Still struggling to evolve, this nascent industry has been in news for a variety of reasons. For one, this ‘intangible’ sector has suddenly been witness to a few high profile disproportionate investments. For another, it has also come under intense public scrutiny in the wake of a technical glitch-induced sale fiasco faced by an online marketplace. Coming as it does against these backdrops, New Delhi’s move to push for a fresh tax regime for global e-commerce companies assumes considerable significance.
Surely, the demand merits serious consideration, especially since these global firms run their operations through a web of complicated structures that aren’t easy to decipher. The Indian initiative comes ahead of the G20 meeting in Brisbane. And, the timing of its demand is not lost on the international trade watchers. After all, the leaders of G20 are gathering in Brisbane to discuss the establishment of a new international tax regime that will leave little room for smart multi-national firms to skirt levies. E-commerce, especially, poses a new challenge to taxmen across the globe as its activities cut across borders, and impact differently the economies of countries.
In India, e-commerce is still an unclear arena. Flipkart, Snapdeal and Amazon, however, have ensured that this industry hogs considerable column space in the print media. Competitive investment announcements of hitherto unheard of size in the domestic context, no doubt, signals the importance of India as a new investment destination especially in the e-commerce space. Indeed, this vote of confidence is a moment of joy and elation. Yet, one needs to be cautious in jumping to any quick conclusion.
It will be in the fitness of things to remember that these e-tailers, who have seen huge fund flows in the recent past, are essentially market places (where they provide a web-based platform for vendors to congregate in a virtual space - like a typical Mandi in village-parlance – and offer their products for sale). They have opted for marketplace model so as to seemingly conform to the policy prescriptions. This is the result of a general policy articulation i.e. e-commerce cannot be back-door entry into multi-brand retail.
Given this generic policy prescription, one is not quite sure how people put so much money into an online marketplace. Can their marketplace only activity justify the kind of money they attract? Do they have robust business model that could reward the expectation of such big ticket investors? These and several other questions beg convincing answers. Not just the e-tailers but the policy planners at the government level, too, need to clear many a misgiving.
Are we going to play only a reactive role in e-commerce field? Have we got ourselves entangled in a web by letting the marketplace model? Questions have already been raised on our policy approach to e-commerce. As the industry grows – as it is bound to, given the convenience and competitiveness it offers to consumers – and e-tailers turn innovative and smart, tensions are sure to surface between stakeholders. In that scenario, laws as applicable at the moment will be differently interpreted to the convenience of individual participants. It is precisely for this reason that there is an urgent need for putting upfront a comprehensive and all-encompassing policy framework that defines eligibility, rights, privileges and responsibilities of multiple players and stake-holders across the e-commerce chain.
Still a largely undefined space, e-commerce in India falls under multiple ministries. A host of government arms – from commerce to finance ministries and state administrations – try one way or the other to control the e-commerce industry. It is time e-commerce was brought under a unified authority, especially in view of the huge money coming into this space in such a short period.
Given the size of its population, and given the young profile of its content, India will be well served with a robust e-ecommerce structure. Its demand for a new international tax order for e-commerce companies, perhaps, indicates the shape of things to come in the Indian e-commerce industry.
jagannathan.kt@thehindu.co.in
