Amazon Growth Story continues - Business quadrupled in 2015

Amazon Inc's India business has quadrupled in 2015 over the previous year as customers and sellers have risen more than threefold, helped by a similar surge in "fulfillment capacity" as online shopping gathers momentum across the country. "Active customer accounts are up 230 per cent year ­over ­year. We are in the middle of the Diwali season that is going really well," Brian Olsavsky, chief financial officer at Seattle based Amazon, said on an investor call on Thursday, the first time that these numbers have been made public. "The number of sellers has grown more than 250 per cent year ­over year. Sales are 4x what they were last year." The Indian unit of the world's largest consumer marketplace has been adding products at a rate of 40,000 per day this year with 90 per cent of sellers using its logistics and warehousing services. "As a result, we've tripled our fulfillment capacity       year ­over­ year. So we are very encouraged, and continue to invest there very heavily," Olsavsky said.

A month ago, the company injected Rs 1,237 crore into Amazon Seller Services Pvt, the biggest infusion of capital into its Indian flagship since entering the country in 2013. India is one of the fastest­ growing markets for the US online retail giant and Amazon's founder Jeff Bezos had pledged to invest $2 billion in local operations last year. Given the faster­ than ­expected expansion, that number may increase, an Amazon official has indicated. Amazon expects India to overtake Japan, Germany and the UK to become its largest overseas market besides becoming the quickest to reach $10 billion in gross merchandise value (GMV) in the company's history, Diego Piacentini, Senior Vice­ President for international business, told ET last week. Since India bars foreign capital in business­ to ­consumer (B2C) e-commerce, Amazon operates a marketplace for vendors to sell products to customers, as do Flipkart and Snapdeal.

The company will be looking to keep pace as investors have been pumping money into homegrown rivals such as Flipkart and Snapdeal, seeking a slice of India's burgeoning e-commerce market. This is set to rise to $60­70 billion by 2019 from $17 billion in 2014, according to a February report by The Boston Consulting Group and Retailers Association of India. Experts feel Indian Internet companies may need to chart a longer and more tortuous path to profitability though. According to a recent JP Morgan report, India will likely see consolidation among the raft of players populating particular categories as considerations of scale, better pricing power and returns intensify. This consolidation may either be natural or forced, the latter more likely facilitated by investors, it said.

"The funding spigot can spur innovation only up to a point — 'excess' capital can end up funding more expensive customer acquisition strategies, greater discounting and leading to a more elevated cost structure," Viju George wrote in the JP Morgan report. India's aggressive e-commerce companies have been trying to outdo each other in big ­ticket fundraising. In July, Flipkart raised $700 million from a clutch of foreign investors, pegging the Bengaluru ­based company's valuation at $15 billion and making it one of the hottest global start-ups in recent years.

-- CA Kasliwal Ambar

Reference -

• ET

Your purchase on a foreign website can attract the taxman.

Domestic I-T laws require you to deduct tax on software, e-books and music albums; must report every such transactions while filing returns.

You pay Rs 250 to purchase your favourite artist's album from his or her website and save it on your device. According to new taxation laws, you will need to deduct a withholding tax on it. The amount that needs to be deducted is in itself a complex computation. The person will need to refer to the procedure mentioned in the Income Tax Act (chapter XVIIB) or 20 per cent of the amount paid, whichever is higher. To calculate the liability, you will also need to consider if India has any taxation agreement with the country called as Double Taxation Avoidance Agreement.

To complicate the matters further, the new rules also require individuals as well as businesses to report every transaction they make with a non-resident person or entity. This means, if you purchase from Apple App Store, iTunes, Amazon’s global websites, or on eBay Global EasyBuy, you will need to tell the tax authority on each and every transaction done, irrespective of the amount, while filing your returns. And if you don't follow the laid down procedures, the assessing officer can slap a penalty of Rs 1 lakh for non-compliance.

If you are wondering how to determine if the payment was made directly to the company abroad or if it was routed through the Indian entity, tax experts say the person should refer to their bank and credit card statements. These clearly show if the transaction was domestic or international.

The amendment is part of the section 195(6) of the Income Tax Act. Vishweshwar Mudigonda, partner, Deloitte Haskins & Sells, said while the section was changed, the rule (37BB), which covers the specifics of the section is still old and so are the forms (15 CA and 15CB) in which details need to be filled up. Earlier, individuals and businesses were only required to report if the single transaction was above Rs 50,000 or payment to one person/entity crosses Rs 2.5 lakh a year.

“This has created a lot of confusion. Even if some decides to follow the law, he or she can’t do it as there are no provisions made of it,” says Mudigonda. He added thankfully the government has not tinkered with the exempted transactions in the last Budget. Any payments made for medical emergencies, donations, gifts, business-related travel, and so on remain exempted.

While tax experts called the amendments ‘impractical’ and illogical’, all of them said they were hoping that the Central Board of Direct Taxation will clarity the issue because even if someone decides to follow the law, he or she might not be able to do it unless the government brings about changes to the rule and forms. Their advice to taxpayers: wait and watch.

- CA Kasliwal Ambar