India: e-commerce seeks fair tax regime in Budget

Ahead of the Budget, a clutch of e-commerce players have demanded that Finance Minister Arun Jaitley simplify the tax regime to enable the sector’s growth.

E-commerce players are particularly unhappy about multiple taxation points that hamper their business. They want the Government to bring in the GST at the earliest.

“We expect a seamless India. Our country with its 30 states and their own sets of rules and regulations is quite a complex market to operate in. As an e-commerce company, we would surely like the GST to get implemented without any delay so that all these issues related to multiple taxation and logistics can be avoided. The initiative taken by the government for Startup India too is a welcome move and will definitely give impetus to the startups in India like never before. I would like to see a concrete policy getting implemented for this to boost growth,” said Saurabh Ailwadi, founder of Gulmoharlane.

Manu Agarwal, Founder & CEO, Naaptol said, “This budget should have some favorable reforms for the emerging industries like e-commerce. There is still a lot of ambiguity with respect to the taxation laws for marketplace companies like ours. I expect this budget to give some clarity on it. Additionally there should be more plans of development of infrastructure. Our industry relies heavily on imports and having good infrastructure and logistic muscle like larger ports and transit systems will help us to get goods faster for our customers.”

According to experts, the government could allow startups and e-commerce companies to appropriate initial brand building expenses over several years for accounting benefits.

"The advertisement, marketing and sales promotion (AMP) expenses are very important for e-commerce companies to acquire new customers. A major part of this expenses is intangible and the government should allow identified category of AMP expenses to be capitalised," KPMG (India) Partner Tax Amarjeet Singh said.The expenses towards AMP, according to Rakesh Nangia, Managing Partner, Nangia & Co, should be allowed to be capitalised as an intangible asset.

"E-commerce sector is still grappling with outdated laws not flexible enough to adjust to its requirements. This sector unlike the conventional business models does not need to invest much in tangible asset like plant and machinery. Its assets are generally intangible in nature, like the value of its Brand," Nangia said.
The government has decided to give host of tax incentives to encourage startups and some decisions are likely to be announced in the 2016-17 Budget on February 29.

The Finance Ministry may also look at providing relief to e-commerce companies with regard to withholding tax. Currently companies are required to withhold 10 per cent of the payment as tax.