Ease of Doing Business for MSMEs: A Parliamentary committee report on the promotion and regulation of e-commerce in India has opined multiple steps for the government to be taken to boost MSMEs’ e-commerce participation. Among the key suggestions in the report, submitted to the Rajya Sabha secretariat on Wednesday, was to extend the Goods and Services Taxes (GST) Composition Scheme to online sellers subject to the turnover threshold of Rs 1.5 crore in order to incentivise MSMEs toward e-commerce adoption.
Currently, small businesses opting for the scheme are required to pay 1 per cent tax on their annual turnover, instead of calculating GST liability monthly and are permitted to make only intra-state supplies. Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted for by any taxpayer whose turnover is less than Rs. 1.5 crore. However, Section 10(2)(d) of the CGST Act, 2017 restricts businesses or individuals registered under the scheme to sell through e-commerce platforms, the report noted.
The Parliamentary panel also recommended the introduction of a policy in line with the existing Corporate Social Responsibility (CSR) Policy to place an obligation on the large e-commerce companies (such as Amazon, Flipkart, and others in India) to provide training to small retailers and onboard them on their platforms. It also suggested a comprehensive framework in the upcoming e-commerce policy through the PPP model for partnering with e-commerce companies to provide digital and marketing skills in e-commerce business to MSMEs.
Importantly, Amazon, Flipkart and other e-commerce businesses in India already run programmes such as Flipkart Samarth, Amazon Digital Kendra, etc., to help entrepreneurs get on the e-commerce platforms.
The panel also suggested the Department of Commerce to exempt MSMEs from the payment of the 0.5 per cent commission charged on the government’s e-commerce portal Government e-Marketplace (GeM). “The commission increases the operation costs and eats into the already slim profit margin of the MSMEs and hence, providing exemption will incentives more MSMEs to join the platform and enhance their profitability,” the report added.
Currently, out of nearly 46 lakh total sellers, 7.83 lakh are micro and small sellers on GeM having a share of 55.46 per cent in the portal’s total order value.
“The committee, however, feels that the portal has the potential to have a greater impact in the domestic digital marketplace by onboarding more number of MSMEs on the platform,” the report said as it recommended the Department of Commerce to create more awareness about the benefits of the platform and provide training on onboarding and compliance process to MSMEs.
Other major suggestions made by the panel in the report were:
- Dedicated e-commerce exports promotion cells within Export Promotion Councils, Trade Promotion Organisations, and trade bodies at the district level to be created to provide information on the destination market, collate demand data and conduct training on e-commerce exports procedure, brand building and digital marketing.
- A special incentive scheme targeted specifically at e-commerce businesses for digitisation of MSMEs and units run by women entrepreneurs.
- State Governments to identify manufacturing and MSME clusters in their state and initiate targeted onboarding programmes in such clusters, leverage the One District One Product Programme to promote targeted products and tap into the expertise of industry stakeholders to promote e-commerce.
- Department for Promotion of Industry and Internal Trade (DPIIT) to formulate a concrete strategy to onboard existing e-commerce portals on the Open Network for Digital Commerce (ONDC) platform and ensure a level playing field between small businesses and e-commerce companies.