India Regulatory Brief: Ola, Uber Strikes, TCS Clause under GST Worries E-tailers, and Government Tackles H-1B Visa Debate

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Ola, Uber face new challenge with driver strikes

Following initial protests in Hyderabad and Bengaluru last year, widespread strikes by drivers associated with cab aggregators are taking place this month across India. While Ola and Uber drivers partially called off their indefinite strike in the National Capital Region after meeting with Delhi transport minister Satyendar Jain on Sunday, not all drivers’ unions are convinced. Further, a planned joint strike is scheduled for February 15 across the southern states of Andhra Pradesh, Karnataka, and Tamil Nadu. Ola and Uber drivers will participate in the upcoming strike according to their union representatives.

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Multiple reasons have fueled the ongoing protests: reduced incentives for drivers, slowdown in earnings (falling to US$299 to US$597 from peaks of US$1195 to US$1494), low fares per kilometer, overwhelming demand versus supply, and the inevitable challenges emerging from an unstable business model.

Transport aggregators Ola and Uber have already faced multiple regulatory battles over surge pricing norms, antiquated laws, and the disruption of the monopoly of traditional cab companies. Ola, Uber, and their kin now face the uphill task of implementing a profitable business plan by growing their consumer base while also retaining driver loyalties. 

TCS clause under GST worry e-commerce giants

E-commerce firms Flipkart, Snapdeal, and Amazon have expressed their worries over the Tax Collection at Source (TCS) clause in the Goods and Services Tax (GST) law. As per the regulation, online marketplaces are required to deduct two percent of the amount payable to sellers and remit it to the government on the seller’s behalf. Online retailers believe the TCS clause will lead to a capital lock-in of about US$59.38 million (Rs 400 crore) per annum for sellers already operating on small margins. Online retailers instead propose that it should be enough that seller information is shared with tax authorities and sellers on their platforms are Value Added Tax (VAT) registered.

On the contrary, the All India Online Vendors Association (AIOVA) representing 1,800 sellers hopes that TCS will remove unfair competition in terms of product pricing from tax evaders. As for the working capital to be committed, e-commerce firms already hold a certain amount of the seller’s money; TCS will therefore, not affect them substantially.

What is of concern to sellers is the application of TCS in the case of returned products, where they will have to claim TCS from tax authorities. AIOVA suggests that tax authorities implement a threshold for TCS depending on the sales of merchants, particularly in cases where the current VAT is less than the TCS amount for the seller. TCS under the GST will be in effect from July 1.  

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India seeks more information from IT giants over H-1B visa conundrum

Responding to the growing Indian anxieties over the impending tightening of H-1B visa regulations in the US, India’s commerce ministry consulted with IT industry stakeholders last week, and asked companies in the sector to submit detailed business data on their contributions to the American economy. Industry body National Association of Software and Services Companies (NASSCOM) will oversee the data collation as the Indian government prepares to take up their concerns with the Trump administration. The heads of the country’s leading IT firms will also meet separately with officials from the Trump administration and US lawmakers.

India’s IT sector contributes around 9.3 percent of the country’s GDP and will be significantly impacted if the US approves restrictive measures. Three bills are under consideration in the US Congress: the High-Skilled Integrity and Fairness Act, 2017, which proposes hiking the minimum wage for H-1B visa holders from US$60,000 to US$130,000; the `End Outsourcing Act’ that calls for a ban on outsourcing by the states; and the Reforming American Immigration for Strong Employment (Raise) Act that seeks to reduce the number of green cards issued to half a million from about a million.

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