Amazon and Flipkart are pushing back against a proposed Indian tax on the online eCommerce market, saying it will stymie growth in the industry, according to a report by Reuters.
The tax would be 1 percent on every sale made by a seller on the eCommerce platforms, and it would take effect in April if approved by the country’s parliament. The proposed tax is a piece of a bigger plan by Indian Prime Minister Narendra Modi.
Modi wants to increase revenues from taxes to balance weaker customer demand in the country, which has slowed down the economy.
The Federation of Indian Chambers of Commerce and Industry (FICCI) said the tax will not help the eCommerce industry.
The tax “would cause irreparable loss to the entire industry with increased compliance burden,” the group said. “This will also lead to reduced trading activity.”
A number of third-party sellers are opposed to the tax as well, saying it will harm their ability to earn. They also argue that they’re already paying an India-wide sales tax.
One merchant said the tax will be “extremely detrimental to the growth and sustenance” for smaller sellers and will make their business model become an “unviable” one, according to Unexo Life Sciences, a seller of healthcare products on Amazon’s India website.
The eCommerce industry in India is growing, and expected to reach $200 billion by 2026, but with the boon has come more stringent regulations for companies like Amazon and Flipkart. Drivers for Uber and Ola would be affected by the tax, as well as restaurant delivery services like Zomato and Swiggy.
Modi said he wants to increase the country’s tax base to include cab drivers, food sellers and manufacturers, who don’t currently pay income tax. The prime minister said that only about 15 million of the 1.3 billion people in India pay income tax.