The possibility of implementing a 1 percent tax on each sale made by sellers on online e-commerce platforms is facing major resistance from online retailers, Amazon and Flipkart. This third-party tax proposition would be brought up at the Parliament next month. Ecommerce giants Amazon and Flipkart want a rollback on this tax as they believe it would hurt the fledgling e-commerce space.
This taxation move is a part of the Government’s aim to increase tax revenues to combat the existing economic slowdown due to dropping consumer demand. As per a presentation by Federation of Indian Chambers of Commerce and Industry (FICCI) this tax will seriously impact the country’s growing e-commerce industry, as seen by Reuters. An increased compliance burden would affect retailers and also cause working capital concerns.
There has been resistance from third-party sellers as well that have argued they already contribute through a sales tax to the nation. With this tax on their sales, it would become difficult for small businesses to sustain.
The tax would be exempted from online sellers as well as brick-and-mortar retailers that have a revenue of less than half a million rupees in the previous year. The Indian e-commerce industry is predicted to reach $200 billion by 2026 with the country moving to digital use for all kinds of activities.
The US-India Strategic Partnership Forum (USISPF), an influential lobby group, has asked the Indian government to give some time leeway for e-commerce firms to comply with this tax proposal. They have suggested the tax be implemented on April 1, 2021, as reviewed by Reuters.