Implementation of GST will help resolve various issues concerning taxation and logistics with regard to e-commerce business, which has been recording rapid growth in the country, says a study.
The e-commerce space has rapidly evolved but several challenges have surfaced primarily in areas of taxation, logistics, payments, internet penetration and skilled man power, the CII-Deloitte report on 'e-commerce in India A Game Changer for the Economy' said.
"In taxation, for example, the lack of a uniform tax structure leads to several issues such as double-taxation or impediments in the free flow of goods across the country.
However, the ensuing Goods and Services Tax (GST) is expected to help in overcoming these challenges through a uniform tax structure," it said.
Clearly defined rules for e-commerce transactions in GST and a consultative approach while framing these rules will be favourable to both, the government as well as e-commerce companies, it added.
It also said timely and effective implementation of programmes like Digital India, Make in India, Startup India and Skill India will support the e-commerce ecosystem to overcome the challenges related to ineffective rural internet penetration and lack of skilled manpower.
The report has recommended several measures including in the areas of direct and indirect taxes to promote this sector.
It said documentation requirements should be simplified for applying tax treaty provisions such as declaration by the payee, as opposed to tax residency certificate; and simplified mechanism should be in place to obtain lower or nil withholding tax certificates for the companies, without requiring payer details.
"Unutilised business losses of e-commerce companies should not be lost even if the shareholding of the company changes by more than 49 per cent. Increasing the number of years within which the tax holiday can be availed by startups in the e-commerce industry," it suggested.
The indirect tax environment in terms of policy as well as administration would also be the key towards unleashing the potential of the industry in India.
"The indirect tax laws need to be evolved and re-designed to consider the changing business dynamics of e-commerce since the activities involve high volume and low-value supplies," it said adding a central committee needs to be constituted to oversee the implementation of a conducive environment.
States and local bodies should ensure that a comprehensive tax is uniformly interpreted, and implemented for facilitating the growth of the sector, besides GST laws should take into consideration the actual nature of the transaction to determine tax liability of the sellers.
The report also recommended that sellers should be allowed to register market place warehouses or fulfilment centres as an additional place of business under applicable state VAT as well as the proposed GST laws.
Entry and exit of e-commerce consignments across multiple states should be eased with uniform legislative structure and a single common GST rate should be proposed on all inter-state supplies so that businesses are not constrained to apply multiple rates, it said.
It said GST should be introduced uniformly across all states to ensure uniform tax structure.
The e-commerce industry is expected to form the largest part of the Indian internet market with a value of about USD 100 billion by 2020.
Further it said an integrated and coordinated approach is much needed between different government agencies, such as policy-makers, income tax, sales tax, direct tax, excise, and registrar of companies, to ensure faster turnaround, efficiency and transparency for all stakeholders in the e-commerce ecosystem.