DNA Money Edit: E-commerce firms in Catch-22 situation

The last few weeks have been busy for the commerce and industry ministry. It started with issuing clarifications on foreign direct investment (FDI) policy in e-commerce, which created confusion among the players. Then came the income tax notices wherein founders of various start-ups were issued notices under Section 56(2) (viib) of the Income Tax Act, asking them to pay taxes on angel funds raised by them. 

These have created uneasiness among entrepreneurs and investors. But the government claims there is no confusion on the FDI policy part — something the impacted e-commerce business do not buy into. 

The only option left with them is to push for dialogue, seek additional time and figure out ways to comply with the guidelines.

Addressing the concerns, the ministry is said to be issuing a notification to ease the procedure to seek income tax exemption on investments from angel funds. 

However, the start-ups feel the government is just changing the department —from the Department of Industrial Policy and Promotion to Central Board of Direct Taxes and the latter may not even ave the expertise on how to value a company.

Amid all this, one can only wonder what’s really playing in the regulator’s mind