Equalisation levy on e-commerce firms: Govt says tax in line with WTO rules

It emphasised that the levy was applicable prospectively, and could not be said to have 'extra-territorial' application.

India has jumped to defend the imposition of Google Tax — a 2 per cent equalisation levy on e-commerce operators — calling it non-discriminatory in nature.

In its comment on the Section 301 probe launched by the US last month, the government said it was fully consistent with World Trade Organization norms and international taxation agreements.

It emphasised that the levy was applicable prospectively, and could not be said to have ‘extra-territorial’ application.

“The equalisation levy does not discriminate against non-resident e-commerce operators. The underlying policy objective and application of India’s equalisation levy is to ensure a neutral and equitable taxation is applicable to e-commerce operators that are resident in India, or have physical presence in India, and those not resident in India,” New Delhi said in its public comment.

Further, it said that far from targeting any US entity, the purpose was to ensure fairness, healthy competition, and to exercise the ability of governments to tax businesses having a nexus with the Indian market through digital operations.

“It does not discriminate against firms based in the US, as it applies equally to all non-resident e-commerce operators not having a permanent establishment in India, irrespective of the origin,” it added.

New Delhi highlighted that the threshold application for the levy — which is annual revenues in excess of Rs 20 million (which the USTR has noted to be approximately $267,000) — is low, aimed at exempting very small e-commerce operators globally.

The deadline for filing the equalisation levy, for the first quarter, was July 7.

Retail needs therapy: Future and fortunes of a business after coronavirus

Modern, organised retail is bleeding as the coronavirus pandemic keeps India indoors and shuttered. Arvind Singhal explains what it will take to get this business back on its feet.

India’s economy slowed down in March, but it is projected to have managed a gross domestic product (GDP) growth of about $3,000 billion at the end of FY20. Private consumption accounts for about 58 per cent of GDP (around $1,700 billion). Of such consumption, about 48 per cent (or about $825 billion) is consumer spending on merchandise (the size of India’s retail sector) and the remaining $875 billion is spent on a range of services (and small savings).

Traditional mom & pop retail accounts for the largest share and will continue to do so, despite the Cassandras crying for the last 15 years that large (physical and digital) businesses will decimate them. India has an estimated 17 million independent retailers and their number is likely to increase to 20 million by 2025, despite the growth of modern, organised retail (brick and e-commerce).

India’s economy was expected to grow by about 3 per cent in FY21 and by 4.5 per cent in FY22 before returning to 6 per cent growth from 2023. A sharp fall in growth will have a significant impact on what India consumes in the next six or eight quarters as purchasing power diminishes. Accordingly, this will influence the fortunes of the retail sector across all types of channels and formats.

Food and grocery accounts for about $550 billion of the $825 billion consumer spending on merchandise. This spending is likely to see the least impact, either in terms of volume consumed across different sub-segments, or on retail channels selling food and grocery.

Textile and apparel, at about $65 billion, is the next big category in consumer spending on merchandise, and it may suffer the most from the coronavirus. Just about every textile and clothing manufacturer (including those in exports) is likely to have stocks of raw material and semi-finished or finished goods. With textile and apparel stores shut, their stocks run the risk of becoming slow-moving as summer goes. After the nationwide lockdown to contain the coronavirus ends, it is quite likely that spending on clothing (and accessories) would not be a priority for most consumers in various income strata. Clothing and fashion retailers may face tough times well into 2022.

Coronavirus: India Inc steps up act to contain crisis as tally reaches 29

Across the country, companies have stepped up their act to contain the crisis. IT and other new economy firms seem to have taken a lead.

Mindspace IT Park, Hyderabad’s largest office hub spread over several acres, was a centre of panic on Wednesday as a techie tested positive for coronavirus. The complex, housing many marquee brands, caught on to the news in no time, prompting employers to send their staff home.

An employee of Dutch company DSM Shared Services, the software professional had recently returned from an assignment in Italy. Hers was the second confirmed case of the virus in Telangana. “Our thoughts are with our colleague, who is doing relatively well and is being treated in quarantine,” the company said in an internal e-mail.

More than 1,000 km away, in Gurugram, next to New Delhi, another person tested positive, this time in the Paytm office, taking India’s tally to 29. He too had returned from a vacation in Italy. The company has asked its staff to work from home for a couple of days while the office gets sanitised.

Across the country, India Inc has stepped up its act to contain the crisis. IT and new-economy companies seem to have taken a lead.

At the Manyata Tech Park in Bengaluru, a US-headquartered software product company advised its employees to work from home till Friday, after an associate who had travelled from an affected country showed flu-like symptoms. Even though the person was declared asymptomatic by medical experts, the company began disinfecting the campus as a precautionary measure.

While online major Amazon confirmed its first case of coronavirus in its Seattle office, the company’s India unit felt the ripple effect. Amazon India has imposed travel restrictions, advising employees to prioritise health over efficiency. According to the advisory, all domestic travels by the employees can be undertaken only after consulting the manager while approval from vice-president is required for international travels.

Walmart–owned e-commerce firm Flipkart too has imposed a complete ban on all business travels, both domestic and international. In case the travel is unavoidable, CEO Kalyan Krishnamurthy must give an approval.

Paytm parent One 97 Communications' loss doubles to Rs 4,217 crore

One97 Communications banks on its services, other businesses to improve.

Paytm parent One 97 Communications’ consolidated loss more than doubled in the financial year ended March owing to capital expenditure on brand and business activity, but said it was going to focus more on its services and other businesses to improve turnover. Loss for 2018-19 (FY19) more than doubled to Rs 4,217.20 crore, compared with Rs 1,604.34 crore in the year-ago period.

One 97 in its annual report said its total revenue on a consolidated basis rose to Rs 3,579.67 crore in FY19 from Rs 3,309.61 crore a year ago.

“The company is focusing on strengthening its position in various business segments such as Payments Bank, insurance and insurance broking, travel ticketing, hotel, and mobile wallet services and that would result in better turnover in coming financial years,” Paytm's parent said.

The company has moved from being a mobile wallet business to becoming a one-stop shop for all kinds of bill payments, payment gateway aggregator services, ticket services, utility bills payments, and insurance and hotel booking services.

One 97 also has units of Subsidiary of One97 Communications Singapore in countries like Ivory Coast, South Africa, Nepal, Bangladesh, Malaysia, Rwanda, Uganda, Nigeria, and the US.

A Paytm spokesperson said, “For the last two years, we have been investing $1 billion each year to expand digital payments eco-system in our country. We will further invest about $3 billion in the next two years to scale the same. We believe India is at the inflection point of digital payments and Paytm’s sole focus is towards solving the merchant payments & offering them financial services. We will invest Rs 20,000 crore in the next two years towards achieving this.”

Business Standard has earlier reported that Paytm Mall is integrating its offline merchant base with international sellers on a single platform in a bid to take on competition.

During the year, founder Vijay Shekhar Sharma’s cumulative shareholding in the company remained at 15.73 per cent. Its largest investor continued to be Alipay Singapore E-Commerce, with 30.49 per cent cumulative shareholding, followed by SVF India Holding (Cayman) with about 19.69 per cent shares, SAIF III Mauritius Company (13.02 per cent), and Alibaba.com Singapore E-Commerce (7.70 per cent).

Business Standard

Walmart is expected to pump in $1.2 billion to fund Flipkart's operations

The retail giant's total revenue increased $1.2 billion or 1 per cent for the three months ended April 30, 2019, due to the addition of Flipkart's net sales besides other factors.

Business Standard : Walmart is expected to pump $1.2 billion into Flipkart's operations Flipkart. The world’s largest retailer acquired homegrown e-commerce company Flipkart for $16 billion last year, pitching it in direct competition with its rival Amazon.com in a battle for dominance of India’s online retail market.

As of April 30, 2019, and January 31, 2019, Walmart reported cash and cash equivalents of $2.7 billion and $2.8 billion, respectively, according to filings with the United States Securities and Exchange Commission made by Walmart last week. Of the $2.7 billion of cash, approximately $1.2 billion can only be accessed through dividends or inter-company financing arrangements, subject to approval of Flipkart's minority shareholders. 

“However, this cash is expected to be utilised to fund the operations of Flipkart,” said the filing.

The net cash used by the Bentonville, Arkansas-based company in financing activities decreased $1.6 billion for the three months ended April 2019, compared to the same period in the previous financial year. This decrease was partially impacted by the Flipkart acquisition. Walmart reported a working capital deficit of $18.1 billion on April 30, 2019, compared to $21.5 billion in 2018. This decline was primarily due to higher current assets as a result of the consolidation of Flipkart.

Due to the anticipation of announcing Flipkart’s acquisition, Walmart had suspended its share repurchases. However, the share repurchases have increased $1.6 billion for the three months ended April 30, 2019, compared to the same period in the previous finanical year.

Walmart’s total revenue increased $1.2 billion or 1 per cent in the three months to April 30, 2019, when compared to the same period in the previous fiscal year. This increase was due to the addition of Flipkart’s net sales besides other factors.

During April-May this year, Walmart President and Chief Executive Officer (CEO) Doug McMillon and Judith McKenna, president and CEO of Walmart International, visited India to assess the progress made by Flipkart. They also met the senior leadership of Flipkart and group companies — Myntra and PhonePe — and is learnt to have discussed strategy to take on Amazon.

Amazon has stepped up its investment in India and recently pumped Rs 2,800 crore into its marketplace. The fresh investment comes at a time when the Seattle-headquartered firm has logged out from China. In December last year, Amazon invested Rs 2,200 crore in its Indian entity. Jeff Bezos-led Amazon has so far made over $5-billion investments in India. Some reports suggest that the company may have invested an additional $2 billion on top of that.

One deal at a time: How Mukesh Ambani is trying to take on Amazon in India

Asia's richest man is sharpening his focus on e-commerce with a string of tiny acquisitions and stake purchases to face Amazon.

A $2.5 billion spending spree involving more than two dozen deals provides some insight into how Mukesh Ambani is piecing together a strategy to take on Amazon.com Inc. in India.

Asia’s richest man is sharpening his focus on e-commerce with a string of tiny acquisitions and stake purchases to face the world’s largest online retailer, after shaking up India’s telecommunications industry with cheap data and free calls.

The acquisitions represent a new strategy for Ambani’s Reliance Group, whose founder -- his father Dhirubhai Ambani -- built a petrochemicals business and the world’s largest oil-refining complex from scratch. It’s a clear pivot toward consumer offerings in a country that’s becoming a battleground for giants such as Amazon.com and Walmart Inc.’s Flipkart Online Services Pvt.

“The deals may be tiny, but it’s more likely that they are putting together a team of talented people by acquisitions, who can then be invested in to build out larger platform products,” said Kunal Agrawal, an analyst with Bloomberg Intelligence.

Ambani is racing to grab a share of an online shopping market that Morgan Stanley estimates will grow to be valued at $200 billion by 2028 from about $30 billion last year. India will have 829 million smartphone users by 2022, according to Cisco Systems Inc., from a projected half a billion this year. That means a potential surge in demand for online services and products from music to food delivery, electronic gadgets and clothes.

‘Shopping Experience’

Ambani outlined his plan to shareholders in July, saying the effort will involve the group’s unlisted businesses Reliance Retail Ltd. and Reliance Jio Infocomm Ltd. He has already spent about $36 billion on Jio, which has rolled out a nationwide 4G network and fibre broadband infrastructure, causing some established rivals to pull back.

The platform will use augmented reality, holographs and virtual reality to create an “immersive shopping experience,” said Ambani, 61. Reliance’s consumer businesses will contribute nearly as much to the conglomerate’s overall earnings as its bread-and-butter energy businesses by the end of 2028, he said.

The service will seek to get on board the millions of mom-and-pop stores that dominate the Indian retail market, providing heft to its operations. Chains and large department stores account for only 10 per cent of the market.

Business Standard

IIM-Nagpur gets 100% placement, highest package at Rs 20 lakh

The final placement at IIM-Nagpur also saw the highest domestic package offered at Rs 20 lakh, while the average was Rs 12.35 lakh.

One of the first among the third-generation Indian Institutes of Management (IIMs) to achieve 100 per cent placement, IIM-Nagpur saw consulting firms lead the final placement process, making 37 per cent of the 56 offers.

IIM-Nagpur has placed all of its third batch of 55 students enrolled in its flagship Post Graduate Program in Management (PGP 2017-19). The B-school saw over 40 recruiters, including several first-timers, making offers during the process.

Firms from sectors such as analytics, e-commerce, FMCD, IT and manufacturing, were the next in line. Together, these sectors recruited over 70 per cent of the batch.

Consulting firms, such as Deloitte, led placements, apart from other prominent recruiters like MuSigma, Berger Paints, VGuard, Schindler, Sutherland Global, GroupM, Decimal Point Analytics, ValueLabs, JK Technosoft, FSS Global, and Aspect Ratio Data.

Start-ups such as Moglix, Build Supply, Fortigo, Jigserv Digital also made multiple offers at the campus.

The final placement at IIM-Nagpur also saw the highest domestic package offered at Rs 20 lakh, while the average was Rs 12.35 lakh. Further, the average package offered for the top 10 per cent and first quartile of the batch was Rs 17.48 lakh and Rs 15.45 lakh, respectively, and the median package was Rs 12 lakh.

Director of IIM-Nagpur L S Murty said, “This year, too, our graduating batch found challenging careers openings of their choice from the campus. I am very appreciative of the industry for their continued trust in us.”

Business Standard

RIL's plan to strengthen balance sheet hinges on telecom, e-commerce plans

However, the company's balance sheet will be stronger in a year, Srikanth said, as its investment goes down and it transfers its fiber and tower undertakings to separate companies.

Reliance Industries Ltd.’s plan to strengthen its balance sheet will hinge on future capital spending as credit market participants zero in on whether the company will be able to slow those outlays over the next year.

The conglomerate has invested about $64 billion across telecom and retail as well as petrochemicals and oil refining expansions, Joint CFO V. Srikanth said during last week’s earnings briefing.

Reliance will probably continue to spend to build capacities in its telecom business as well as on its e-commerce and broadband operations, according to Nitin Tiwari, an analyst with Antique Stock Broking Ltd.

While petrochemicals has been a key driver for the group’s earnings, contributing about half of total operating profit, shrinking profits from converting dirty residual oil into cleaner light fuel pose a headache.

However, the company’s balance sheet will be stronger in a year, Srikanth said, as its investment goes down and it transfers its fiber and tower undertakings to separate companies.

ALSO READ: Reliance's e-commerce entry to reduce digital colonisation: Mohandas Pai

Spending on telecom unit Reliance Jio Infocomm Ltd. and rising debt have been “a key worry, and monetization of tower/fiber could allay this,” wrote Mumbai-based Anil Sharma and Ravi Adukia, analysts at Nomura Holdings Inc.

Business Standard

Paytm violated KYC rules, RBI reveals reason for blocking payments bank biz

RBI revealed the payments bank failed to maintain the prescribed net worth limit of Rs 1 billion and the bank also violated the end-of-the-day Rs 100,000 limit per account.

The Reserve Bank of India (RBI) has revealed that Paytm was in violation of know-your-customer (KYC) rules while on-boarding users for its payments bank business for which it was banned from opening new accounts and e-wallets in August, The Times of India reported.

In an RTI reply, the RBI revealed the payments bank failed to maintain the prescribed net worth limit of Rs 1 billion and also violated the end-of-the-day Rs 100,000 limit per account.

Payments banks are not allowed to hold more than Rs 100,000 in each account.

The RBI also expressed unhappiness at the close relations between Paytm founder Vijay Shekhar Sharma’s One97 Communications and the entity that runs Paytm Payments Bank (PPB).

While Sharma owns a 51% stake, the rest is owned by One97 Communications and its subsidiaries.

Payments banks are expected to maintain an arm’s length relationship with promoter group entities.

Following the RBI ban on opening new accounts and e-wallets, the bank’s then CEO Renu Satti resigned.

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