Thursday, 16 June 2016

Draft GST Law


NDA government has just released , DRAFT  GST  LAW , for consultations among stake-holders


In the matter of  "  E-Commerce transactions  "  , the draft proposes :

"..... a tax collection at source for E-Commerce companies  "


MINT ( 15 June 2016 ) interprets this as follows :

"  This means that any payment made to a supplier by an E-Commerce company will be subject to tax collected at source  "


In the matter of  "  Intangible and Works Contract to be classified as Services " , it says :

"The law classifies intangibles such as software and works contract as Services "


MY  TAKE :


A Commerce by any other name ( including " E Commerce " ) , is still sale of " Goods / Services " by a Seller , in exchange of " Value " , ( usually money - when that exchange is not a Barter Deal ) , received from the Buyer


E - Commerce " is nothing more than " Commerce " , where such exchange of values , take place electronically , as opposed to physically . It still remains Commerce , even when perceptions differ



Hence , regulations / controls / taxation etc that govern E-Commerce should , essentially remain the same as in case of Commerce




Mere elimination of an intermediary ( Distributor / Wholesaler / Dealer / Agent / Stockist etc ) , from the " Supply Chain " , itself cannot be the determining criteria


Take a look at the various parameters of " Commerce " outlined in my following blog of 15 Sept 2015 :

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Not an easy task to define what is E Commerce ( and what is not ), considering all the possible permutations / combinations ( running into LAKHS of them ! ) , of the following elements :


#    NATURE


      *  A physical " Product " ( Capital Goods / FMCG / Consumables / Perishables )

      *  A virtual " Service "    ( Medical advice / Legal advice / Consultancy / Software etc )



#    GEOGRAPHIC   SPREAD


     *   Across National boundaries    ( International Trade )

     *   Across State boundaries        ( within India )

     *   Across Municipal boundaries   (within a State )



#    SUPPLY- CHAIN   /  INTERMEDIARIES


     *   Mfr  >  Distributor  >  Dealer  >  Retailer  >  Buyer

     *   Mfr  >  Buyer

     *   Any disintermediation in the above chain



#     ORDER  PLACEMENT  /  ACCEPTANCE


     *   In a physical location ( Shop / Store / Office / Factory / Home )

     *   In a virtual location   (Web site/Mobile App/SMS/ Email / Phone / Video Conference  )



#     DELIVERY


     *   Physically in a Shop / Store etc where Buyer collects / picks-up from shelf

     *   Delivered to Buyer's location, thru Delivery Boy

     *   Delivered to Buyer's location, using a Drone

     *   Delivered to Buyer on his home-based 3D Printing Machine  ( using internet )



#    PAYMENT


     *   Cash against delivery

     *   Pre-paid / Post-paid Cheque

     *   Credit / Debit Cards across counter

     *   Credit / Debit Cards thru online Payment Gateways

     *   Through Mobile Wallets

     *   Electronic Bank Transfer

     *   Using Virtual Currency like Bit-Coins

     *   Barter of Goods or Services



#    FOREIGN   INVESTMENTS


    *   FDI in Manufacturing / Supply Chain / Payment Gateways - Apps-  Mobile Wallets 

    *   FDI in Web sites like Amazon - Flipkart - Alibaba - Snapdeal etc ( What percentage ? )



Can you think of any other " Elements " that I have forgotten  ?


In any case , given the fact that there can be lakhs ( if not millions ) of permutations / combinations of the above-mentioned elements , one must not attempt to define what is E Commerce ( and what is not ) , by inclusion or exclusion of these elements in definition


Such a complex definition would lead to thousands of court cases involving Governments and each court interpreting the definition , differently  !


The only definition that would satisfy  ALL  of these permutations / combinations , is :


Any exchange of " Value " between any number of parties , involving ,


>  Goods or Services , on the part of one party


with,


>  Money or its equivalent consideration , on the part of a second party


with or without using,


>  Intermediary services , on the parts  of any other parties


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I hope the  " DRAFT GST LAW " refrains from defining " E Commerce " separately - and as distinct from plain vanilla commerce


GST Law must adopt a BROAD / ALL-ENCOMPASSING , definition of  " Commerce "

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17   June   2016

www.hemenparekh.in / blogs

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