Government proposes new definitions for e-commerce

November 16, 2015 Hot from the Oven Valli Sarvani No comments

E-commerce is growing in India in recent days. Several new startups are emerging due to the opportunities in this market. However, certain issues are there and government tries to solve them.

Indian government is planning to come out with new definitions on e-commerce platforms that sell wholesale and retail. In this context, it sought the responses of state governments and many were received by the commerce and industry ministry.

The new definitions decide the future of e-commerce markets in India. According to the USB report in April, the business is expected to reach $60 billion by 2020 from less than $6 billion previous year.

Several issues like taxation on e-commerce transactions should also be discussed. These issues lead to troubles and cause disturbances between the state governments and e-commerce companies. Commerce and industry minister Nirmala Sitharaman stated that they are in the process of solving the issues and come up with a solution. Hence, a new definition of e-commerce is needed and they are working for it.

Currently, there is no clear definition of an online marketplace under the existing FDI laws. Marketplaces generally connect buyers to sellers though their websites. They provide services such as warehousing, logistics and payments.

The major tax trouble that lies in this is VAT or sales tax. VAT comes under the state and these laws vary for each state. Many state tax laws do not mention e-commerce as these were made before the existence of online selling. Many online retailers are facing troubles on these issues. The online giant retailer, Amazon.com Inc. is one such example. It is facing tax issues in several states like Karnataka on paying VAT.

States like Maharashtra are arguing that the interests of small retailers should be taken care of in addition to assuring that no state government should lose its revenues.

The major retail association, Retailers Association of India (RAI) and the All India Footwear Manufacturers and Retailers Association (AIFMRA), argue that e-commerce market places are providing many advantages to customers in addition to accessing to FDI through them.

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