GST is all set to come in force from July 2017. Its impact will change the essence of taxation system in India. Amazon – a giant online marketplace has suspended its exclusive Platinum Seller Program (PSP) temporarily. Amazon has delayed the renewal of contracts of its top sellers until there is further clarity regarding the Tax policies levied after GST.
This is confirmed from one of the Amazon’s platinum seller “The Company has conveyed to us that the renewals are on hold due to 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, “. Cloudtail is the only platinum seller of Amazon as of now.
He also said “the suspension of the programme, which provides benefits in terms of lower marketplace fee and lowered logistics costs, will lead to fall in volumes for the business of these sellers. The impact could be as much as 25-30% fall in volumes in a month for the seller”. This is catastrophe for the big online sellers since their margin will be reduced. But medium sellers will benefit as they can directly compete with big sellers, only they have to set their prices wisely.
What would happen if Platinum Seller Program is not presumed even after GST rollout:
If this happens then large sellers will be at great loss. This is explained here “For a seller in the television and appliance category for example, the overhead on logistics and service tax comes up to Rs 3,000 for a TV set priced at Rs 25,000. The benefit of being a Platinum 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, “said a seller on condition of anonymity.
On the other hand the small and medium sellers will benefit because all the sellers will now compete on same ground. The impact of this on other marketplaces like Flipkart/SnapDeal is still not known, but they stand to benefit because discounted prices on Amazon by Platinum sellers would stop after this move.
We will have more clarity on the Platinum Program only after dust settles down on GST.