As e-commerce transactions involve multiple parties and spawn across nations, the Internet and Mobile Association of India has sought clarity on taxing them under the proposed Goods and Services Tax (GST) regime.
“Sector-specific provisions are needed in GST for taxes on transactions in e-commerce space, as multiple parties and transactions across nations are giving rise to international and Indian regulatory issues,” the association said in a joint report it prepared with global professional services firm PricewaterhouseCoopers (PwC).
With rise of e-tail firms like Flipkart, Snapdeal and Amazon and growing number of online shoppers, the report said as GST would affect the fundamentals of business in the country, it was essential to assess its impact on online marketplaces.
“There is a need to determine the jurisdiction where value creation takes place and multiple taxes are levied at different stages of transactions and their implication on the FDI (foreign direct investment) policy,” it said.
Similarly, lack of clarity on e-commerce business models will lead to conflicting claims on the jurisdiction entitled to tax transactions and burden of multiple compliances.
“GST regime is perceived as a major indirect tax reform to usher in a simpler tax structure with seamless credit chain. Though its one tax, one market system is suitable also for e-commerce business, sector-specific provisions have to be introduced in the regime for providing seamless service to clients,” PwC India partner Sandeep Ladda said in the report.
The report recommended that the location of service provider should be specified with the place of supply for e-tailers in case of B2C transactions and of the service recipient in case of B2B transactions.
“Rules should be framed on when a service will be deemed to be inter-state or intra-state as it is difficult to identify such transactions in case of services provided over internet,” it said, favouring a lower tax regime, with not more than 18 percent on services and applicable across the country in line with one tax, one market concept.