KARACHI:
Experts have urged the government to drop the proposed general sales tax (GST) on e-commerce marketplaces, claiming that it would stunt the embryonic industry’s growth.
“Marketplaces are a new phenomenon in this country and need much more time to grow and strengthen,” Nest I/O Founder Jehan Ara commented on his official Twitter account. It will be too much for them to absorb a 17 percent GST.”
“Do we want to put a stop to it? ” she inquired.
“We as an online marketplace have seen several constructive developments in the federal finance bill 2021,” Daraz Group Global CFO Kiran Faruqi told The Express Tribune. “However, there have been certain changes proposed in the Sales Tax Act 1990, which pose a threat to the nascent marketplace industry in the country.”
According to her, the plan specifies that platforms that operate online marketplaces will henceforth be considered tier-1 retailers and will be taxed at a rate of 17% on all transactions done on the platforms.or an online marketplace model to work, the title of goods must remain with the seller – not the online marketplace as it would be the case if the proposal is implemented,” Faruqi highlighted.
According to her, the idea effectively turns the online marketplace become a legal vendor rather than the product’s actual seller.
“Other countries, including several Asian countries, have put taxes on online marketplaces, but the rates are quite low,” Topline Securities ICT analyst Umair Naseer said. “The government’s goal is to expand the revenue base, but the equation should also benefit all stakeholders.”
“We believe that if the idea is passed, it will severely impede the industry,” she stated.
Without online marketplaces that enable merchants access and engage with users by leveraging the internet and cutting-edge technology, SMEs would be unable to compete effectively and complete as many transactions, resulting in a reduction in overall economic activity, job creation, and tax collections.
“These policymakers have not understood the basic principle of sales tax,” UNISAME President Zulfikar Thaver remarked, echoing the sentiments of his colleagues.
“According to the sales tax handbook, it is imposed to discourage spending on the item, and it is mainly imposed on imported commodities or items manufactured of imported raw materials; such as cigarettes, liquors, luxury items, and so on,” he explained.
According to Thaver, retail firms have chosen online platforms as a result of the Covid-19 outbreak, and instead of assisting them, the government has imposed a sales tax.
Consumers would lose convenient access to a huge number of commodities across categories that are crucial in their everyday lives, according to the Daraz official, which would negatively effect their quality of life.
“We believe it would be more beneficial to focus on creating incentives for unregistered retail participants to digitalize and register themselves to achieve the ultimate goal of expanding the tax net for SMEs – this would serve the digitalisation vision more fruitfully by activating SMEs and maximising long-term tax revenues,” Faruqi suggested.
