Editorial: Taxing Online

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Published: January 16, 2016 12:18:14 AM

State governments looking at means to earn from e-commerce sales

Over the past couple of years, while e-commerce has taken root with people across India buying goods online, it has ended up irking state finance ministers no end. While people were getting goods cheaper, it meant a loss of tax revenue to states. In recent times, e-commerce companies have reduced supplies to Uttar Pradesh according to a report in The Economic Times, because the state wants online buyers to file a VAT declaration for every purchase over Rs 5,000. But, then e-commerce companies have faced such problems in Kerala, Maharashtra, Tamil Nadu and Karnataka. The problem area is that e-commerce companies in India follow the marketplace model—since FDI is not allowed in online retail—where these companies do not own the goods. They facilitate transactions between the buyers and sellers for a fee.

One way out for e-commerce companies is to increase the numbers of sellers within these states and ramp up warehouses. But, that would lead to higher costs, and removing the huge advantage that they offer to consumers—cheaper products delivered at home. To ensure that there is some resolution to the issue, industry body Nasscom has proposed a committee to evaluate emerging trends and technologies, which should over time be institutionalised to provide inputs for a policy roadmap.

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