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GST policy on e-commerce may make life difficult for cab startups: Experts

GST policy on e-commerce may make life difficult for cab startups: Experts

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A Bengaluru-based startup has filed an appeal questioning a July 27 ruling by GST authorities in Karnataka which said app-based cab aggregators must pay GST on trip fares collected by private cab drivers/owners tied to their e-commerce platforms.

Opta Cabs, a startup that plans to offer app-based cab hailing services, has preferred an appeal to the ruling by the GST Authority on Advance Ruling in Karnataka. Its founder Chandrakaladhar Reddy (44) said: “This kind of regulations impose huge legal costs, and create an entry barrier for startups like us. The policy needs to change.”

Sections of GST experts believe the GST policy requiring aggregators to pay GST on fares collected by cab drivers will hurt startups as “it affects their liquidity and increases their operational risks and costs.”

The provisions of law and notifications are detrimental to the interest of e-commerce players, especially startups, engaged in the business of providing taxi hire services through marketplace model, said M.A.Maniyar, GST consultant and former Deputy Commissioner of Commercial Taxes, Karnataka. A former tax commissioner, not willing to be identified, too felt the GST policy approach seemed to skew in favor of deep-pocketed aggregators, and not budding platforms.

PV Srinivasan, a mentor for indirect tax expert committee at Bangalore Chamber of Industries & Commerce (BCIC), felt the GST policy, in this case, militates against the government’s policy of encouraging self-employment. “The policy looks discriminatory against small entrepreneurs, and imposes a tax cost on e-commerce cab aggregators on a consideration that they don’t collect.”

The GST legislation has indirectly led to taking away the benefit of the GST exemption available to individual/small taxi operators for annual turnovers below Rs 20 lakh, said Vivek Pachisia, tax partner at EY. According to Maniyar, aggregating the fare collected by all the taxi drivers/owners and subjecting the same to tax at the hands of the e-commerce operator is unreasonable.

Like it does with e-commerce retailers, the GST policy could have asked app-based cab aggregators too to collect 1% TCS (tax collected at source), instead of transferring the entire burden on the e-commerce company, Srinivasan said. “When the transport sector is already paying steep taxes with fuel price steadily increasing, I think if this additional GST on e-commerce platforms needs a relook.”

EY’s Pachisia, however, said the government has in a way expanded the tax-base by indirectly including even small service providers within the GST net because they provide the services through an e-commerce platform while the same service would not be taxable if they were to provide it without platform support. “Eventually, the impact of GST is borne by the customers and taxi-operators and not e-commerce platform operator,” he said.HG Kumar, former Additional Commissioner of Transport, Karnataka, clarified that small e-commerce players with less than 100 cabs can operate just with a radio taxi license while those above 100 cabs require aggregator license. Only Uber, Ola and Utto have taken aggregator license in Karnataka.

An Uber spokesperson, in an email, said: “Basis the legal requirements as stipulated and verified with the concerned authorities, Uber ensures GST compliant receipts are generated for every trip taken. Separately, as a company, Uber also makes the relevant GST payments and complies with the requirements and necessary disclosures.”


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Source: economictimes.indiatimes
How e-commerce firms will gain in the GST regime

How e-commerce firms will gain in the GST regime

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GST should end numerous hurdles that state governments put up against online retail firms, such as Amazon and Flipkart, to protect offline retailers and state revenue.

Goods and Services Tax (GST), being a ‘destination-based tax on consumption’, is also set to address concerns of state governments that the business models of e-commerce firms erode their tax base.

E-commerce

E-commerce companies such as Amazon Seller Services Pvt. Ltd and Flipkart Ltd are set to be among the winners in the transition to a single national market which will be created by the proposed goods and service tax (GST).

GST should put an end to the numerous hurdles state administrations have been erecting amid complaints that online sales, and the hefty discounts they come with, are eroding the sales and profitability of physical retailers as well as state revenues.

It will mean a shift from the current model of taxing inter-state transactions, where the manufacturing state gets the proceeds of a 2% central sales tax on goods sold in other states. This will make way for a system in which the consuming state will get proceeds of taxes on interstate supply of goods. The integrated GST, which applies to inter-state supplies, has central and state components of roughly equal measure.

“We believe GST is good for the e-commerce industry as it would eliminate hurdles in inter-state delivery and subsume the entry tax introduced on e-commerce shipments by some states,” an Amazon India spokesperson said. Flipkart did not immediately respond to a request for comment.

GST, being a ‘destination-based tax on consumption’, is also set to address concerns of state governments that the business models of e-commerce firms erode their tax base.

Getting hassle-free access to markets across the country will benefit the e-commerce sector which, according to a January 2017 report by industry lobby group Associated Chambers of Commerce and Industry of India, is expected to touch $17.52 billion in turnover by the end of 2018.

E-commerce firms achieve efficiency by building warehouses in a few states where merchandise is stored for selling to consumers across the country. These companies typically offer the service of an online marketplace, and in some cases a warehousing facility to vendors, and pay service tax to the central government on any fee or margin received for that. The liability of value-added tax (VAT) to be paid to the state government at the business-to-consumer level is on the vendor.

The Karnataka government had in 2015 asked e-commerce firms to take the responsibility of paying VAT for the sales made by third-party vendors on their platform, leading to litigation between the state and firms such as Amazon.

Experts said that e-commerce firms being asked to provide details of sales by vendors on their platforms was fair, but holding them liable for VAT payment was not.

E-tailers work on thin margins of 3-4%. If they are forced to pay VAT at 14.5% on the product’s value, it won’t work, said an expert who asked not to be named.

“In the GST regime, the vendor has to pay GST and instances of holding e-commerce companies responsible for vendors’ tax payment will come down. In general, GST introduction is good for e-commerce companies as GST is a destination-based tax on consumption, unlike central sales tax on inter-state sale of goods which is origin-based,” said Pratik Jain, leader, indirect tax, PricewaterhouseCoopers India.

Online retailers face one potential irritant in GST—a 1% tax collected at source from vendors and paid to the government. “Vendors will get full tax credit on this 1% tax, but it could cause administrative inconvenience to e-commerce firms when products are returned by the consumer,” said R. Muralidharan, senior director, Deloitte in India.

Source : LiveMint