Federation of Indian Micro and Small and Medium Enterprises (FISME) has sought parity in the rate of GST being charged for the online selling platforms with that of the off-line sellers.
According to FISME, one of the reasons for low digital penetration are the complex GST compliance requirements needed to make the transition from offline to online selling platforms. Presently, it is mandatory for online businesses to register under GST regardless of turnover. However, for offline sellers, it only applies to businesses with a turnover of over Rs 40 lakhs. This creates an unequal playing field between offline and online retail.
The suggestion for parity in GST came at a “National Workshop on Growth of Retail & E-commerce in India” to identify the policy obstacles in the way of small businesses and retailers in joining digital retail and e-commerce.
The consultation was attended by over 40 delegates representing MSMEs, think tanks, payment service providers, e-commerce and last-mile delivery platforms, and industry organizations such as Amazon, Meesho, Zomato, BlinkIt, PayU, Shiprocket, among others. This was aimed at providing constructive recommendations to the government on how offline and online channels can complement each other to embark on a new era for retail.
Some key recommendations tabled during the workshop sought MSME empowerment and an e-commerce policy.
MSMEs contribute almost 30% to the country’s GDP and play a critical role in making India a $5 trillion economy. In order to enable and empower them, provisions such as exemption from import duties on returns, inventory and order management support for new business, simpler funding options and subsidies for MSMEs, and efforts to drive awareness around digital marketing for new MSMEs, should be incorporated into policies.
The rapid digitization in India makes it crucial for MSMEs to make their business sustainable and resilient by leveraging e-commerce. There is a need for simpler and more enabling government policies for online businesses, removal of disparity between the regulatory requirements for online and offline sellers, and exemption of additional compliance obligations for online sellers.
There is lack of awareness amongst MSMEs about the benefits of e-commerce platforms and the regulatory requirements for selling online. A favorable policy particularly for women entrepreneurs to increase their participation, a uniform e-commerce logistics policy that makes it easy for new MSMEs to reduce their transactional cost, driving awareness on the onboarding process and making the process easier, are some ways that will help small sellers. Additionally, an informational portal that serves as a one-stop-destination for regulatory policies will also help educate MSMEs.
With a paradigm shift in buying habits in the last 2 years, consumers, especially from tier 2 and tier 3 cities, have increasingly adopted e-commerce. Consumers now have the convenience to buy and compare products online, shop from offline stores while paying digitally, and return products from the comfort of their homes, statement from FISME said.
Yet, currently, only around 10% of India’s small businesses sell online. One of the reasons for this is the multiplicity of regulations for online platforms, creating an overlap of rules and casting a sense of regulatory uncertainty on the entire ecosystem. There is also a lack of parity between the regulatory requirements for online and offline sellers, burdening online sellers with additional compliance obligations, such as the disclosure of the country of origin for their goods and services, ensuring the authenticity of imported products, and providing a comprehensive breakdown of product charges.
Moreover, there is a lack of digital literacy amongst small sellers on how they can expand their businesses through online platforms such as Amazon, ONDC, etc. MSMEs can leverage the expertise of online platforms such as easy access to exports, last-mile delivery solutions, warehousing and logistics support, and training and skill development programs.
Dr. Rajneesh, Additional Secretary & DC, MSME, Ministry of MSME, said, “India is an aspirational country – we are on our way to becoming a $5 trillion economy and will soon also be $10 trillion economy. This won’t be possible by only relying on traditional ways of businesses. E-commerce is a disruptive force for unleashing the potential of MSMEs in India. We, at the government, realise the relevance and importance of e-commerce. We are in line with the recommendations shared by FISME and the MSME representatives present today. We are committed to digitise businesses so that they can recognise the true value of e-commerce in growing their business and contributing to the the economy at large.”
Anil Bhardwaj, Secretary General, FISME, said, “There is an urgent need to educate MSMEs on the benefits of online selling, such as access to a wider audience and nuanced market intelligence. We need to establish a level-playing field between online and offline businesses, and limit the additional compliance burden imposed on online sellers.”