Intrusive directive

Government's directive to e-commerce companies seeking details of top five sellers makes no sense and will only end up hampering investment flow

AuthorPublished: 23rd Oct 2019  12:12 amUpdated: 22nd Oct 2019  9:30 pm

The NDA government’s latest directive to the global e-commerce companies to provide details of the businesses of top five players on their platforms smacks of an unreasonably intrusive regime. As it is, the guidelines imposed by the Commerce and Industry Ministry were largely seen as stifling. This is not the ideal way to treat foreign companies operating in India after bringing in billions of dollars of investments. The government and the tax department have already instituted elaborate compliance requirements for online marketplaces under the GST regime. The government has enough data, as e-commerce firms are mandated to collect tax at source on their sales. This creates audit trails that the government can pursue. Vendors have to mandatorily register for GST irrespective of their turnover, making vendor-wise information such as taxes paid and input tax credit availed by them readily available. The data can be accessed from the GST Network. This being the reality, a directive seeking details of the top five sellers makes absolutely no sense. Apparently, the government wants Amazon and Flipkart to provide details of business done by their top five sellers and ascertain whether these marketplaces are compliant with the GST regime. The information has been sought following complaints by retailer associations like the Confederation of All India Traders (CAIT), which have alleged FDI norms are being flouted. They have been seeking government’s intervention to check alleged malpractices by Amazon and Flipkart, including deep discounting, predatory pricing and running exclusive partnerships with brands that are prohibited under the existing FDI in e-commerce rules.

It must be pointed out that the global e-commerce giants have created platforms for small and medium enterprises that do not have to spend money on building a distribution network of their own. If the objective of the government is to address the genuine concerns of offline retailers, then it should have referred their complaints to the Competition Commission of India (CCI) whose job it is to penalise unfair trade practices. The government must realise that inconsistent policy interventions will only end up hampering investment flow. It first allowed global players to set up shop in India via ‘marketplace model’ even though FDI was not allowed in multi-brand retail. But, after billions of dollars came in to set up millions of square feet of warehouses with world-class logistics, the government has been changing the rules frequently. In the latest change, the Industry Ministry wants these e-retailers to share details of the top five vendors and the kind of support provided by the platform to these sellers. If the government wants huge amounts of FDI flowing into the e-commerce space, it must stop pandering to every whim of local retailers who must learn to live with the competition.

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