Focused on the overall growth and upliftment of the eCommerce industry in the country, the Union Budget 2020, presented by FM Nirmala Sitharaman on 1st Feb in the Lok Sabha brought in with itself revivals and revisions on current tax incentives to help local manufacturers including small and medium enterprises scale up their businesses.
Budget 2020 managed to attract a lot of attention from the industry pioneers as the focus of it was in regards to the growing sectors of retail, agriculture, FMCG along with digitization of businesses. Major highlights included the proposal of 1% tax deductions on transactions for giant eCommerce operators and relaxation of taxes on consumers to drive their purchasing power.
Impact on the Big eCommerce Players- Amazon, Flipkart etc.
To be applicable by April 2020, the 1% tax deduction on operators will be effective for the eCommerce sellers and retailers with a gross amount of sales of over ₹ 5 lakh. This reform may push the seller to restructure their working capital around this to restrict loss in cash flow. This deduction can also mean sellers being able to sell their products with higher margins.
The policies of this budget emphasized on the eCommerce marketplaces right from selling to managing payments is a clear indication of how successful this industry is and what growth can be expected of it in the coming years.
Focused on levying taxes on income, thus increasing take-home salaries, driving the consumers to spend more and uplift the demands for goods, the budget creates bigger selling grounds for eCommerce sellers and retailers that will result into a huge contribution to the economy of India via their services.
Opportunities for the growing sectors
– Retail & Logistics at the Centre Focus
The focus of Budget 2020 remained on Make in India and Digital India. The union budget brought in with itself revivals and upliftment of various online and offline retail segments.
Current tax incentives on income and GST simplification are the major offerings that will help local manufacturers including small and medium enterprises focus on the overall growth and financial upscaling of their businesses as FM allocated ₹6,000 crores, to the retail sector due to its contribution of a massive 10% of India’s overall GDP, FM
Along with this, to ease the eCommerce operations in the country and make last-mile deliveries possible there was a formation of a national logistics policy, emphasizing on the expansion of BharatNet and streamlining machine learning, robotics, and AI for creating an e-logistics market for MSMEs, making it competitive and of global scale.
SMEs will have better financial stability with the NIRVIK scheme, aimed at scaling up the manufacturing and development of these businesses as an export hub.
Apart from all of this, UPI payments were made mandatory for retailers to accept, which will enhance the customer satisfaction rates for purchasing, providing eCommerce retailers with the ease to do business across all channels and mediums.
– Textile & Garments Industry To Flourish
As India is the 3rd largest exporter of textile and apparel globally and a major contributor to the economy with organized retail and eCommerce structure, FM Nirmala Sitharaman, to promote it further, announced a ₹1,480-crore National Technical Textiles Mission, with an increased focus on the growth of end-user sectors of defence, agriculture, healthcare, infrastructure, and automobile.
Statistically indicated to reach $223 billion by 2021, with rising per capita income and higher disposable incomes and consumer’s preferences for the brands, the apparel and textile industry now has a pool of opportunity for sellers & retailers to scale their businesses, with this budget in place.
– Building up the Agricultural Sector
Allocating a total of ₹ 2.83 lakh crore, the FM emphasized on making the farming market more competitive by providing handholding of farm-based activities and involving technology for sustainable cropping patterns and growth.
Agritech pioneers such as Ninjacart, AgroStar, KishanMandi, Seedbasket etc., have managed to help farmers produce quality products with increased profitability by streamlining their agricultural processes with technologically driven solutions and services. To ensure complete distribution of produce, focus also remained on the logistics of agricultural goods. Kisan Rail and Krishi Udaan were introduced to promote seamless transfer of perishable goods nationally and internationally.
– Startups Encouraged to Strive for More
Continuing to promote the start-up culture and providing high opportunities to young entrepreneurs, the union budget offers investment clearance and assistance along with a raised tax limit on profits from INR 25 crores to INR 100 crores. Along with this, FM announced a Seed Fund for budding startups in the country.
ESOP or employee stock options were taken into consideration, a highly demanded provision by startups for long. Strong taxation reforms around ESOP were made, strengthening the vision of PM Narendra Modi of a powerful startup environment in the country.
With the plethora of opportunities it has brought in with itself, the Budget 2020-21 has been welcomed by MSMEs with open arms and high hopes. Awaiting implication on the ground level, this budget is set to transform the Indian eCommerce marketplaces along with creating an overall positive outcome on the business class.