Budget 2020 Expectations: Relief in GST, income tax needed to boost e-commerce

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Published: January 28, 2020 7:06 PM

Budget 2020 Expectations for e-commerce: Tier 2 to 5 cities and towns contribute more than 50 per cent to e-commerce and online retail.

e-commerce Budget 2020 Expectations, Budget 2020 Expectations for e-commerceUnion Budget India 2020-21: The e-commerce industry in smaller cities across India is witnessing an increase in sales.

Budget 2020 Expectations for e-commerce: Supported by cashless transaction apps, which are safer and easier than ever before, as well as deeper penetration of inexpensive mobile data plans and better connectivity, the e-commerce industry in smaller cities across India is witnessing an increase in sales.

Tier 2 to 5 cities and towns contribute more than 50 per cent to e-commerce and online retail, as an estimated 56 million+ digital shoppers from smaller cities and rural areas have adopted online platforms.

However, despite at least 56 airports and 31 heliports being developed as a part of the government’s efforts to provide connectivity to unserved tier 2 to 5 cities and towns, deeper penetration of courier services and further enhancement of postal services will go a long way in cementing the logistical roadblocks.

“The government needs to continue showing strong support to these cities by trying to upgrade the urban infrastructure by upgrading the MRTS, airports; introducing SEZs etc, but the Budget should cut down duties on oil to reduce transportation costs so that the cost of distribution in Tier 2 to 5 cities comes down,” said Nalin Agrawal, Founder and CEO, Snapmint, a financial services platform that provides purchase financing to millennials and consumers with thin or no credit history in Tier 2-5 cities.

According to industry grapevine, a sizeable chunk of merchants in tier II cities onwards can be seen going back to cash transactions, so efforts should be made to incentivise merchants for accepting digital payments, even if it is for a notable percentage of the entire payment.

So, the government should also offer some tax benefits for fintech companies making investments towards lending to people without credit access. On the other hand, in order to boost demand, steps need to be taken to increase the disposable income in the hands of the consumers.

“The rationalisation of income tax slab rates is the need of the hour. In the past, union budgets have rendered relief in the form of rebates to individuals having an annual income of up to Rs 5 lakh, thereby marking their tax liability to nil. The same set of individuals could still be handed over a nil tax liability (without any rebate), if the government decides to increase the non-chargeable tax slabs to Rs 5 lakh – a move which will certainly increase the disposable income of the common man,” said Agrawal.

Budget 2020: Inadequate revenue a big challenge for government

A large part of the cash economy, which is now under the lens of GST, has rendered many businesses unviable due to shrinking of incomes. This impacts the income and consumption of associated households, which are primarily in tier 2 to 5 cities and towns. “A reduction in GST can thus play a critical role,” said Agrawal.

“An increase in manufacturing output is extremely critical, not just to bring down bank NPAs (which will increase liquidity) but also boost consumption. A boost in manufacturing and investments in clothing, electronics and semiconductor industries will not just reduce product prices but also help lower the volume of imports in these categories,” he added.

“Outside of defence, the budget should focus on reducing expenditure in railways and homeland security via disinvestment centric initiatives. There is a critical need to offset decrease in revenues that may arise from reducing taxes and duties,” Agrawal further said.

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