India’s e-commerce business to be redefined

Commerce and Industry Minister Nirmamala Sitharaman has said the government is working on a proper definition to bring clarity on a host of issues including taxation, in view of ‘very complex’ and ‘multi-layered’ business structure of e-commerce firms. Sitharaman said that they have had meetings with stakeholders and the state governments had given their inputs. They felt that the whole thing should be defined as what is a market place, why it is a market place, when it is portal related, etc. Also, the minister clarified that the ministry was not looking at foreign direct investment (FDI) in e-commerce retail.

As most companies in this sector are dealing in logistics and keeping inventories, e-commerce itself has a lot of issues she said. The entire discussion was about the various levels at which level playing field is absent (for brick and mortar stores), and many states had started taxing these firms as they keep inventories, she further added.

The minister added that state governments thought it fit to have VAT on them or levy service tax, and eventually these companies started questioning as to why they were being taxed. However, at the same time, e-commerce strictly means creation of the portal where a buyer and a seller come together but the companies don’t finish off with that; they also hold stocks of one seller or many sellers, Sitharaman said.

E-commerce activities refer to the activity of buying and selling by a company through an e-commerce platform according to the current FDI policy. 100 per cent FDI is allowed in business-to- business (B2B) e-commerce and not in the retail segment at present.