Endless possibilities on the horizon for the e-commerce sector in Bangladesh

How would you define the significant growth and emergence of the e-commerce sector in the last 7 years?

Bangladesh has been witnessing incredible economic progression. So, it was reasonably predictable that with the transforming user behaviour and their increased financial capacity, more people would be receptive to the futuristic trends of shopping and exploring their desired products.

In the past decade, we have witnessed customers grasp the concept of online shopping and its pros and cons. Then we saw the growth of digital financial systems and their deep integration alongside the traditional methods. Kudos to the relevant stakeholders for bringing optimism to the industry and helping it evolve rapidly with time.

E-commerce is still an infant industry, but it shows a lot of potential that can bring significant momentum to the national growth trajectory in the long run. 

In light of the Budget (2022-2023), what impact might it have on businesses that rely heavily on FDI?

In the recently published Finance Bill 2022-2023, it appears that the startup companies have received favourable incentives in case of critical business sustainability issues like loss carry forward (9 years) and minimum tax (0.1%). Daraz commends the vision of the policymakers in facilitating the growth of startups, as they need massive foreign investments and a minimum of 8-10 years to mature their business. 

However, a startup is an integral part of the digital ecosystem, not the entire ecosystem. So incentivising only a portion of the industry will not bring desired growth,

Therefore, the necessary incentives need to be provided to the e-commerce industry. The e-commerce sector is heavily dependent on foreign investment due to the requirement of massive funds for a sustainable and long-term business plan. Unfortunately, it was excluded from any such vital incentives.

Additionally, the eligibility of such benefits was limited to startups incorporated within or after 2017-2018, with an annual turnover of BDT 100 crore only. Furthermore, they cannot be a subsidiary with 50% or more shareholding. 

These barriers have excluded entities like Daraz, Chaldal, ShopUp, Pathao, etc with significant foreign investments. We have been heavily investing in this sector for a long time and are still loss-making and collectively do not even comprise 2% of the potential market.

What budgetary changes would you recommend to ensure that the e-commerce industry's contribution generates significant revenue? What are your thoughts on a potential tax break for the industry?

First of all, we must acknowledge that the industry is still in its 'infant state'. Plenty of skilled resources are also needed to strengthen the industry's logistical backbone. We also need more investors and larger capital funds to secure the industry's financial future.

Our strategic steps must be measured and adjusted for precision. That is where we would like to incorporate the topic of tax exemption.

Currently, the contribution of the e-commerce sector to the overall revenue collected by the National Board of Revenue each financial year is still minuscule. Hence, we believe that even if tax gets exempted for this sector, it may not create any immediate revenue crisis. But this little change can be a game-changer for the market players, giving them a better financial stance to back their endeavours and explore their prospects more courageously. We also request the authority's assistance in facilitating the inclusion of the definition of 'online marketplace' in the Bill. We also want the aforementioned incentives to be included for e-commerce entities to encourage foreign investment and the overall sustainability of the e-commerce industry. We believe that if we put too much strain on the entrepreneurs and marketplaces through overburdening regulations right from the inception, the genuine drive may not be sustainable for us to reap the optimum benefits going forward.

How do you define the term 'Marketplace'? Do you believe the existing definition in the SoP leaves room for e-commerce industry malpractice?

There must always be a specific definition of widely and commonly used terms for strict legal and organisational purposes. It is required to keep everyone on the same page, especially when there is a scope for misunderstandings. The current definition of online goods sales in the VAT Act only defines retail purchases and sales, whereas the marketplace must be defined and incorporated. For legal and VAT context, it needs to be defined in ways in which it is published in the SOP by the Ministry of Commerce. 

It is to be noted that the marketplace definition mentioned in the Digital Commerce SOP 2021 is legally approved. In the marketplace model, separate legal responsibilities for buyers, sellers, platforms, or payment gateways exist. Therefore, without a distinct classification, online marketplaces may continue to face operational bottlenecks, as long as their activities are being considered as retailers'.

A typical marketplace has 30,000 to 40,000 vendors, and it is difficult to identify the people or organisations that are eligible for VAT. Also, the marketplace should not be held responsible for collecting 'Mushak' as they are not direct buyers or sellers.

What measures should be taken to accelerate the growth of the e-commerce industry? 

Like most other countries worldwide, Bangladesh now has a thriving e-commerce industry worth approximately USD 1.6 billion and will double to $3 billion by 2023. We are slowly stepping into a tech-dependent ecosystem, where high priority needs to go to digital means of purchasing and transactions.

Thus, it is predictable that e-commerce is going to add more value to our economy, businesses, and entrepreneurs. Many businesses have already partnered with Daraz as sellers. Outside, there are many more e-commerce ventures. Then there is also f-commerce.

These are creating more avenues for commercial exploration in one way, while also creating employment opportunities and eradicating the nation's unemployment problem. This way, e-commerce is helping shape Bangladesh's next generation of businessmen, providing them with the opportunity to grow experience with much-improved convenience and customer reach.