Budget Expectations of the E-commerce sector

By | Feb 16, 2016 |1 Comments| 1821 views

The E-commerce sector has witnessed an unprecedented growth and is developing at a fast pace. Despite growth, the sector is incurring losses and facing many problems like poor infrastructure and logistics issues. Still, E-commerce firms are offering huge discounts and sales primarily to attract more customers. While trying to strike a balance in challenges and opportunities, the E-commerce and Startup sector in India has high expectations from the Union Budget 2016-17 to be presented on 29 February, 2016 and is looking forward to a clear stand on the tax rules and other regulations related to the Online Commerce industry on the following issues :

1. Clarity and uniformity in tax structure and GST

The E-commerce sector is experiencing an explosive growth but this has given birth to taxation issues. The sector is still struggling with old tax laws and regulations. The online players seek the budget to do away with ambiguity and offer clarity on the tax structure. New business models have developed like Cash on Delivery to tap potential customers. This has led to a debate on intra-state sale vs. inter-state sales tax laws. E-commerce sector has to typically cater to sale of products in all over India but different states have varied regulations, so the sector seeks a uniformity of rules across states. The E-commerce sector has to grapple with various taxes like VAT, CST, excise, and service taxes.  Currently, taxes are levied by both central as well as state governments. The online players hope that the GST is rolled out clearly in order to unlock issues faced by the sector. The sector looks forward to an integrated and uniform approach for tax laws and regulatory policies.

2. Foreign Direct Investment (FDI)

As of now, the Indian government has allowed 100 % FDI in single brand retail and up to 51 % FDI in multi-brand retail. E-commerce players are mostly multi-brand retailers and they expect 100 percent FDI. This will attract foreign investors and the E-commerce companies will be able to get funding in the initial stages. This will also ensure growth and better logistics in place. So, the sector looks forward to increase in FDI.

3. Policies for Startups

The E-commerce sector expects the government to simplify tax regime for startups to foster innovation and create conducive ecosystem for entrepreneurs in the country. The move by PM Modi to offer 3 years of tax exemption under the Startup India action plan is good; but more than exemption on Income tax, the statutory and regulatory compliances related to various filings like Service Tax returns, MCA filings, TDS returns and various state specific compliances should be simplified, as the filing of these documents consumes a lot of time and bogs down a startup.

Exemption of the angel tax (that taxes the capital receipts) will help the startup industry, especially when financing from banks and VCs is unavailable. Even the tax rates for the investors should be rationalized, as they also take a risk by investing in startups. Favorable policy regulations like ease of compliance and tax exemptions will boost the sector and contribute to favourable growth of the economy.

A dedicated Corpus of Funds announced by the government under Startup India action plan will definitely help entrepreneurs and startups, as many players struggle with funds in the initial stages. However, the Govt. must make sure that the funds are judiciously allocated so that there is uniform distribution across different industry sectors. Also, there should be limit on funds allocated to one startup. The ‘Startup India, Standup India’ campaign has created excitement and raised hopes for the startups and budding entrepreneurs. They expect a clear roadmap on the execution of all the policies announced under the plan.

4. Improved Infrastructure and Logistics

Logistical issues have always been a pain point in the E-commerce industry. Besides facing the problems of delivery to remote parts of India, there is a shortage of warehousing facilities in India. Thus, the delivery costs are high. While delivering products to far off places in India, the logistics companies face issues like lack of surface transport and limited air cargo capacity. So, the E-commerce players expect the government to announce policies to improve the warehousing and logistical infrastructure.

The E-commerce sector is growing rapidly and wants the government to introduce E-commerce and startup friendly initiatives to give the much-needed fillip to the sector. The initiatives by the government to develop a ‘Digital India’, campaigns like ‘Skill India’ and ‘Make in India’ along with the boost given to tech-based startups has raised the hopes of the online players. They look forward to a host of initiatives in the Union Budget 2016-17 to ensure the sustainability of the E-commerce sector.

Also Read - The views of Rajiv Kumar, Founder StoreHippo at http://www.cxotoday.com/story/union-budget-2016-gst-will-solve-e-commerce-challenges/

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Hi, I want to start online business. I wanted to know the initial investment and entire process .

By: Sandhya katiyar
Feb 19, 2016   Reply

Replies :
Hi Sandhya, thank you for showing interest in our platform. Our executive will get in touch with you very shortly regarding the plans and process involved. StoreHippo Support - February 23, 2016, 5:34:19 AM

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