NEW DELHI: Issues around cyberlaw compliance and “inefficient anti-corruption framework” pose a serious challenges that could weigh down the booming e-commerce sector in India, consultancy firm PwC said.

A PwC report ‘e-commerce in India: Accelerating Growth’ said the sector has seen unprecedented growth in 2014, driven by rapid technology adoption led by increasing use of devices like smartphones and tablets and access to internet.

“While the growth in this sector excites entrepreneurs and financial investors alike, some serious challenges are beginning to weigh down on the sector,” the report said.

It added that e-commerce companies have to comply with several laws, many of which are still evolving, which could be one of the major challenges.

“Potential issues around cyberlaw compliance, inefficient anti-corruption framework, legal exposure in agreements or arrangements, indirect and direct tax compliance framework and Fema contraventions and regularization could pose problems,” it said.

Also, uncertainty around VAT implications in different states due to peculiar business models could cause issues, it added.

According to several reports, e-commerce firms like Amazon and Flipkart have been facing tax related issues regarding VAT and sales tax.

“Companies will need to address issues around sub-optimal warehouse tax planning; imbalance between FDI norms vis-a-vis adequate entity controls; inefficient holding, IPR or entity structures; and international tax inefficiencies,” it said.

The report added that the new Companies Act, policy on related-party transaction pricing, and the uncertainty around GST roadmap could emerge as challenges for the fledgling sector in the future.

According to PwC, the e-commerce sector in India has grown by 34 per cent (CAGR) since 2009 to touch $16.4 billion in 2014 and is further expected to touch $22 billion in 2015.

In 2013, Asia-Pacific emerged as the strongest business-to-consumer (B2C) e-commerce region in the world with sales of around $567.3 billion, a growth of 45% over 2012, ranking ahead of Europe ($482.3 billion) and North America ($452.4 billion).

Citing an e-commerce Europe report, PwC said the US, UK and China together accounted for 57% of the world’s total B2C e-commerce sales in 2013, with China having total sales of $328.4 billion.

India, on the other hand, had sales of only $10.7 billion (3.3% of that of China in 2013) with total e-households at 46 million against China’s 207 million.

Source: Times of India