Amazon, Flipkart seek rollback of 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 documents seen by Reuters.
The web retail industry is braced for a possible 1% tax on each sale created by sellers on the platforms from April if the proposal is approved by parliament next month.
The move is part of a broader plan by Prime Minister Narendra Modi’s government to improve tax revenues and counter a sharp financial slowdown because of weakening consumer demand.
But 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 seen by Reuters.
“(It) would cause irreparable loss to the whole industry with an increase of compliance burden,” the lobby group said with respect to e-commerce companies. “This may also result in reduced trading activity.”
Another influential lobby group, the U.S.-India Strategic Partnership Forum (USISPF), is asking the federal government to give e-commerce firms more time to adhere to the tax proposal.
It wants the implementation of the brand new tax to be deferred to April 1, 2021, or later, according to a copy of its proposal reviewed by Reuters.
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 also declined to comment.
Within an interview with TV channel ET Now this month, Finance Minister Nirmala Sitharaman said the measure had not been an “additional burden” as taxpayers would have an option to offset it later.
“Eventually, if you’re a taxpayer, that’s likely to be offset,” she said. “Why should every TDS (Tax Deducted at Source) be seen as additional tax?”
Retail industry executives have asked the government not to levy the new tax on the amount they donate to a nationwide goods and services tax. They also have expressed concerns about how precisely long refunds could take.
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 the 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 earnings of less than half a million rupees in the last year, together with bricks-and-mortar retailers, will be exempted from the brand new tax, although they are at the mercy of the nationwide sales tax.
India’s e-commerce sector is likely 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 handle tighter regulations and an antitrust probe.
The tax would connect with the income of drivers on ride-hailing businesses such Uber and Ola and also 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 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 also provide data on vast amounts of dollars in sales.
