BENGALURU: The government will set up E-commerce Export Hubs in public-private-partnership model in order to enable MSMEs to sell their products in international markets. Finance Minister Nirmala Sitharaman in her budget speech said that TDS rate on e-commerce operators is proposed to be reduced from 1% to 0.1%. This comes into effect from October 1.
Reducing the TDS rate will significantly free up working capital for sellers, said Kalyan Krishnamurthy, CEO, Flipkart Group. He said the provisions of the budget will remove bottlenecks in the supply chain and lend a big support to industries by encouraging clusters, establishing e-commerce export hubs and improving credit flow to MSMEs.
Homegrown e-commerce majors have welcomed the move. “Reducing TDS rates on e-commerce operators is a much-needed change that will enhance liquidity. Previously, small businesses had to wait a year to claim their refunds. This change will now lead to improved working capital efficiency, creating more parity between online and offline,” said Dhiresh Bansal, Chief Financial Officer at Meesho.
Experts said the focus on e-commerce hubs will help direct-to-consumers firms, including small vendors and aggregators. This will also improve accessibility to markets.
Anand Ramanathan, partner and consumer products and retail sector leader, Deloitte India, said focus on e-commerce hubs through PPP mode is a creative intervention to help MSMEs in this sector derive benefits of a cluster approach such as access to cheaper finance and export markets.
“Co-location will also help derive better efficiencies in the logistics value chain for e-commerce players. The approach will also help organise supply in sectors such as footwear, apparel, jewellery and other categories, where there is heavy dependence on skilled artisans and weavers. Clusters will also help improve quality of production and certification which will help exports,” he said.
TDS cut from 1% to 0.1%
TDS rate on e-commerce operators is proposed to be reduced from 1% to 0.1%. This comes into effect from October 1. The move will significantly free up working capital for sellers.