Sunday 27 December 2015

E-Tax on E-Commerce

Every time you shop in a large departmental store, mall or a shop belonging to some retailers association, you are made to pay for the polythene shopping bag. You pay as per the size which cost may vary from Rs. 3/- to Rs. 9/-. This rule was made to dissuade people from using polythene bags, encourage recycling, reduce dependence and move towards an environmentally friendly end user packaging regime. This is a user pays model. You may bring in your own shopping bag and save on some money.

Now this rule covers a walk in customer in a shop. What about shoppers in the digital world of E-tailers.

Sometime back I had posted about the new age entrepreneur who made money on the packaging material of the E-tailers. See link

To me the E-tailing packaging is far more serious threat to the environment than the polythene bags of the brick and mortar retailer. In a regular set up, you buy the product, put it in your shopping bag and walk out. This is not the case in E-commerce. Assuming you buy four products and irrespective whether you get free delivery, it is likely that you will be delivered four different packages as the goods will be sourced from four different locations. So what would otherwise be carried in a shopping bag worth Rs. 5/- may see a packaging cost of Rs. 50/- collectively. The customer is not complaining here with the kind of deals going on. He doesn't really care who pays for the packaging or who is paying for the discounts or the delivery.

I recently happened to order some laminated paper posters. I got a discount of 25 % on list price and having crossed a certain threshold with purchase of other products I also got free delivery. Since the posters were sourced from the same seller, I would have expected a single package. But that was not the case. The pictures given below will be proof of the wastage that goes in. Now mind you these posters can be rolled easily and hardly have any weight.

The single rolled up poster and the six foot carton it came in

The other two rolled up posters and their carton with the third poster hanging in the background

The empty space in the carton filled with air pillows
So effectively I got two packages where the cost of packaging and delivery may have possibly exceeded the cost of the posters. FYI each poster cost me Rs. 90/- and three such posters were ordered for a total cost of Rs. 270/- inclusive of delivery.

I understand there is a need to package goods in way so that no damage is caused, but how much of protective packaging is the question. Typically the outer packaging will be a paper carton with the inside filled with bubble wrap or air-pillows. The invoice will be in a polythene bag stuck on the outside with lengths of sticky tape. Effectively there will be more polythene in this than in your regular polythene shopping bag.
Now given this background, I do not see any harm in the government charging an Environment Tax on this business. If there could be a Swacch Bharat cess on services, why can't there be a similar cess on e-tailing. There could be different ways of charging it. It may be charged on per package or a percent of the sale value. It could be a user pays model or the seller pays model or the platform pays model. I would much prefer a user pays model and cess of at least Rs. 5/- per package is not much to ask for. News reports talk of a single E-tailer getting 100,000 orders in a day. Assuming there are a 100,000 packages delivered per day across the country (and growing), Rs. 18.25 crore per year (@ Rs. 5/- per package) is not a bad collection to start with.

This needs a serious thought by the government.


  1. Hi,
    Completely agree with you since I myself am a e-seller and it annoys me when I think of the Plastic packaging being used by etailers.
    I had got the same world poster worth rs70/- in a big carton box worth around rs 30/- probably and free shipping....dont know how they could afford that...
    All the e-items are delivered in Plastic Packaging for small sizes and assuming the quantum of orders the marketplaces receive which are in lakhs daily then every market place or their sellers use at least one lakh plastic bags....which eventually are thrown in the dustbin whereas possibility of using a single plastic bag during retail shopping is high.

    Other options for packaging are cardboard boxes but it may increase the dimension and weigh as it is an important factor for shipping charges.

    Government has started charging Swachh Cess to every online transaction already.

    1. Hopefully someone will innovate on the packaging front.

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