Flipkart, Amazon ... As ecommerce booms, govt looks to define it

  • HT Correspondent, Hindustan Times, New Delhi
  • Updated: Jul 15, 2015 14:45 IST

Finally, the government has decided to face up to the question: what is ecommerce?

This at a time when the value of online transactions has already touched $3.1 billion (about Rs 19,650 crore excluding travel portals) through popular sites such as Flipkart, Snapdeal, Amazon, Paytm, ShopClues, and others.

The question has become contentious of late, with states beginning to look at ecommerce companies as fresh new sources of revenue and offline retail companies complaining that foreign investment laws favour their Internet rivals.

Commerce and industry minister Nirmala Sitharaman is meeting state commerce ministers and chief secretaries on Wednesday to thrash out a definition for ecommerce, which would pave the way for uniform and consistent tax and investment policies across the country.

This would be a day-long affair, beginning with commerce secretary Rita Teaotia first meeting the group followed by DIPP secretary Amitabh Kant in a separate session and ending with Sitharaman’s interaction, at Udyog Bhawan, the seat of the commerce ministry in New Delhi.

An ecommerce company can be fully funded by foreign direct investment (FDI) if it sells only to other businesses and not to consumers. No FDI is allowed for those selling directly to consumers.

However, some states, taking advantage of the lack of a clear and tight definition, have sent notices asking for more taxes. Karnataka, the hotbed of online transactions, wants Amazon to pay value-added tax on goods sold through the site because it sees loopholes in its fulfilment centre model. The matter is in court. Delhi, Uttar Pradesh, Kerala and others have also tried to find opportunities for raising tax demands.


According to reports, states are also asking for monthly sales data for the sellers registered on ecommerce platforms that work as marketplaces to bring the buyer and seller together.

“We cannot curb ecommerce. The march of technology is inevitable. We have to support it. We have to define ecommerce,” said a top government official, who did not want to be named.

Wednesday’s meeting is a critical milestone in arriving at the definition. Once that is done, the Centre will likely issue guidelines to the states on taxing ecommerce companies.

Meanwhile, concerned over declining exports, The government is looking to set up a trade facilitation council comprising members of the Centre and states to promote overseas shipments. The council which will be chaired by Sitharaman and will include secretaries of key ministries and state ministers.

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