PM's Vision Hits a Roadblock as E-commerce Organizations Demand Exemption from GST

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BENGALURU: “We Are Working Aggressively for Making India a Very Easy Place to do Business: PM Narendra Modi” that’s what a report published on May 19, 2015 by NDTV said. But unfortunately, PM’s vision of making India a very easy place to do business seems to have hit a major roadblock. A strong case was made today by the e-commerce companies. The demand was to keep them out of the proposed GST net. E-commerce companies have increased rapidly over the last few years, and constitute a thick amount of the organizations operational in India. The state finance ministers appeared in no mood to oblige to the demands made by them.

Online retailers said at the meeting of the Empowered Committee of State Finance Ministers that they do not make money out of sales, but only provide a 'platform' to vendors and customers. This meeting was the first to be held after the Parliament approved the GST Bill. A government representation was made in this meeting which apparently had declared that the e-commerce firms are liable to pay GST only on service income as they are only 'service providers' to the vendors. Companies such as Flipkart, Amazon India and Snapdeal etc. were all marked in this declaration.

Replying to the questions raised by Amit Mitra on the billion dollar valuations some of the so-called online platforms, and the e-retailers said their source of revenue is advertisement on which they pay service tax as reported by The Times Of India. Amit Mitra is the Panel Chairman and West Bengal Finance Minister and had strong objection against the e-commerce organizations’ argument that the vendors should be liable to pay GST.

Mitra further said, “The e-commerce sector is generating millions of dollars but pay practically no taxes. Consumer buying products online pay VAT, producer pays excise duty but these companies go untaxed on the pretext that the transaction is just a pass through. E-commerce brings in competition, but you are also adding some value. Else how are your companies generating so much valuation.”

Mitra also asked the e-commerce companies to give in writing how the tax structure for such companies should be under the new GST regime, which the government proposes to roll out from April 1, 2017. “The issue may become a political hotpotato as the end product will come under GST but the intermediary will not pay tax,” observed Mitra.

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