Online buys to be cheaper by 12% if...

Online shopping would be cheaper by 10-12 per cent and prices of entertainment over broadband might fall by around 30 per cent, if the government heeds to a request to waive off e-commerce taxes.

The Association of United Telecom Service Provider of India and Internet & Mobile Association of India have sought waiver of sales tax for online transactions. Auspi has moved a step ahead seeking a legislation to enforce it.

"The government of India should recommend all the state governments to waive sales tax on goods and services that are transacted through the electronic mode (e-commerce)," said Auspi in its pre-budget proposal to the government.

The exemption should be for "the next five years and up to limits prescribed by the government", and this should be followed with a legislation to ensure execution by the state governments, it said.

This could mean a fall in prices, depending on the sales taxes (which is as high as 12 per cent in certain states) levied by various state governments. The recommendations were made to provide a "special emphasis to broadband growth" in the country.

Auspi has also made a similar recommendation to waive off entertainment tax, which is as high as 30 per cent in certain states, levied on broadband subscriptions and entertainment services offered through broadband or Internet platforms.

The association has also sought a legislation to ensure execution by the state governments. Meanwhile, IAMAI is also planning to follow suit. The organisation is planning to submit a proposal to the ministry of finance, seeking a exemption from sales taxes while conducting online trading.

The association has formatted a proposal, which is expected to be submitted to the government in a couple of weeks.

Confirming this IAMAI president Preeti Desai said, "There are a lot of tax-related issues that plague the e-commerce sector and need to addressed.

An online shopper needs a tax lawyer to untangle the value-added tax and other modes of tax structures before making a purchase, and waiving of tax would help in a smooth functioning of the industry".

According to a study by Internet & Online Association of India, e-commerce transactions in India are slated to grow to around Rs 1,180 crore (Rs 11.8 billion) in 2005-06 and rise further to Rs 2,300 crore (Rs 23 billion) by the next year.

"e-commerce is coming of age in India. Changing lifestyles and shopping habits, a similar metro, non-metro consumption of media and Internet and multiple Internet access points will propel online transactions to Rs 2,300 crore in 2006-2007 from the projected Rs 1180 in 2005-2006," she said.

Tax Factor

• The associations want the central government to recommend the state governments to waive sales tax on goods and services  traded online.
• The exemption should be for the next five years and upto limits prescribed by the government.
• Entertainment tax waiver, which is as high as 30 per cent in certain states, is also recommended.