The growing ecommerce sector is expecting further relief in terms of tax and GST in the upcoming union budget. Last year, GST was one of the biggest economic reforms that helped various sectors of the economy and particularly smoothened the tax process for ecommerce companies. The industry feels there are still more reforms that need to be done in terms of the slabs as well as Tax Collected at Source (TCS) levy till March 2018.
“On GST, while Tax Collected at Source (TCS) has been suspended till March 2018 for eCommerce companies, it can prove to be extremely challenging to not only register in several states but also comply with various onerous obligations in each state for the eCommerce companies. This provision should be deleted altogether,” says, Sandeep Ladda, Global TMT Tax Leader, and Technology Sector Leader, Partner, PwC India.
Angel Tax exemption
According to the last report by Nasscom on the startup ecosystem, the seed stage funding dropped by 53 percent in last year. This was mainly due to the angel taxation of 30.9 percent still being imposed. Most startups and industry bodies feel that to encourage innovation as well as for a startup to gain market value, early-stage investments are very important. The industry expects this taxation issue to be addressed in the upcoming budget.
A similar view was expressed by Mitesh Shah, head of finance, BookMyShow, who expects the upcoming budget to clarify and ensure that no other state body taxes are imposed.
“Given the NDA Government’s strong intent to drive reforms, we definitely anticipate some rationalization in tax structures and strengthening of related infrastructure. While the GST council has already taken some proactive measures, we hope the Government will re-emphasize on a roadmap for simple and business-friendly GST-compliance and administration systems,” says Shah.
He further adds, “More importantly, over the course of next few months, initiate all necessary constitutional amendments to ensure that there are no other State or Local Body Taxes, as they defeat the very purpose of bringing uniformity in the tax structure while ensuring proper input credit for taxes.”
Another area of concern that a lot of payments and lending companies feel is in terms of exempting the marketing and promotional spends in GST.
Satya Prabhakar, founder and CEO of online classified company Sulekha says that most MSME’s may come under the GST composition scheme that has a business turnover limit of Rs. 1.5 crores currently. “Budget 2018 can look to see if marketing and promotional spends done by such entities are fully exempt from GST. This will help them to further invest and grow their business,” he adds.
Further reduction in certain GST slabs
A lot of ecommerce companies are also expecting that the upcoming budget announcements include the reduction in certain GST slabs particularly in healthcare and hotels.
Meena Ganesh, MD and CEO, Portea Medical, explains: Critical care equipment like Ventilators, Oxygen Concentrator, BIPAP, CPAP are under 12 percent GST and 7.5 percent customs duty. She says, “Considering these are life-saving equipment, they should be made tax free. Similarly, equipment like the wheelchair, walking stick, crutches which were earlier tax-free under VAT, should remain so under GST as well.”
Currently, such equipment attracts 5-7.5 per cent GST. The healthcare industry also expects lowered GST on spare parts for medical equipment which are currently at 28 percent GST.
Even the online travel aggregators for hotels have a similar demand. Currently, any hotel booking above Rs 7,500 attracts 28 percent luxury tax. This the industry expects to be reduced to 12 percent.