E-commerce players seek sops on digital transactions in Budget

With the government`s emphasis on a less-cash economy, stakeholders in the country`s digital space have sought incentives in the upcoming Union Budget on February 1.

The incentives would help to promote e-commerce -- an essential component of non-monetary transactions, they said.

The e-commerce industry is one of the fastest-growing sectors in India, and the government`s demonetisation move in November 2016 helped the entire sector as people adopted e-wallets and other payment options. 

According to Amarjeet Singh, Partner, Tax, KPMG in India, the e-commerce industry was hoping that the government would incentivise digital transactions undertaken on these platforms.

"This could be in the form of rebate on service tax/GST (goods and services tax) levied on commission, rationalising or withholding tax on commission to improve cash flows," Singh told IANS.

"Similarly, on the direct tax front, the government should take steps like granting exemption to provisions of Section 79 for the industry, allow e-commerce companies to capitalise customer acquisition costs as market intangible, to give a booster to the industry," he added.

The e-commerce market in India has grown from $4.4 billion in 2010 to around $16 billion in 2015. It is expected to hit $76 billion by 2021.

"The Indian e-commerce industry would be looking for some positive outcomes both in terms of tax relaxation and more freedom of operation," said Harshvardhan Lunia, Co-founder and CEO, Lendingkart Technologies.

"Moreover, the sector will also look at receiving more clarity for FDI (foreign direct investment) in B2C (business-to-consumer) e-commerce through an automatic route," he added.

Industry stakeholders are of the view that expectations from the government in the upcoming budget on direct tax issues follows the fact that several challenges have surfaced in the area of taxation in the e-commerce space.

"The characterisation of income is a key issue faced by e-commerce industry both by residents and non-resident players," said Anil Talreja, Partner, Deloitte Haskins and Sells LLP (limited liability partnership). 

"There should be appropriate amendments in the budget to provide clarity on the characterisation of income and consequent tax treatment for such payments to put at rest significant litigation."

Besides relaxation in taxes and incentivising digital platforms, experts are of the view that the implementation of the GST may resolve some of the various issues faced by the industry in indirect taxes such as entry tax and collection of tax as agents.

"If the government can amend the provisions of service tax relating to `intermediary` to end the on-going litigation for some e-commerce players, it would certainly rejuvenate the mood in the industry," Singh added.