Amazon, Flipkart to challenge the new Indian tax on online sellers

NEW DELHI (Reuters) – Amazon’s and Walmart’s Flipkart are among the online retailers to demand that India scale back a proposed tax on third-party sellers on their platforms, saying that the costs of compliance will hurt the young industry, according to a document seen by Reuters.

A FILE PHOTO of A shipment is moving on a conveyor belt at an Amazon Fulfillment Center and BLR7) in the outskirts of Bengaluru, India, from September 18, 2018. REUTERS/ Abhishek N. Chinnappa

Online retailers braced for a possible 1% tax on all sales made by vendors at the platform of April, if the proposal is approved by the parliament in the next month.

The move is part of a broader plan by prime Minister Narendra Modi’s government to increase tax revenues and a sharp economic slowdown as a result of the weakening of the demand of the consumers.

However, the tax will hurt the country’s young e-commerce industry, according to a presentation prepared by the Federation of Indian Chambers of Commerce and Industry (FICCI), the government and reviewed by Reuters.

“(It) would result in irreparable damage to the whole of the sector, increased compliance expense,” the lobby group said ” on behalf of the e-commerce business. This will also result in reduced trading activity.”

Amazon declined to comment. A spokesperson of Bengaluru-based Flipkart said that it had to be to work in the industrial rooms, the voice of the vendors provide, and to highlight the increased cost of compliance.

The Ministry of Finance declined to comment.

A number of third-party vendors, are also pushing up against the tax, arguing that it would have a negative impact on their working capital, adding that they are already making a contribution to a national sales tax.

The tax would be “extremely detrimental to the growth and maintenance of small online retailers, and the model is “inefficient”, Unexo, Life Sciences, and a seller of health care products on the Amazon web site in India, it said in an e-mail to the Central Board of Direct Taxes, which was seen by Reuters.

Online vendors, or vendors with a turnover of less than a half-a-million rupees in the previous year, as well as brick-and-mortar retailers, you will be exempt from the new tax, however, they are subject to the national vat.

India’s e-commerce sector is expected to rise to $200 billion in 2026, as the rising smartphone usage, and budget information to help the hundreds of millions to shop online for everything from groceries to furniture. However, companies such as Amazon and Flipkart will also have to face stricter regulation, and an antitrust probe.

The tax would apply to the income of the driver on the way from companies Uber and Ola, as well as the sale of restaurant aggregators, such as Zomato and Swiggy.

Ola and Uber declined to comment, as Swiggy and, Zomato did not respond to requests for comment.

Modi is pushing to expand in India, the tax base of hundreds of thousands of manufacturers, food vendors and taxi drivers, who at this time do not have to pay tax on the income of a senior Finance Ministry official said. Modi has said that the 15 million of India’s 1.3 billion people in India pay income tax.

New Delhi is expected to collect about € 30 billion Indian rupees ($419.46 million) as a result of the tax and customs administration, the Ministry of Finance said. It will also provide information on the magnitude of billions of dollars in sales.

Editing by Alexandra Ulmer, editing by Louise Heavens

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