tax is levied based on the rules and revenue policies of the State Governments.

With the introduction of the goods and services tax (GST), many of the above mentioned supply chain challenges that impact the e-commerce sector, are likely to get resolved. GST has a dual structure – a central tax levied and collected by the centre and a state tax levied and collected by the state governments. It is a single comprehensive tax regime that is applicable across all Indian states on sale, manufacture and consumption of goods and services. GST will ensure a smooth flow in the business. Shipment to and fro will be done efficiently and with less paperwork. With a single comprehensive tax uniformity it becomes easier for the companies to concentrate on pricing and calculate margins without worrying about the shipping of the product. The challenges like lack of skilled human resources, low rural internet penetration in the e-commerce zone can be tackled by realizing them through various government initiatives like Startup India, Digital India, Skill India and Make in India.

The Dollar Business Bureau - Apr 25, 2016 12:00 IST