GST to take care of many of e-commerce firms’ tax issues

GST to take care of many of e-commerce firms’ tax issues: IT minister Digital India has three components: creation of digital infrastructure, delivering services digitally and digital literacy, says Ravi Shankar Prasad

New Delhi: Ravi Shankar Prasad , who took charge as information technology (IT) and communications minister in May, has received plaudits for sustaining the momentum around Digital India, which aims to provide government services to citizens online and connect villages to high-speed Internet networks to improve governance. But many have been critical about his handling of the telecom sector over spectrum issues, taxation of the rapidly growing e-commerce sector and increasing censorship of the Internet, ostensibly over national security issues and to combat child pornography.

In an interview on Wednesday, Prasad, who is also a lawyer, was categorical that he would not comment on spectrum issues, but insisted that the government is keen to support e-commerce companies. Prasad believes the introduction of the goods and services tax (GST) will help resolve the taxation problems of e-commerce companies. He also spoke about how the new government is balancing freedom of expression and security concerns with Web filtering. Edited excerpts:

How is the Digital India initiative shaping up?

Digital India is designed to bridge the gap between rural and digital (urban) India. India’s growth in IT has been quite urban-centric. We have 900 million mobile connections. Urban is some 40%. Broadband connectivity is also good in major cities, okay in other cities, but there is scope for improvement. Basically, Digital India has three components. One, creation of digital infrastructure. Two, delivering services digitally. Three, digital literacy. Digital connectivity is the logical cue to India’s connectivity. Basically, we are going to connect the rural hinterland with a national optical fibre network. We will link...a total of 250,000 gram panchayats by April 2016. We also have many services available now, like e-district, SWAN (state-wide area network), etc. All these would get metamorphosed into a whole system.

Another issue is digital literacy. Two months ago, the Prime Minister inaugurated a programme in Ranchi under which people will be trained digitally in local languages for 10, 20, 30, 40 hours. For BPL (below poverty line), families will be taught free of charge. We have about 1.5 lakh CSCs (community service centres) in India. I intend to increase this number, because CSCs will become the centres of e-education, e-health, digital literacy and also e-commerce... I want to promote women service centres in a big way—women who are digitally trained. The biggest trophy of my life would be if I can have Dalit women and girls running CSCs in a maha Dalit village. My office and personal staff are already working on that.

I have also told my office to introduce guidelines whereby the establishment of a BPO (business process outsourcing firm) is duly incentivized in a mofussil town like Gorakhpur, Devariya, Sitamarhi, Ahmednagar or Kannur. I have given that mandate to them. For me, Digital India would be incomplete if BPOs are not present in mofussil towns of India.

So you are also talking about making villages smarter along with smarter cities...

Smart city is a defined concept. But for me, a digitally connected village would mean a digitally empowered and digitally literate village. Smartphones have second-largest consumption in India after the US. And no one teaches them. A granny who may not be literate knows what a missed call is. How can we leverage this technology? We see mobile not only as communication facilitator, but also as a device of empowerment.

What about chip manufacturing and electronic clusters?

The chief ministers (of some states) are very excited about electronic clusters too. The whole substance is that if a state government gives 50 acres (for e-clusters), we give Rs.50 crore. If you invest Rs.100, the government of India will give Rs.25. I just laid the foundation of these in Bhopal and Jabalpur. There was a lot of interest from states like Andhra Pradesh, Telangana, Odisha, Tamil Nadu and Rajasthan. We are also pushing the manufacturing of chips, and are in very advanced stages of preparation. I also went to Germany, South Korea; met LG, Samsung and others, and they are excited about India. Two issues emerged from my interaction with them. First, they are worried about China, as far as IP (intellectual property) security is concerned. And I said, India is a very robust democratic country. There is very effective rule of law. We have legal remedies. So I hope big players will come to India and my sense is that they are very keen as well.

Do you see enough private participation in India?

Cisco (chairman and chief executive officer John Chambers) came to meet me, Mark Zuckerberg (founder and CEO of Facebook Inc.) met me. Then Flipkart came… This evening (Wednesday) I had a meeting with the postal department as to how to leverage the postal department’s infinite infrastructure, nearly 1.5 lakh post offices, in the interest of e-commerce. Flipkart and Amazon are in touch with them. I have told them to modernize and to leverage their network in rural areas so that talents of the Indian artisans can be blended with the e-commerce.

I see a lot of role for private players in distribution. If we are able to ensure e-commerce, e-education and e-health ride on this, it will really change the landscape of India. Today, I had a meeting on e-commerce. (I was told that) we do e-commerce worth Rs.70,000 crore in India. The biggest contribution of e-commerce in India, as Sachin Bansal (co-founder) of Flipkart told me, is cash on delivery. It is something unique. As I have always said, in India, you will have rocket science and jugaad technology going side by side. Any policymaker must create an ecosystem so these can exist side by side. We want this cash on delivery, or jugaad, to exist with smart cards.

But if the government is serious about Digital India, how do you plan to solve the discrepancies in taxation that e-commerce companies are facing?

GST will take care of a lot of those issues. We are pushing GST in a very substantial and effective way. Secondly, a lot of these challenges will be answered by the pressure of consumers. Softbank (CEO Masayoshi Son) said there were five million drivers with Alibaba. Once we begin electronic manufacturing in India in a big way, we can give jobs to 20 million people. If e-commerce spreads in India in an effective way, we can give jobs to millions of people. Once this will become evident, then politicians will need to understand that this particular venture should not be caged by uncalled-for regulatory frameworks. GST will take care of this. There is no problem with healthy competition, but the quality of goods and services should be good.

Another issue is that while the Internet user base in India is projected to cross 300 million by December, government policies do not appear to be keeping pace with Internet growth. How do you plan to balance security concerns with data privacy and the right to expression?

The first thing is after 26 May (the day the new government was sworn in), India is a different country. As far as I am concerned, I am all for freedom of press, freedom of expression, from which flows the Internet. But let us not forget, Article 19(1)(a), the fundamental right to expression, is subject to Article 19(2), (the State may make a law imposing “reasonable restrictions” on the exercise of the right to freedom) that can be imposed for the sake of security or public order, etc.

So the constitutional right, which creates the right (to freedom of expression) also creates those conditions under which it can be exercised. But yes, free flow of thoughts must be encouraged.

While I say that, we cannot lose sight of the fact that India is facing a threat from terror. Many of these fringe or terrorist groups have been abusing technology in a very effective way. Therefore, in the case of national security issues, if there is a provision, it should be respected. But these powers should be exercised in the extreme of circumstances. As I have seen, if you have to block any particular website for communal hatred or terrorism, there is a whole mechanism—officers look into it, and finally, the IT secretary has to approve it. So there are whole mechanisms of safeguards available. I am very clear, otherwise, privacy issues of others should be respected. And it is a democracy; people have got the right to express their views, and they can express their views strongly as well as in a very critical manner.

But what about the increase in Web filtering?

The Web filtering part is a rather delicate issue. You have got the right to consider the freedom of expression. When people, children, mothers, come and complain about proliferation of pornographic material, that is because they seek accountability from me. These have been worked out. My instruction is that there should not be any abusive use of it. That’s the bottom of it.

But it is possible that Web filtering can spread to other areas. For instance, India has a central monitoring system that can effectively snoop on citizens...

I am willing to take it on the record, (that) this Web filtering, if at all it happens, will only be used in the extreme provocative situation like pornographic material.

What’s the status of the communication Bill? (The legislation seeks to repeal certain archaic telecom sector laws like the Indian Telegraph Act, 1885, while modifying others like the Cable TV Networks (Regulation) Act 1995 and IT Act (2000)?

I saw a presentation on that. I have asked people to work on it. It is not that straight or simple. The world over, we don’t have such a precedent. Even in most countries that are technologically more advanced, I see there are separate laws for IT, separate for media, etc. This is an issue which requires a more elaborate discussion.

What is your stance on the Loop Telecom issue? Will you have a relook at the merger and acquisition guidelines? (Bharti Airtel Ltd in November abandoned a bid to buy Loop Telecom after failing to secure regulatory approval for the acquisition.)

I will not like to reply on any particular issue, but I have already created a committee, headed by the telecom secretary along with other senior officers, to hear out all the stakeholders and whatever further improvement is required. Whatever we do, we will keep the consumers’ interest in mind and also ensure the growth of the telecom sector. And, if in that process, you need some guidelines to be revisited, we will work it out.