BENGALURU: The government will set up e-commerce export hubs under a public-private partnership model to enable small and medium-sized enterprises to sell their products in international markets. Finance Minister Nirmala Sitharaman said in her budget speech that there is a proposal to reduce withholding tax rate on e-commerce players from 1% to 0.1%, effective from October 1.
Flipkart Group CEO Kalyan Krishnamurthy said the cut in tax deduction rates will free up significant working capital for merchants. He said the provisions in the Budget will provide significant support to the industry by removing bottlenecks in the supply chain, promoting clusters, setting up e-commerce export hubs and improving credit flow to small and medium enterprises.
Leading e-commerce players in the country have welcomed the move. “Reduction in withholding tax rates for e-commerce players is a much-needed change that will increase liquidity. Earlier, small and medium-sized businesses had to wait a year to claim refunds. This change will improve working capital efficiency and create greater online-offline parity,” said Dilesh Bansal, chief financial officer, Meesho.
Experts say the focus on e-commerce hubs will help direct-to-consumer businesses, including smaller vendors and aggregators, which will also improve their access to markets.
Anand Ramanathan, partner and consumer goods and retail practice leader at Deloitte India, said the focus on e-commerce hubs through the PPP modalities is a creative intervention to help MSMEs in the sector unlock the benefits of the cluster approach such as cheaper financing and access to export markets.
“Co-location will also help improve efficiency in the logistics value chain for e-commerce operators. The approach will also help organize supplies in sectors that are heavily dependent on skilled artisans and weavers such as footwear, apparel and jewellery. Clusters will also help in improving the quality of production and certification, which will help in exports,” he said.
Reduce TDS from 1% to 0.1%
The withholding tax rate on e-commerce businesses is proposed to be reduced from 1% to 0.1%, effective from October 1. This measure will result in significant savings in working capital for merchants.
