Indian government has been streamlining e-commerce and activities related to the same for the past one year. Initially an e-commerce friendly foreign direct investment policy was formulated by Indian government. The same may be accessed at Consolidated FDI Policy Circular Of 2015 By DIPP (pdf). Then guidelines were issued to further clarify the e-commerce related business activities in India. The same can be accessed at Guidelines For Foreign Direct Investment (FDI) On E-Commerce 2016 Series (pdf).
Now Indian government is testing a software that intends to capture crucial data related to export of e-commerce related goods and services in India. Indian government has already indicated that it would impose tax on online transactions happening in India for certain cases. For instance, according to the Budget announcement, any person or entity that makes a payment exceeding Rs 1 lakh in a financial year to a non-resident technology company will now need to withhold 6% tax on the gross amount being paid as an equalisation levy.
The said rule is applicable when the payment is made to companies that don’t have a permanent establishment in India. This tax, however, is only applicable when the payment has been made to avail certain B2B services from these technology companies. Specified services include online and digital advertising or any other services for using the digital advertising space. This list, however, may be expanded soon.
Indian government now plans to tap data on overseas online sales as part of efforts to boost outbound shipments through e-commerce platforms and channel benefits to these dedicated exporters. Indian government has made a software for e-commerce exports that would capture data for further action and policy decisions. This would benefit small exporters as customised solutions can be then provided to them by Indian government. Presently the value of items shipped through couriers is often not captured in export data because they are categorised as samples or gifts. These are labelled as samples because under the normal export channel exporters have to file shipping bills and are subject to checks by custom officials, which is cumbersome, especially for small exporters with low-value shipments. The software intends to mitigate these rigours and further help in claiming duty drawbacks for e-commerce exports. To give benefits to small exporters, the director general of Foreign Trade has defined “e-commerce” as the buying and selling of goods and services, including digital products, conducted over digital and electronic networks.
These steps are being introduced a year after the government provided export incentives to the shipment of goods through couriers or foreign post offices using e-commerce in the Foreign Trade Policy of 2015-2020. At present, exports that can avail of these sops are capped at Rs 25,000 per consignment, a value considered small for such purchases. Moreover, only six product categories i.e. handicrafts, handlooms, toys, customised fashion garments, books and leather footwear are entitled to these incentives under the Merchandise Exports from India Scheme (MEIS).