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FOES TO BROS

At long last, there’s one thing that Amazon, Flipkart and Snapdeal agree on

Manu Balachandran
First time together.
By Manu Balachandran
Published Last updated This article is more than 2 years old.

By Flipkart executive chairman Sachin Bansal’s own acknowledgement, it was the first time that India’s biggest e-commerce companies came together on one platform.

On Feb. 09, at New Delhi’s Federation House—the headquarters of industry body FICCI—the founders of Flipkart and Snapdeal, along with the India head of Amazon, came together for a common cause: to ask the Indian government to remove a clause in the much-awaited goods and service tax (GST).

The Narendra Modi government has proposed tax collection at source, a new framework under the GST, to tax sellers on internet marketplaces. Under the clause, e-commerce marketplaces must deduct 2% of the amount payable to the supplier of the goods or services and, deposit that with the government. The idea is to ensure that sellers don’t avoid their taxes.

“We are estimating that close to Rs400 crore of capital per annum will be locked up in the system, which will not be accessible to sellers. That will certainly eat into their working capital,” Bansal said.

India’s online sellers currently file their taxes mostly towards the end of the financial year. Under the new clause, tax will be collected upfront, and any claims can only be made after 30-50 days. “It is a measure that goes against the spirit of making India digital and improving the ease of doing business in the country,” Snapdeal founder Kunal Bahl said. “We are positive that the government will address this crucial concern.”

India’s e-commerce industry is worth $41 billion and is expected to be worth some $103 billion by 2020, contributing 4% to the country’s GDP according to consultancy firm, KPMG.

A unified stand by the e-commerce giants is somewhat ironic, since it comes at a time when all three have been sniping at each other. Just two months ago, in a veiled attack on Amazon, Flipkart’s Bansal said foreign competitors are destroying the Indian domestic market, hinting at the need for protectionist policies.

“I think what we need to do is what at some level China did: [tell foreign players that] we need your capital, but we don’t need your companies,” Bansal said. Amazon’s total committed investment in India is much higher than the total funds raised by Flipkart (around $3.2 billion) and Snapdeal (around $1.8 billion).

Months before that, Bansal and Bahl were involved in a Twitter exchange that underlined the fierce rivalry between their two companies.  ”Alibaba deciding to start operations directly shows how badly their Indian investments have done so far,” Bansal tweeted. Snapdeal had raised $500 million from investors, including Alibaba, in 2015. Immediately Bahl tweeted back, “Didn’t Morgan Stanley just flush $5 billion worth market cap in Flipkart down the toilet. Focus on your business, not commentary.”

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