Govt to Decide on FDI and Taxation Policy for E-commerce Firms
Industry Trends
17-11-2015 00:00:00
Govt to Decide on FDI and Taxation Policy for E-commerce Firms
NEW DELHI: After proposing to open up Foreign Direct Investment (FDI) in retail among 15 more sectors to boost economic growth, the government is now in the process of getting a detailed "definition" for the term "E-commerce" after receiving some serious objections from the traders' bodies and states about taxation and FDI, it is reliably learnt.
According to Commerce and Industry Minister Nirmala Sitharaman, the government is working on the definition of 'e-commerce' to clear the air over key issues such as taxation and foreign investment in the burgeoning sector, an ET report said.

The minister said her ministry has received inputs from almost all the states on the issues related with FDI in e-commerce segment.

When asked whether the states are favouring FDI in the sector, she said: "We have got the inputs from the states. We are in the process of putting it all together," Sitharaman told PTI.

The minister on July 15 chaired a meeting of states on the issues related to foreign direct investment (FDI), the definition and taxation in the e-commerce sector. The states were asked to give their views and comments on the matter.

After the meeting, officials had indicated that the ministry would come out with a detail clarification on the matter, as brick and mortar shops have raised serious concerns over the domestic e-retail players.

As per the current FDI policy, e-commerce activities refer to the "activity of buying and selling by a company through the e-commerce platform".

Industry experts said that the government needs to define the term marketplace and also elaborate as to what constitutes retail and wholesale trading on online platforms.

At present, 100 per cent FDI is allowed in business-to- business (B2B) e-commerce and not in the retail segment.

Global retail giants as well as some domestic e-retailers want the government to relax the foreign investment norms in the the space.

Global players are looking at India as it is one of the fastest-growing markets in Asia-Pacific, along with China. Rise in Internet penetration, adoption of smartphones and lower data rates are completely changing the way India shops.

According to estimates, the sector's size is around USD 5 billion annually. Analysts said online shopping is expanding at a massive rate.

On the other hand, traders body CAIT has strongly opposed any kind of relaxation in FDI in e-commerce retail. They have alleged that e-commerce firms are violating FDI norms.

Sitharaman said her ministry is in discussion with finance counterpart over the taxation issues.

In the absence of detailed guidelines, tax disputes have cropped up between e-retailers and some states.
-K Ramanathan

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