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'If not FDI, rollout GST' - Indian ecommerce retailers

26
Sep '12
Though the Indian government has given a nod to 51 percent foreign direct investment (FDI) in multi-brand retail, it has not done so for the burgeoning Indian ecommerce industry. However, the ecommerce sector is demanding that the government urgently rollout Goods & Service Tax’ (GST).        

According to Forrester – an independent research firm, the overall ecommerce trade in India is expected to be around US $1.6 billion in 2012. This figure according to Forrester is expected to skyrocket five times to $8.8 billion by 2016.

Suneet Manchanda of India's first women’s only shopping website – Ladyblush says “We think that restricting FDI in online retailing is more out of compulsion than anything else, since FDI implementation is based on approval from the states and not the Central Government.

“As we understand today, certain states will allow FDI while others will not, and since etailing is a borderless transaction, restricting delivery of a consignment to a non-FDI state would have made it extremely complex and unattractive. However, We expect FDI in ecommerce to open up as soon as FDI is implemented across all states”.

Abhishek Goyal – CEO of fashion e-retailer fashion&You says, “We expect 51 percent FDI in ecommerce to be permitted very soon. The government has taken the first step in the right direction, although we too would have been pleased if it had been extended to our industry also.”

Abhishek adds, “Foreign ecommerce companies have been in business since the last 15 years, while in India it has come in to its own since the last 2-3 years. By opening the sector, they would have brought in a lot of expertise and also capital, which would result in the industry growing faster, with the consumer being the ultimate beneficiary”.

Manu Midha - Vice-President at Infibeam – a multi-product ecommerce retailer including apparels is of the opinion that most of the ecommerce retailers have already attracted investments from foreign venture capital investors. “However since the government has not allowed FDI from ecommerce retailers this time, retailers like Amazon, etc will still have to wait for some more time”, he explains.

He observes, “However, the Indian market is very different from those in the developed markets, which have high labour costs and makes ecommerce attractive. We in India, have a dual tax structure and since we have low labour costs, it makes sense for small stores to operate. Over and above we have various intermediates in the distribution structure”.

According to an expert on ecommerce who does not want to be identified, “The government has done right by not permitting, as these companies will not bring investments in to back-end as well as not be creating jobs in back-end. The government in its wisdom has allowed Indian ecommerce sites to become structurally strong, before giving the nod to FDI”.


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