Amazon, Flipkart challenge new Indian tax on online sellers
Amazon and Walmart's Flipkart are among trusted online retailers demanding that India scale back a proposed tax on third-party sellers on the platforms, saying the responsibility of compliance will hurt the fledgling industry, according to a document seen by Reuters.
The web retail industry is braced for a possible 1 % tax on each sale created by sellers on their platforms from April if the proposal is approved by parliament the following month.
The move is part of a broader plan by Prime Minister Narendra Modi's government to improve tax revenues and counter a sharp monetary slowdown due to weakening consumer demand.
However the tax will hurt the country's fledgling e-commerce sector, according to a presentation made by the Federation of Indian Chambers of Commerce and Industry (FICCI) for the federal government and reviewed by Reuters.
"(It) would cause irreparable loss to the entire industry with an increase of compliance burden," the lobby group said with respect to e-commerce companies. "This may also cause reduced trading activity."
Amazon declined to comment. A spokesman for Bengaluru-based Flipkart said it was working with industry chambers to voice sellers' concerns and highlight the increased expense of compliance. The Finance Ministry declined to comment.
Some third-party sellers are also pushing back against the tax, arguing it could negatively impact their working capital, adding that they already donate to a nationwide sales tax.
This tax will be "extremely detrimental to the growth and sustenance" of small online sellers and make the model "unviable", Unexo Life Sciences, a seller of healthcare products on Amazon's India website, said within an email to the Central Board of Direct Taxes that was reviewed by Reuters.
Online vendors, or sellers with income of not even half a million rupees in the previous year, as well as brick-and-mortar retailers, will be exempted from the brand new tax, although they are subject to the nationwide sales tax.
India's e-commerce sector is expected to reach $200 billion by 2026 as rising smartphone use and cheap data help vast sums to look online for from groceries to furniture. But companies such as Amazon and Flipkart also have had to face tighter regulations and an antitrust probe.
The tax would connect with the income of drivers on ride hailing businesses such Uber and Ola together with sales on restaurant aggregators including Zomato and Swiggy.
Ola and Uber declined to comment, while Swiggy and Zomato did not react to requests for comment.
Modi is pushing to expand India's tax base to thousands of manufacturers, food sellers and cab drivers who currently usually do not pay income tax, a senior Finance Ministry official said. Modi has said nearly 15 million of India's 1.3 billion Indians persons pay income tax.
New Delhi expects to acquire about 30 billion Indian rupees ($419.46 million) through the tax, the Finance Ministry said. It will provide data on vast amounts of dollars in sales.
