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Widening of tax base: E-commerce business on I-T radar

The Income Tax department has trained its scanner on the burgeoning 'e-commerce' business in the country with the taxman deciding to monitor a host of services conducted by these popular online portals to better fill up the revenue kitty.

New Delhi: The Income Tax department has trained its scanner on the burgeoning 'e-commerce' business in the country with the taxman deciding to monitor a host of services conducted by these popular online portals to better fill up the revenue kitty.

After making an official assessment report on the online retail business in India, the department has decided to track these "huge business" conducting services for extracting the special category of Tax Deducted on Source (TDS) which is taken from the payment made by firms and organisations for getting special services done on the internet retail space.

A "strategy action plan" formulated by the CBDT, the apex policy making body of the I-T department, for bolstering revenue collection in the current fiscal, has asked taxman to pay special attention to this area of business.

The action plan prepared for 2015-16, also accessed by PTI, states that advertisements on different websites of various organised and unorganised agencies, payments for jobs like creating a website, translation of pages, data entry of text, research, among others are areas which can yield "significant revenue" under the TDS category.

"The e-retail or e-commerce business is a fairly new avenue from the view point of collecting taxes and the sector is witnessing huge money changing hands. The department has prepared some trends in this regard and it has been decided to seriously tap this popular online sector for better TDS collections," a senior I-T official said.

"A lot of people now purchase their daily goods or choice items through popular online retailers. A number of entities involved in the operations of these web portals are beyond the tax radar and as part of CBDT's initiative to widen the tax base, this sector is important to be tapped," the official said.

As per industry estimates, e-commerce business in India was about USD 6 billion in value in 2012 and is expected to reach USD 76 billion by 2021.

The Economic Survey prepared by the Finance Ministry in 2014-15 had said that the e-commerce sector in the country is likely to witness a growth of over 50 percent in the next five years.

The I-T department has particularly been bolstered by ever-increasing collections under the TDS head as it believes that collecting taxes this way promotes a "non-adversarial" regime and according to latest data of the Finance Ministry, TDS now contributes 36.08 percent of the total direct taxes collection.

The official said that the tax department has developed required "technical platforms" to track business activities on popular e-retail websites operating in the country.

The Central Board of Direct Taxes has also decided and instructed the I-T offices to monitor "catering contracts of 5-star hotels" and "sub-contractors" working with large and small infrastructure companies for tax collection under TDS.

Under the new service sectors, which will be monitored by the taxman this fiscal, the action plan has called for including payments made by educational institutes to guest faculty, payments made to event managers and medical transcription companies among few others.

According to consultancy firm PwC, the e-commerce sector in India has grown by 34 percent (CAGR) since 2009 to touch USD 16.4 billion (roughly Rs 1,01,375 crores) in 2014 and is expected to touch USD 22 billion in 2015.