Budget 2015: E-commerce transactions, online shopping may turn expensive

The budget has proposed changes in the Service Tax in some certain e-commerce transactions that involve aggregator model, which may impact online aggregator taxi services.
Budget 2015: E-commerce transactions, online shopping may turn expensive

New Delhi: E-commerce websites and mobile apps based on 'aggregator model', including cab services and online shopping, may now become expensive as these companies providing services under their own brand are being brought under the service tax net.

The budget has proposed changes in the Service Tax in some certain e-commerce transactions that involve aggregator model, which may impact online aggregator taxi services.

'In respect of any service provided under aggregator model, the aggregator, or any of his representative office located in India, is being made liable to pay Service Tax if the service is so provided using the brand name of the aggregator in any manner,' according to the Union Budget 2015, presented by Finance Minister Arun Jaitley in Parliament.

'If an aggregator does not have any presence, including that by way of a representative, in such a case any agent appointed by the aggregator shall pay the tax on behalf of the aggregator.'

'The increase in Service tax from 12.36 to 14 percent would be a precursor to introduction of GST, would avoid the feeling of steep increase of taxes on service, on introduction of GST as the proposed rate under GST is 16 % or more. Service industries shall be geared to factor even a higher service tax cost next year,' says Sachin Menon, KPMG.

The Government has proposed introducing GST from April 2016 which will help ecommerce companies rationalize supply chains by addressing the taxation issues.

There are progressive plans to address infrastructural challenges that will help increase reach of eCommerce, to improve connectivity in the hinterlands under the Digital India Program by accelerating the NOFN rollout.

'It is a welcome move to encourage job creators by introducing a 1000 cr fund to enable the technology start up eco systems to incubate new ideas. We also expect a cascading effect of the reskilling program and the plan to set up new educational institutions to provide a boost to hiring the right IT engineering talents in the long term,' says Ashvin Vellody, Partner – Management Consulting, KPMG in India.

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