Consumers in India and across the globe switched to online commerce portals for the purchase of products, ranging from basic daily needs to branded goods. E-commerce as an industry has not just accelerated due to Covid-19, but the growth has seen an upward trend in India even before the pandemic hit the people.
Factors like improvement of the logistics network of e-commerce platforms in tier 2 cities and beyond, have led to an expansion of the online marketplace, leading to increase in demand for online shopping.
As the Budget 2023 is going to be presented after a day on February 1 by finance minister Nirmala Sitharaman, the industry is also seeking some announcements which are expected to help the sector and the economy.
Vidit Aatrey, founder and CEO, Meesho, “Budget 2023 gives our government an opportunity to put our MSMEs in the fast lane, building on its proactive efforts to transform the small business economy. First, the government can bolster working capital for e-commerce suppliers by lowering GST on input services like logistics and facilitating refunds of accumulated input tax credit. Over April-November 2022, ~2.9 lakh sellers on Meesho dealing in products that attract <18% GST saw input tax credit accumulation of Rs 265 crore.”
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Second, expediting the implementation of GST relaxation norms for small online businesses will allow them to realise their full potential.
Aatrey added that with the National Logistics Policy bringing down costs for the ecosystem and strengthening distribution networks, “the government could leverage the unmatched reach of India Post and Indian Railways to help our MSMEs meet rising e-commerce demand from small towns and villages in a fast and reliable manner, thereby boosting their competitiveness."
Saahil Goel, co-founder and CEO, Shiprocket highlighted that to make the $5 trillion GDP dream a reality, doubling down on digital infrastructure is vital.
Goel too urged that the budget should be centred around digitisation initiatives that empower the MSME sector.
The impact generated would be felt in the improved urban and rural mobility as we see more ports, roads, airports and other infrastructure developing, Goel said.
“This will culminate in reducing logistics costs - from roughly 13-14% of the GDP to 8%. The eventual target would be to mark India’s presence in the top 25 countries with the best Logistics Performance Index(LPI),” Goel added.
Ramesh Jhajharia, co-founder and CEO, Tradexa, elaborated on the need to recognise that the Indian e-commerce industry is recovering from the shocks of the pandemic.
There is a need to provide additional financing opportunities at an affordable interest rate, Jhajharia suggested.
The government can also bolster working capital for e-commerce suppliers by lowering GST on input services like logistics and facilitating refunds of accumulated input tax credit. Expediting the implementation of GST relaxation norms for small online businesses will allow them to realise their full potential.
“Tax reductions or incentives for investment in technology and infrastructure for D2C brand and retailers is another area that needs focus from the Union Budget,” Jhajharia urged.
Budget 2023 should also prioritise reforms to improve the process of conducting business for the MSME sector and address the competition to level the playing field for small and medium enterprises against e-commerce giants, Jhajharia said.
“Current measures are not effective as all the internal information, tools and strategy are shared with only selected partners. We also expect the government to come up with policies to increase the tax benefits for D2C brands or retailers on sale through their own web stores. Also there is an urgent necessity to implement policies that lower input costs, increase liquidity, promote financial inclusion and allow losses in startups to be carried forward by offering small firms with affordable financial products.”
Ajoy Thomas, vice president and business head (retail, e-commerce, logistics and transportation), TeamLease Services, feels that the e-commerce industry in India has managed to gain substantial growth owing to a rapid increase in internet user penetration, and greater demand for easy access to goods and services among consumers from all walks of life.
“The e-commerce sector should be looking for an impetus to digitisation and incentivising digital transactions in the upcoming Budget. I also hope that the government cuts the corporate tax rate across the board to spur growth,” Thomas urged.
According to an analysis by Grant Thornton, E-commerce in India continues to gain traction, with total market size expected to reach $188 billion by 2025 with 974 million internet users, 220 million online shoppers.
The rise of e-commerce has also been a boon for the allied sectors as well, with digital payments in particular receiving a major push. A KPMG analysis said that cash-based transactions have slowly given way to their online counterparts, with cards becoming the most preferred payment method for online shopping.
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