Improve consumption, lower GST, imports: The many ask of ecommerce sector from Budget 2025

With the Union Budget around the corner, founders, investors, and analysts in India’s burgeoning ecommerce sector expect Finance Minister Nirmala Sitharaman to announce proposals to improve regulatory and physical infrastructure for the sector’s growth. 

In last year’s budget, the government doubled down on its push for digital marketplaces by reducing tax deducted at source (TDS) for ecommerce operators from 1% to 0.1%. 

This time, stakeholders are seeking more tax liberties for consumers to boost spending, and investments in infrastructure to improve logistics networks. They also call for government support to aid domestic manufacturing and shield businesses from currency volatility. 

Relief to boost private consumption

According to the latest inflation data, the Consumer Price Index (CPI) in December 2024 was 5.22%. As per data released earlier this month, inflation rates for rural and urban areas were 5.76% and 4.58%, respectively. 

FMCG giant Hindustan Unilever, in its December quarter earnings call, flagged a moderation in urban growth, highlighted by the preference for small packs as opposed to large packs as budgetary constraints hit consumers. 

Food delivery and quick commerce giant Zomato also cited lower losses in the third quarter, hurt by a broad-based demand slowdown. 

Flagging measures to boost private consumption and domestic production, Achint Setia, CEO of Snapdeal Marketplace, says, “We hope that Budget 2025 will incorporate substantive measures to increase the disposable income in the hands of India’s vast middle class. This is a powerful lever to boost domestic consumption, which, in turn, will enable Indian retail—both online and physical—to set a higher growth trajectory.” 

Tax advisory firms also flagged a need to rationalise the tax and Goods and Services Tax (GST) structure to foster growth, sustainability, and innovation in the sector. 

According to Grant Thornton, a centralised GST registration for ecommerce operators, enabling them to operate across all states with a single registration number, will simplify compliance and reduce administrative costs.

While growth-stage startups need working capital, traditional lenders often hesitate to offer credit at attractive rates due to the losses they see in early-stage startups focused on achieving product-market fit. 

“A significant source of liquidity—GST input tax credits—remains inaccessible until they turn profitable. This ties up funds that could otherwise drive their growth, creating a counterproductive cycle,” says Ramesh Bafna, Chief Financial Officer of Zepto.

Abhishek Shah, Founder of D2C Insider, an accelerator for D2C brands, says, “Streamlining input tax credit (ITC) mechanisms is critical. Ensuring timely and hassle-free ITC claims is essential for maintaining healthy cash flow and supporting business growth.”

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Improving import hurdles

Stakeholders are also concerned about improving the ease of doing business for ecommerce firms working with import processes. Rahul Garg, Founder and CEO of Moglix, adds, “Simplifying processes for electronics imports while promoting domestic manufacturing is essential for innovation and competitiveness in high-tech industries.” 

Researchers and analysts have also flagged the need for measures to support startups dealing with currency volatility. This could encompass financial tools, stabilising measures, and incentives.

According to Reuters, the Indian rupee fell for a seventh straight year in 2024—dropping 2.8% in 2024 to end the year at 85.6150 per US dollar—largely due to headwinds in the last quarter, including Donald Trump's US election victory-spurred surge in the dollar, while locally, slowing growth and a wider trade deficit weighed.

“By focusing on exchange rate hedging, tax relief, domestic manufacturing, and foreign capital inflows, the government can help reduce the negative effects of currency fluctuations on startups, allowing them to thrive in a dynamic and uncertain global market,” says Anshika Jain, Senior Analyst at Counterpoint Research. 

Similar sentiments were also echoed by Priyanka Duggal, Partner at Grant Thornton Bharat, who says, “Special incentives for local sourcing and manufacturing, coupled with a reduction in customs duties on raw materials, would encourage domestic production and reduce import dependencies, ultimately strengthening the FMCG sector.” 

Startups, such as wearables seller Boult, have emphasised the need for affordable working capital loans, especially during volatile currency periods. Meanwhile, global players like Captain Fresh have urged the government to strengthen bilateral trade agreements to reduce tariff barriers.

Investments to improve logistics infrastructure 

With growing digital penetration, ecommerce shipments have seen adoption even in remote villages and smaller settlements leading to an overall increase in shipments. High penetration of quick commerce operations in top-tier cities has further exacerbated this trend. 

The industry’s sustainability is heavily dependent on a well-oiled logistics network to sidestep delays and improve customer experience. 

“Investment in dedicated ecommerce import terminals with advanced customs processing technology and greater capacity for handling small parcels could reduce congestion and improve turnaround times. Additionally, improving last-mile delivery logistics in ports would speed up the import process,” says Grant Thornton Bharat. 

Moreover, the ecommerce industry would also benefit from flexible policies on duty refunds for returned goods or re-exported items, especially for low-value items.