Implementation of GST will help resolve various issues concerning taxation and logistics with regard to e-commerce business, which has been recording rapid growth in the country, says a CII-Deloitte report on ‘e-commerce in India A Game Changer for the Economy’.
The e-commerce space has rapidly evolved but several challenges have surfaced primarily in areas of taxation, logistics, payments, internet penetration and skilled man power, the report said.
“In taxation, for example, the lack of a uniform tax structure leads to several issues such as double-taxation or impediments in the free flow of goods across the country. However, the ensuing Goods and Services Tax (GST) is expected to help in overcoming these challenges through a uniform tax structure,” it said.
Clearly defined rules for e-commerce transactions in GST and a consultative approach while framing these rules will be favourable to both, the government as well as e-commerce companies, it added.
It also said timely and effective implementation of programmes like Digital India, Make in India, Startup India and Skill India will support the e-commerce ecosystem to overcome the challenges related to ineffective rural internet penetration and lack of skilled manpower.
The report has recommended several measures including in the areas of direct and indirect taxes to promote this sector.
It said documentation requirements should be simplified for applying tax treaty provisions such as declaration by the payee, as opposed to tax residency certificate; and simplified mechanism should be in place to obtain lower or nil withholding tax certificates for the companies, without requiring payer details.
“Unutilised business losses of e-commerce companies should not be lost even if the shareholding of the company changes by more than 49 per cent. Increasing the number of years within which the tax holiday can be availed by startups in the e-commerce industry,” it suggested.
The indirect tax environment in terms of policy as well as administration would also be the key towards unleashing the potential of the industry in India.
“The indirect tax laws need to be evolved and re-designed to consider the changing business dynamics of e-commerce since the activities involve high volume and low-value supplies,” it said adding a central committee needs to be constituted to oversee the implementation of a conducive environment.
States and local bodies should ensure that a comprehensive tax is uniformly interpreted, and implemented for facilitating the growth of the sector, besides GST laws should take into consideration the actual nature of the transaction to determine tax liability of the sellers.