GST Forces Amazon To Suspend Platinum Seller Program

Ecommerce marketplace Amazon India has reportedly suspended its invite-only Platinum Seller Program (PSP) due to GST.

The company has not renewed the contracts of the top sellers associated with the programme. As per sources close to the development, the PSP is suspended temporarily until there is further clarity on Goods and Service Tax (GST) regulations for sellers.

An unnamed platinum seller said, “The company has conveyed to us that the renewals are on hold due to (no) clarity on GST. There will be a single tax under GST, the benefits of which will be passed on to the merchant and to the buyer in terms of pricing. Hence, Amazon is trying to understand whether there is a need for differential standards. Even the sellers are confused and do not know what margins to quote as the impact of GST is still not clear.”

PSP is a growth-oriented programme, wherein the sellers are asked to achieve specified metrics and sales targets. Later the company picks sellers to become a part of PSP. These include categories like smartphones, fashion, large electronics, and consumables. The PSP provides benefits like lower marketplace fee and lowered logistics costs. The seller further added that the suspension may lead to fall in volumes for the business of the sellers. The impact may range from 25%-30% downfall in volumes in a month.

“For a seller in the television and appliance category, for example, the overhead on logistics and service tax comes up to INR 3,000 for a TV set priced at INR 25,000. The benefit of being a PSP member is that the marketplace absorbs the overhead to provide prices competitive to offline stores. By bringing down the margins, the benefits are passed on to the customer,“ a seller told ET.

“Our PSP program is ongoing. The details of our engagement with our sellers are confidential and we do not discuss them externally,” said Amazon India spokesperson in response to a mail sent by INC42.

Currently, Cloudtail is the only premium seller on Amazon, as per reports. Cloudtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy’s private investment fund Catamaran Ventures.

The PSP gained traction after March 2016, when the DIPP came out with guidelines on ecommerce marketplaces in India. As per the new guidelines, FDI in B2C commerce prevents a single seller from accounting for more than 25% of a marketplace’s total sales. As a result, Cloudtail stopped the sale of mobile phones via the online ecommerce platform, in order to reduce revenue. At the same time, this led to the emergence of new sellers in high-gross-sales categories like smartphones. This, in turn, helped Amazon India to bring down the share of Cloudtail on the platform.

Ecommerce majors, Flipkart, Amazon India, and Snapdeal have always collectively opposed tax collection at source (TCS). They have raised concerns about the GST (Good and Service Tax) as well. In March 2017, in a bid to help sellers to understand the GST better, Amazon India came up with a programme called the ‘A-Z GST Guide’ for sellers. The programme, which will roll out on July 1, 2017, along with the new tax regime, will help sellers gain insights about the proposed GST.

(The development was reported by ET)

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.