Hike in service tax may affect e-commerce

March 01, 2015 12:00 am | Updated 05:58 am IST - Bengaluru:

The hike in the service tax rate in the Union Budget for 2015–16 from 12.36 to 14 will impact online buyers.

The hike may be passed on to the customers, which will result in a higher rate while shopping online.

Praveen Sinha, founder and MD, Jabong.com, said, “The government’s decision to hike service tax rate is a disappointing move.”

The hike is likely to impact the nascent taxi aggregator segment also as the traveller may need to pay more.

‘Tax burden will increase’

Raghunandan G., CEO and cofounder, TaxiForSure, said, “If the government is going to raise the tax burden so significantly, it may only increase the cash burn in the system, thereby reducing our efficiencies. We can opt to pass this on to our customers, however, this step may push them away from our services, as the cost to the customers may increase. We hope the government would have taken this step in tandem with the introduction of the Goods and Service Tax (GST).”

Ashvin Vellody, partner–management consulting, KPMG, said, “The expectations from the e-commerce industry stakeholders from the Union Budget were definitely high this year, and while the Finance Minister provided a set of welcome measures, he stayed away from big bang policy announcements specific to this space. The sector expected welcome announcements on GST, and on creation of a conducive environment for foreign investment inflow and improvement in ease of doing business.”

GST implementation

According to Brijesh Agrawal, co-founder, IndiaMart, specifying a clear date of GST implementation is expected to give a huge boost to the e-commerce space. “GST implementation will ensure single marketplace which will break tax barriers between States, bringing in a uniform tax rate across the country. Overall benefits received by the sector would be sufficient to offset the rise in service tax clause,” he said.

The hike is likely to impact the nascent taxi aggregator segment also as the traveller may need to pay more

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