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Parichiti - Domestic Workers’ Access to Secure Livelihoods in West Bengal
http://editors.cis-india.org/raw/parichiti-domestic-workers-access-to-secure-livelihoods-west-bengal
<b>This report by Anchita Ghatak of Parichiti presents findings of a pilot study conducted by the author and colleagues to document the situation of women domestic workers (WDWs) in the lockdown and the initial stages of the lifting of restrictions. This study would not have been possible without the WDWs who agreed to be interviewed for this study and gave their time generously. We are grateful to Dr Abhijit Das of the Centre for Health and Social Justice for his advice and help. The report is edited by Aayush Rathi and Ambika Tandon, and this work forms a part of the CIS’s project on gender, welfare and surveillance supported by Privacy International, United Kingdom.</b>
<p> </p>
<h4>Domestic Workers’ Access to Secure Livelihoods in West Bengal: <a href="https://www.parichiti.org.in/ckfinder/userfiles/files/Final%20report_WDW_Lockdown.pdf" target="_blank">Read</a> (PDF)</h4>
<h4>Cross-posted from <a href="https://www.parichiti.org.in/r&p.php" target="_blank">Parichiti</a>.</h4>
<hr />
<h2>Executive Summary</h2>
<p>Hundreds of thousands of women from poor communities work as domestic workers in Kolkata. Domestic work is typically a precarious occupation, with very little recognition in legislation or policy. Along with other workers in the informal economy, women domestic workers (WDWs) were severely impacted by the national lockdown enforced in March, with loss of livelihood and few options for survival.</p>
<p>Parichiti works with WDWs in 20 different locations - slums and informal settlements in Kolkata and villages in south 24 Parganas. We conducted this pilot study from late June to August 2020 to document the situation of WDWs from March onwards, in the lockdown and the initial stages of lifting of restrictions. We interviewed 14 WDWs on the phone to record their experiences during the lockdown and after, including impact on livelihoods. The objectives of the study were to document the impact of the Covid-19 pandemic on the lives of WDWs, with focus on economic and health dimensions.</p>
<p>We found that most domestic workers in our sample were paid for March, but faced difficulties in procuring wages April onwards. During this period, they faced economic hardships that threatened their survival, with members of their family also involved in the informal sector and experiencing loss of wages. Workers survived on relief received through civil society or by taking loans from banks or informal lenders. Some are now stuck in a debt trap.</p>
<p>Most went back to work from June, but faced several barriers – public transport services continued to be dysfunctional, apartment complexes prohibited entry of outsiders, and employers were reluctant to allow workers into their homes. Employers were wary of workers if they were employed in multiple households or used public transport, forcing workers to adapt to these conditions. Due to these reasons, some workers lost their jobs permanently, while others returned with lower wages or lower number of employers. Workers were well aware of the precautions to be taken at the home and workplace with regards to Covid-19.</p>
<p>Many WDWs were unable to access ration through the Public Distribution System. Some were not enrolled and others were enrolled in the districts they had migrated from. Some were not classified as below the poverty line and were hence not priority households for the state, although they were ‘deserving’ beneficiaries. All of the respondents were affected by Cyclone Amphan, which devastated parts of the state in May 2020. Despite the announcement of a sizeable compensation by the state, those whose homes were impacted were unable to get any relief. WDWs overall tended to not rely on the state for welfare or health services. Many regarded public health systems to have poor quality services, and turned to private services when possible. Both central and state governments fell short of meeting the needs of WDWs during the pandemic, which could potentially have long-term impact on their income and health.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/parichiti-domestic-workers-access-to-secure-livelihoods-west-bengal'>http://editors.cis-india.org/raw/parichiti-domestic-workers-access-to-secure-livelihoods-west-bengal</a>
</p>
No publisherAnchita GhatakGig WorkResearchNetwork EconomiesPublicationsGender, Welfare, and PrivacyResearchers at Work2020-12-30T10:01:36ZBlog EntryDWRU, BBGS & MKU - The Covid-19 Pandemic and the Invisible Workers of the Household Economy
http://editors.cis-india.org/raw/dwru-bbgs-mku-covid19-invisible-household-workers
<b>Domestic Workers Rights Union (DWRU), Bruhat Bangalore Gruhakarmika Sangha (BBGS), and Manegelasa Kaarmikara Union (MKU) have prepared a report on the invisibilisation of domestic workers under the Covid-19 pandemic and a set of demands directed at the government and resident welfare associations (RWAs) for better, dignified and just treatment of domestic workers in Karnataka. We at CIS are proud to contribute to and publish this work as part of the ongoing 'Feminist Internet Research Network' project supported by the Association for Progressive Communications (APC).</b>
<p> </p>
<h4>Report: <a href="https://cis-india.org/raw/files/dwru-bbgs-mku-covid19-invisible-household-workers-report" target="_blank">Download</a> (PDF)</h4>
<p><em>This report is authored by Geeta Menon, and edited by Aayush Rathi (CIS) and Ambika Tandon (CIS).</em></p>
<hr />
<h3><strong>Introduction</strong></h3>
<p>Up until the first phase of the imposition of lockdown in India, while restrictions were enforced, domestic workers went to work as usual. Domestic workers were aware of the announcements of precautions, but the
employers insisted they come for work disregarding any concerns for workers' safety.</p>
<p>During the phase of strict imposition of the first lockdown, covering the time from March 24, 2020 to the first week of May, several corporate employees “worked from home”. While pictures of employers’ families spending family time, and learning to clean and cook, circulated widely on social media and in press, domestic workers lived in cramped conditions with the fear of rations running out.</p>
<p>In the first 2 weeks of May, a survey of nearly 2400 domestic workers in Bengaluru was conducted by Domestic Workers Rights Union (DWRU), Bruhat Bangalore Gruhakarmika Sangha (BBGS), and Manegelasa Kaarmikara Union. Some of the findings from the survey are below:</p>
<ul><li>2084 (about 87%) of the workers were told not to come for work since the lockdown in March and were not sure if and when they would be called to work again.</li>
<li>341 workers in the areas surveyed by BBGS (87%) and 150 workers in the areas surveyed by Manegelasa Kaarmikara Union lost their jobs entirely during the lockdown.</li>
<li>91% of workers lost their salaries for the month of April.</li>
<li>50% of all workers above the age of 50 lost their jobs during the lockdown.</li></ul>
<p>The report also showcases the tyranny and hypocrisy of resident welfare associations (RWAs) and employers. The period of relaxation of the lockdown has again seen RWAs issuing directives that are demeaning to domestic workers and pose insurmountable barriers to domestic workers’ ability to work. For example, several RWAs issued emails advising residents to ask domestic workers to minimise or avoid usage of the lift and take the stairs instead. They also discouraged domestic workers from waiting in the common areas in between shifts. RWAs also invaded domestic workers’ privacy by mandating the disclosure of personal information without any protocols in place to keep this information secure.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/dwru-bbgs-mku-covid19-invisible-household-workers'>http://editors.cis-india.org/raw/dwru-bbgs-mku-covid19-invisible-household-workers</a>
</p>
No publisherGeeta MenonCovid19ResearchNetwork EconomiesResearchers at WorkDigital Domestic Work2020-06-19T12:34:22ZBlog EntryFrom Health and Harassment to Income Security and Loans, India's Gig Workers Need Support
http://editors.cis-india.org/raw/gig-workers-need-support
<b>Deemed an 'essential service' by most state governments, and thereby exempt from temporary suspension during the COVID-19 lockdown, food, groceries and other essential commodities have continued to be delivered by e-commerce companies and on-demand services. Actions to protect workers, who are taking on significant risks, have been far less forthcoming than those for customers. Zothan Mawii (Tandem Research), Aayush Rathi (CIS) and Ambika Tandon (CIS) spoke with the leaders of four workers' unions and labour researchers to identify recommended actions that public agencies and private companies may undertake to better support the urgent needs of gig workers in India. </b>
<p> </p>
<p><em>Originally published by <a href="https://thewire.in/business/covid-19-lockdown-delivery-gig-workers" target="_blank">The Wire</a> on April 29, 2020.</em></p>
<hr />
<p>Nearly two weeks ago, news broke that a Zomato delivery worker <a href="https://indianexpress.com/article/cities/delhi/pizza-man-who-tested-covid-19-positive-also-delivered-food-for-us-zomato-6365513/" target="_blank">tested positive for COVID-19</a> in New Delhi.</p>
<p>As many as 72 families in the south Delhi neighbourhood where he made deliveries have been quarantined, along with 17 other people he worked with. With the luxury of social distancing not extended to delivery workers, the incident further fuelled the apprehensions and uncertainties that they already were contending with. This was only a matter of time.</p>
<p>Deemed an “essential service” by most state governments, and thereby exempt from temporary suspension during the lockdown, food, groceries and other essential commodities have continued to be delivered by e-commerce companies and on-demand services including Swiggy, Zomato, BigBasket, Dunzo, Housejoy and Flipkart.</p>
<p>In choosing to continue operations, these companies have then rushed to enforce measures to put customers at ease. Such measures have included no-contact deliveries, card-only payments, and displaying temperature readings of workers.</p>
<p>Uber and Ola Cabs suspended services in most areas, and announced that in places where they are <a href="https://www.livemint.com/news/india/covid-19-uber-to-offer-cabs-for-essential-services-11586077100965.html" target="_blank">providing essential services</a>, workers have been instructed to wear masks and observe hygiene standards.</p>
<p>Swiggy and Zomato announced they were communicating with workers about safety and hygiene standards. Zomato has more recently <a href="https://twitter.com/deepigoyal/status/1252844887797428230" target="_blank">announced</a> that the company is making the Aarogya Setu app mandatory for workers to receive orders.</p>
<p><a href="https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/covid-19-zomato-sets-up-funds-for-income-starved-daily-wage-workers-in-india/articleshow/74823838.cms" target="_blank">Relief funds</a> have been set up— donations to these funds continue to be solicited from the public and company executives have made grandiose gestures of <a href="https://www.carandbike.com/news/ola-introduces-drive-the-driver-fund-initiative-to-fund-relief-for-driver-community-2201886" target="_blank">contributing their salaries</a> to these funds.</p>
<p><strong>Stark reality</strong></p>
<p>The situation on the ground, however, tells another story. Actions to protect workers, who are taking on significant risks, have been far less forthcoming than those for customers. Workers are also bearing the brunt of arbitrary surveillance measures, like being asked to download the Aarogya Setu app, in addition to scrutiny they are placed under regularly. No such surveillance measures have been placed on customers. The priorities of on-demand service companies are clear: protect the bottom line at the expense of vulnerable workers.</p>
<p>In the absence of any concerted support from the companies, service workers could have looked to the state for relief. None has been forthcoming. Government action has pegged the targeting of relief works and services to those currently eligible for welfare programs and registered under its various schemes. Most gig workers, if not all, are ineligible as a result of the arbitrary conditions underlying these schemes.</p>
<p>We spoke to the leaders of four unions — including the Indian Federation of App-based Transport Workers (IFAT) and the Ola and Uber Drivers and Owners’ Association (OTU)– who represent gig workers across the country about the risks and vulnerabilities that they are having to contend with.</p>
<p>The precariousness characterising gig work could not be starker. A summary of the discussions can be found <a href="https://cis-india.org/raw/zothan-mawii-covid-19-and-relief-measures-for-gig-workers-in-india" target="_blank">here</a>, while the recommendations emerging from these discussions have been shared with government officials and company representatives and can be found in full <a href="https://cis-india.org/raw/covid-19-charter-of-recommendations" target="_blank">here</a>.</p>
<p>Below are some of the key recommendations that emerged from these discussions.</p>
<p><strong>Health</strong></p>
<p>Many on-demand service companies have not provided workers with any personal protective equipment (PPE), not even to delivery workers who face heightened risks of exposure to the coronavirus at nearly every step of the delivery process.</p>
<p>Some unions had to take to distributing masks, while many other workers continue to incur repeated costs to safeguard their own health. At a later stage, Swiggy announced that workers would be reimbursed for these purchases, but the process is so tedious that workers have found it untenable.</p>
<p>In addition, health awareness campaigns regarding safety measures and risks were also launched very late into the crisis, and then were not in vernacular languages and could not be comprehended by most workers.</p>
<p>In terms of insurance, most platforms have announced financial assistance for workers who test positive for COVID-19. This is aimed at covering their hospital expenses, as well as providing a daily stipend for a limited period. However, these come short as there are no provisions for OPD consultations or even for the cost of going and getting tested (losing one day’s work and then potentially one more before the results come in).</p>
<p>Additionally, the difficulty and expenses of obtaining a test could place an additional burden on workers — as without proof of a positive test, workers will be unable to access this fund in the first place. This is far from the robust health insurance that must be provisioned to ensure workers’ health and safety. Some platforms have made telemedicine services available for workers and while this is a step in the right direction, it must be backed by more tangible protections like covering part of the costs incurred for treatment.</p>
<p>Unions demand that companies provide adequate PPE to workers free of cost —masks, gloves, hand sanitisers, and soap. If platforms continue to ask workers to log in at significant risks to themselves and their families, provision of safety equipment is the basic minimum requirement that must be met immediately. This should also include a plan to ensure workers’ access to clean and hygienic sanitation facilities, as they may not have access to these on their delivery routes.</p>
<p>In addition, platforms must provide health insurance cover in addition to accident insurance coverage and hospitalisation cover for COVID-19. This should include OPD consultations.</p>
<p><strong>Income security and social protection</strong></p>
<p>With services suspended or demand really low, gig workers have either lost their income or seen it fall drastically — delivery workers’ daily earnings are as low as Rs 150-Rs 300 for a full day’s work.</p>
<p>Almost a month into the lockdown, there is little clarity as to who is eligible for the funds that companies have raised, and in what manner and or what purposes it will be disbursed.</p>
<p>Ola Cabs has offered interest free loans to drivers for relief in the short term, while some Uber drivers have received a Rs 3,000 grant from the company. If disbursed universally this would ensure availability of some liquidity for workers, although at this stage it remains unclear if all drivers are eligible to receive the grant.</p>
<p>Workers and unions are afraid that this grant might only be accessible for workers with high ratings, or those who have logged longer hours especially through the course of the lockdown period. This would effectively penalise workers for going to their homes for the lockdown, or being otherwise unable to work. Unions have estimated that not more than 20 percent of workers continue to remain active through the lockdown period.</p>
<p>Moreover, research has shown that workers are not necessarily aware of the protections made available to them as a result of the legalese that companies couch these terms in.</p>
<p>To ensure income security, platforms must make direct cash transfers to all workers who have logged in for at least two weeks between January and April 2020. This should be fixed according to minimum wage standards for skilled work in each state or at Rs 1,000 per day of the lockdown, and will have to be enforced with retrospective effect.</p>
<p>The former should be treated as an entitlement of workers while a portion of the latter can be asked to be repaid by the workers over the course of the next year. The fiscal responsibility for the cash transfers can be shared with governments. Governments can request the data held by these companies for the transfers.</p>
<p><strong>Rent and loans</strong></p>
<p>Some states have announced moratoriums on house rent but again there is no explicit mention of gig workers being included in this — and in states where such a move hasn’t been announced, gig workers must continue to pay house rent without having a source of income to rely on.</p>
<p>On the issue of loan repayments, the RBI allowed lending institutions to grant a three-month moratorium on retail loan repayments as a part of its COVID-19 regulatory package. On the one hand, availing of the moratorium will significantly increase the loan tenure and total amount to be repaid. On the other, several gig workers have reported that the enforcement of the moratorium itself has been piecemeal outside of public sector institutions.</p>
<p>Here again they have to make a Faustian bargain. The government should enforce the RBI’s directive strictly so gig workers get some relief.</p>
<p>Further, several companies themselves have leased vehicles to workers, for which payment of EMI must be ceased through the months of March to May to allow workers some relief without requiring the return of vehicles. Currently, EMIs have only been stalled on the condition of returning vehicles.</p>
<p><strong>Harassment</strong></p>
<p>Workers have been subject to harassment and discrimination by the police and customers alike, making it difficult to continue work. Despite the categorisation of delivery as an essential service, companies are finding it difficult to get easy access to movement passes in bulk, which implies that workers are penalised by being unable to work even if they are available. Companies have come out to allege harassment despite clear directions to allow movement of delivery workers, which points to gaps in enforcement.</p>
<p>Further, frequent barricading has implied that workers are not able to complete orders without diversions despite having passes for movement. Meanwhile, companies continue to mandate door-to-door delivery so as to ensure that customers are not inconvenienced at all. In some cases, this has implied that workers have to travel on foot in barricaded areas to deliver orders.</p>
<p>We recommend that companies urgently set up a helpline for workers to address such issues that may arise in delivery. We also recommend that companies proactively work with the government to map hotspots and containment zones and cease delivery in such areas. Thus far, there is no indication of any such measures by companies.</p>
<p><strong>Post-lockdown revival</strong></p>
<p>The lockdown brings to the fore just how vulnerable gig workers are.</p>
<p>This is a direct consequence of the gig work arrangements structured as disguised employment. Deeming workers as independent contractors and self-identifying as technology providers, on-demand service companies have washed their hands of the responsibility of providing labour protections and social security measures despite exerting extensive control over the conditions of work (such as wages, incentives) and the manner of its dispensing (such as the standard of work, hours of work).</p>
<p>Governments, too, have done little to recognise gig workers although they have been added as a category of workers in the draft Social Security code. Relief measures announced by the government exclude them. However, the government needs to intervene urgently in the current situation.</p>
<p>Platforms are likely to recover once the lockdown is lifted —home delivery services like BigBasket and Grofers have already seen their businesses skyrocket.</p>
<p>However, there is an urgent need to rebuild on-demand work as one that isn’t merely in the service of capital. A first step to that would be to reduce commissions to 5% for at least 6 months so that workers can recover financially. The unencumbered spending to capture market share at the expense of workers needs to be curbed. Enforcing these recommendations will require a coordinated effort between governments and on-demand service companies. As consumers, it is also our responsibility to question companies that do not take on the moral responsibilities of extending adequate worker protections.</p>
<p>With unemployment in the country skyrocketing, it may be the case that on-demand work opens up avenues to securing work. It then becomes imperative to ensure any future of work is one that is inclusive and accounts for the systemic changes that are now impossible to ignore.</p>
<p>While social distancing is a choice truly available to a privileged few, we need to ensure that social protection isn’t.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/gig-workers-need-support'>http://editors.cis-india.org/raw/gig-workers-need-support</a>
</p>
No publisherZothan Mawii (Tandem Research), Aayush Rathi (CIS), and Ambika Tandon (CIS)Gig WorkDigital LabourResearchPlatform-WorkNetwork EconomiesPublicationsResearchers at Work2020-05-19T06:57:36ZBlog EntryCOVID-19 Charter Of Recommendations on Gig Work
http://editors.cis-india.org/raw/covid-19-charter-of-recommendations
<b>Tandem Research and the Centre for Internet and Society organised a webinar on 9 April 2020, with unions representing gig workers and researchers studying labour rights and gig work, to uncover the experiences of gig workers during the lockdown. Based on the discussion, the participants of the webinar have drafted a set of recommendations for government agencies and platform companies to safeguard workers’ well being. Here are excerpts from this charter of recommendation shared with multiple central and state government agencies and platforms companies.</b>
<p> </p>
<em><a href="https://cis-india.org/raw/zothan-mawii-covid-19-and-relief-measures-for-gig-workers-in-india" target="_blank">Summary of discussions</a> from the COVID-19 and Gig Economy webinar, authored by Zothan Mawii, Tandem Research</em>
<hr />
<h3><strong>Contributors</strong></h3>
<ol>
<li>Aayush Rathi, Ambika Tandon and Tasneem Mewa, The Centre for Internet and Society, India</li>
<li>Aditi Surie, Indian Institute for Human Settlements</li>
<li>Anita Gurumurthy and Nandini Chami, IT for Change</li>
<li>Astha Kapoor, Aapti Institute</li>
<li>Dharmendra Vaishnav, Indian Delivery Lions (IDL)</li>
<li>Janaki Srinivasan, International Institute of Information Technology, Bangalore</li>
<li>Kaveri Medappa, University of Sussex</li>
<li>Pradyumna Taduri, Fairwork Foundation</li>
<li>Rakhi Sehgal, Gurgaon Shramik Kendra</li>
<li>Sangeet Jain, Researcher</li>
<li>Shaik Salauddin, Indian Federation of App-based Transport Workers (IFAT)</li>
<li>Shohini Sengupta, Assistant Professor of Research, Jindal School of Banking and Finance</li>
<li>Simiran Lalvani, Independent researcher</li>
<li>Tanveer Pasha, Ola, Taxi 4 Sure and Uber Drivers and Owners’ Association (OTU)</li>
<li>P. Vignesh Ilavarasan, Researcher and professor, IIT Delhi</li>
<li>Vinay Sarathy, United Food Delivery Partners’ Union (UFDPU)</li>
<li>Vinay K. Sreenivasa, Advocate, Alternative Law Forum</li>
<li>Zothan Mawii, Iona Eckstein and Urvashi Aneja, Tandem Research</li></ol>
<h3><strong>Context</strong></h3>
<p>The nationwide lockdown in response to the ongoing COVID-19 pandemic has had a devastating impact on ‘gig workers’ working for on-demand service platforms such as those providing ride-hailing, home-based work and food delivery services and also e-commerce companies. Those driving for on-demand transportation companies have lost their source of livelihood as services remain suspended.</p>
<p>Workers for on-demand delivery and home-based services, on the other hand, have been deemed “essential” and continue to work although demand has fallen drastically. Earnings for delivery workers have fallen to as low as INR 100-300 per day for a whole day’s work. Workers face a high risk of contracting COVID-19 due to their exposure to multiple customers. Apprehensions are rising after a <a href="https://indianexpress.com/article/cities/delhi/pizza-man-who-tested-covid-19-positive-also-delivered-food-for-us-zomato-6365513/" target="_blank">delivery worker for Zomato</a> tested positive for COVID-19 in New Delhi. Demand has fallen further but delivery workers must continue to put themselves and their families’ health and safety at risk with limited or no provisions for personal protective equipment or other safety measures <a href="https://gadgets.ndtv.com/apps/news/swiggy-zomato-customer-advisory-coronavirus-outbreak-covid-19-india-2193038" target="_blank">offered by companies</a>.</p>
<p>The relief works announced by the central and state governments do not specifically provide for ‘gig workers’. At the same time, the measures announced by on-demand service companies are inadequate, ambiguous and inconsistent. The eligibility, manner and quantum of relief and the process of availing relief is unclear to workers.</p>
<p>We urge you to bolster the socio-economic and healthcare protections for ‘gig workers’ in India in light of the outbreak of COVID-19. Any efforts aimed at directing relief to ‘gig workers’ will have to be combined, involving the central and state governments and on-demand service companies.</p>
<p>We suggest that the measures adopted incorporate the recommendations outlined below. The recommendations have been drafted after discussion between civil society actors including labour unions from delivery and transportation sectors, researchers, and activists. A summary of the discussions leading to this charter of recommendations can be found <a href="https://cis-india.org/raw/zothan-mawii-covid-19-and-relief-measures-for-gig-workers-in-india" target="_blank">here</a>.</p>
<h3><strong>Charter of Recommendation on Gig Work</strong></h3>
<p><img src="https://cis-india.org/raw/covid19-charter-image-1/" alt="null" width="85%" /></p>
<p><img src="https://cis-india.org/raw/covid19-charter-image-2/" alt="null" width="85%" /></p>
<p><img src="https://cis-india.org/raw/covid19-charter-image-3/" alt="null" width="85%" /></p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/covid-19-charter-of-recommendations'>http://editors.cis-india.org/raw/covid-19-charter-of-recommendations</a>
</p>
No publisherAayush Rathi and Ambika TandonResearchers at WorkGig WorkDigital LabourCovid19ResearchPlatform-WorkFuture of WorkFeaturedNetwork EconomiesHomepage2020-05-13T08:53:02ZBlog EntryZothan Mawii - COVID-19 and Relief Measures for Gig Workers in India
http://editors.cis-india.org/raw/zothan-mawii-covid-19-and-relief-measures-for-gig-workers-in-india
<b>CIS is cohosted a webinar with Tandem Research on the impact of the COVID-19 response on the gig economy on 9 April 2020. It was a closed door discussion between representatives of workers' unions, labour activists, and researchers working on gig economy and workers' rights to highlight the demands of workers' groups in the transport, food delivery and care work sectors. We saw this as an urgent intervention in light of the disruption to the gig economy caused by the nationwide lockdown to limit proliferation of COVID-19. This is a summary of the discussions that took place in the webinar authored by Zothan Mawii, a Research Fellow at Tandem Research.</b>
<p> </p>
<em>Re-posted from <a href="https://tandemresearch.org/blog/covid19-and-relief-measures-for-gig-workers-in-india" target="_blank">Tandem Research</a> (April 14, 2020)</em>
<hr />
<h3><strong>List of Participants</strong></h3>
<ul>
<li>Aayush Rathi, Ambika Tandon and Tasneem Mewa, The Centre for Internet and Society, India (Co-organisers)</li>
<li>Zothan Mawii, Iona Eckstein and Urvashi Aneja, Tandem Research (Co-organisers)</li>
<li>Aditi Surie, Indian Institute for Human Settlements</li>
<li>Astha Kapoor, Aapti Institute</li>
<li>Dharmendra Vaishnav, Indian Delivery Lions (IDL)</li>
<li>Janaki Srinivasan, International Institute of Information Technology, Bangalore</li>
<li>Kaveri Kaliyanda, The University of Sussex</li>
<li>Pradyumna Taduri, Fairwork Foundation</li>
<li>Rakhi Sehgal, Independent researcher</li>
<li>Shaik Salauddin, Indian Federation of App-based Transport Workers (IFAT)</li>
<li>Simiran Lalvani, Independent researcher</li>
<li>Tanveer Pasha, Ola, Taxi 4 Sure and Uber Drivers and Owners’ Association (OTU)</li>
<li>Vinay Sarathy, United Food Delivery Partners’ Union (UFDPU)</li></ul>
<h3><strong>What relief measures do gig workers need during this pandemic?</strong></h3>
<p>The coronavirus pandemic has the world in its grips, and exposed the fragility of our economic systems and societal structures. The ensuing lockdown and physical distancing measures put in place by states to control the spread of the virus has impacted citizens differently and largely along class lines. While white collar workers remain relatively insulated as they work from home and have their essentials delivered, it has laid bare the vulnerabilities faced by India’s largely informal workforce. Since announcing the lockdown and the exodus of migrant workers from cities, the central and state governments in India have announced a number of relief measures for workers. However, those working on on-demand platforms have been excluded, while relief measures announced by a few platforms are inadequate to provide meaningful protection, leaving workers to fall at the cracks. Tandem Research and the Centre for Internet and Society (CIS) hosted a webinar on 9th April with a group of union leaders and researchers to draft a charter of demands for platforms and government to ensure better protection for gig workers.</p>
<p>We heard from 4 union leaders about the situation facing workers on the ground and the shortcomings of the measures platforms claim to be taking to ensure their workers' safety and protection. This piece recaps some of the issues that were uncovered during the meeting.</p>
<p>Tanveer Pasha, President of Ola, Taxi 4 Sure and Uber Drivers and Owners’ Association (OTU) and Shaik Salauddin, President of the Indian Federation of App-based Transport Workers (IFAT) pointed out that while Ola Cabs and Uber claim to have instructed drivers on safety and hygiene measures and provided personal protective equipment (PPE), in reality their efforts have been wanting. The unions themselves have been conducting these awareness drives while IFAT purchased masks for drivers in Telangana. On-demand food delivery services have also not provided workers with any PPE, although they have been deemed essential workers and must continue to interact with customers and restaurants as they go about their tasks.</p>
<p><strong>High on the list of concerns facing gig workers was income security and the security of their jobs once the lockdown is lifted</strong>. Transportation companies Uber and Ola cab have suspended services although some drivers in Bengaluru, working with OTU have pivoted to delivering essential goods or transporting healthcare workers. The number of orders on on-demand food delivery services has dropped drastically too. Gig workers are earning little to no money during this time and have little recourse to savings or other safety nets.</p>
<p><strong>Unions are demanding that workers are paid a sum of money to tide them over during this time, which can be paid back to the platforms without interest</strong>. Unions argue that the commissions charged by platform companies can be used to cover these costs and even call for a reduction in the commission after the lockdown is lifted so that workers can recover financially.</p>
<p><a href="https://www.carandbike.com/news/ola-introduces-drive-the-driver-fund-initiative-to-fund-relief-for-driver-community-2201886" target="_blank">Ola Cabs</a> and <a href="https://yourstory.com/2020/03/coronavirus-zomato-feed-daily-wager" target="_blank">Zomato</a> have started funds to support their workers, taking donations from the public and from management, <strong>but workers are yet to see the benefits of the funds</strong>. With little transparency or clarity as to how these funds will operate, unions and workers are left wondering if this is solely a publicity move on the part of platforms. No announcements have been made regarding these funds - who is eligible for the fund? What are the criteria workers will have to meet to receive funds? Will workers have to pay the amount back to the platforms? If yes, will it carry interest? Will workers’ ratings or the hours they’ve logged on the app be used to determine their eligibility?</p>
<p>The government announced a moratorium on EMI and loan repayments, and has directed the RBI to set guidelines. Some state governments have also announced waivers on house rent payments. While these measures should have eased the pressure on gig workers, that hasn’t been the case - <strong>informal lenders and non banking financial companies (NBFC) have continued to ask workers for payments, flouting the RBI guidelines</strong>. In the absence of enforcement from the government, gig workers are unable to reap the benefits of directives designed to relieve the financial pressure they are currently under.</p>
<p><strong>Delivery workers find themselves in a double bind</strong> - they have been deemed essential workers by the government and on-demand services remain up and running. However, with few restaurants remaining open and few orders coming in, they are forced to work long hours for little money, and in risky conditions as roads remain deserted because of the lockdown. Dharmender Vaishnav (Indian Delivery Lions) and Kaveri Kaliyanda (PhD scholar, University of Sussex) raised pertinent questions over the classification of delivery workers as essential workers - <strong>Who are the workers essential for? At what personal cost to their health and safety must delivery workers continue to serve the interests of platforms and their middle class customer base?</strong> This categorisation also allows on-demand food delivery companies to absolve themselves of the responsibility for ensuring workers receive wages - they can claim services continued to operate and shift the blame onto workers for not logging in. Many of the workers who have gone back to their native towns and villages are anxious that their accounts will be deactivated for not logging in.</p>
<p>These issues facing gig workers will be drafted into a set of demands for platforms and government to provide relief. However, many questions remain unanswered. While these measures may address the hardships gig workers face in the short term, it doesn’t address long standing issues that characterise this line of work. The precarity of gig workers stems from the marginal space they occupy in the labour market. As ‘partners’ or ‘independent contractors’, they are not entitled to social protection measures from the government nor are platforms obliged to provide them. Unlike construction workers or domestic workers-who are also informal workers but enjoy recognition of an organised body and some legislative protections-they remain largely invisible to policymakers and government. Getting gig workers this type of recognition will be crucial to ensure their wellbeing. In Karnataka, there are efforts underway to introduce regulations similar to <a href="https://edd.ca.gov/Payroll_Taxes/ab-5.htm" target="_blank">California’s AB5 bill</a> that recognises gig workers as employers eligible for state and employer sponsored benefits. Gig workers have been included in the <a href="https://www.prsindia.org/sites/default/files/bill_files/Code%20on%20Social%20Security%2C%202019.pdf" target="_blank">draft Code on Social Security</a>. However, regulating platforms to make them more accountable and safeguarding worker welfare is long overdue. It is especially urgent at this time - the economic repression that will follow is likely to push more young jobseekers to the platform economy as a stop gap solution in the absence of suitable employment. The conditions of work platforms engender are far from ideal and should not become the model for jobs in the future.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/zothan-mawii-covid-19-and-relief-measures-for-gig-workers-in-india'>http://editors.cis-india.org/raw/zothan-mawii-covid-19-and-relief-measures-for-gig-workers-in-india</a>
</p>
No publisherZothan Mawii (Tandem Research)Gig WorkDigital LabourResearchPlatform-WorkFuture of WorkNetwork EconomiesResearchers at Work2020-05-19T05:41:57ZBlog EntryRoundtable on India’s Gig-work Economy
http://editors.cis-india.org/raw/india-gig-work-economy-roundtable
<b>Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This roundtable discussion marks the end of our series on 'India’s Gig-work Economy' published by the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC). In this discussion, the researchers reflect on methods, challenges, inter-subjectivities and possible future directions for research on the topic. Listen to the audio track below or read the transcript for the full discussion.</b>
<p> </p>
<p><em>Originally published by the <a href="http://blog.castac.org/category/series/indias-gig-work-economy/" target="_blank">Platypus blog</a> of CASTAC on September 5, 2019.</em></p>
<h4>Full <a href="http://blog.castac.org/wp-content/uploads/sites/2/2019/09/CASTAC-roundtable-transcript.docx" target="_blank">transcript</a> of the roundtable in English.</h4>
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<iframe src="https://www.youtube-nocookie.com/embed/q4G4v46ZlOU" frameborder="0" height="315" width="100%"></iframe>
<h3><strong>Excerpts from the roundtable</strong></h3>
<h4>Part 1: On continuities between traditional and newer forms of work in cab-driving</h4>
<p><strong>Anushree (researcher, taxi-driving in Mumbai):</strong> “Something that came out during field work was the flow of workers from traditional services to app-based services which kind of happened in phases and all these platforms have played a different function in the history of this. While the radio taxis were more important in teaching workers to become professionals in the service economy the new platforms have given them a larger customer base and hired access to audience.”</p>
<p><strong>Sarah (researcher, taxi-driving in Delhi):</strong> “Prior to Ola and Uber there were radio cabs, but they were not the same phenomenon obviously. They used to work in specific pockets better, such as the airport route.”</p>
<h4>Part 2: Regulation of platform companies and platform-work</h4>
<p>The State’s response to disruptive technologies in India has always accounted for worker groups as electoral constituents as well. This means that there are no neat divisions between older black and yellow cabs and the newer ride-hailing app-based cabs. To pacify the threatened black and yellow cab drivers, they were accorded a special category on hailing apps as well:</p>
<p><strong>Anushree:</strong> So there were a lot of issues around the emergence of the app-based platforms and services and how they were disrupting the existing arrangements so in a bid to pacify the yellow and black cab drivers who are already operating in the city, these platform companies decided to go ahead and provide access to traditional taxi services as well. But also the related development that happened there is at the Maharashtra state government also provided another app to the black and yellow Cab drivers and as far as I found out during my fieldwork there hasn’t been any resolution on that front and most black and yellow cab drivers also use the State government made app but they also log into apps and every time I tried to book a black and yellow cab using Ola and Uber I could not get one.</p>
<h4>Part 3: On motivations and perceptions of gig-work</h4>
<p><strong>Simiran (researcher, food-delivery work in Mumbai):</strong> “So, I felt that these non app-based workers had difficulty joining apps because they lack domicile proof to prove they live in the city. There is also a perception that one needs to be English speaking. I am not implying that app-based workers have no rural roots or are all English speaking or educated but this is the perception that was held by non-app workers that was interesting.”</p>
<p><strong>Rajendra (researcher, food-delivery work in Delhi):</strong> “In case of the food-delivery workers in Delhi, they push them to deliver orders on time. This pressure makes them violate traffic rules, they ride on pavements, they break traffic signals. This also disrupts the social understanding of how to move in the city.”</p>
<h4>Part 4: On studying the gig-economy in India: how did you recruit, why?</h4>
<p><strong>Noopur:</strong> Why not order and recruit because so many people seem to be taking this pathway to approach gig-economy workers?</p>
<p><strong>Simiran:</strong> “…One thing is that I have never ordered food online so I wanted to keep it a bit blind that way but also the other thing is that I did not want my first interaction with the worker to be as a consumer or in a consumer-provider relationship. So, I was searching on Youtube, looking for city names and looking for search terms such as strikes or protests. Looking for videos about these things and their views on the companies…This was very interesting because there were also people from non-metro cities, from small towns doing this work who were also very eager to speak to me. They were expressive already and wanting to speak…”</p>
<p><strong>Anushree:</strong> “Apart from them fleet owners and union members were very eager to talk to us. They saw the study as a way to put their voice out. I had to establish my identity as well as a researcher. I used Telegram and facebook groups extensively…I think I relied on Telegram the most. It was also surprising that such a diverse set of people were on that platform. I had never used Telegram before this project but the comfort levels of all the people using it was really surprising. Drivers in the union members group was sort of surprising to me, they were posting images from the road, they were posting audio notes, they were moderating conversations in the group. Telegram was my major source of responses and I also got to know what was happening on the ground.”</p>
<p><strong>Sarah:</strong> “So, when you identify as a researcher and ask them these questions there is a certain expectation of allyship. So, I started asking them what they think is a good customer. That was a good entry point to assuring them that I was on their side. Some of them were still very cautious. We were talking about things like drunk women and they would be quick to tell me that not all women are bad. Or not all customers are bad. But discussing customers and their behavior was generally a good way to connect with them…”</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/india-gig-work-economy-roundtable'>http://editors.cis-india.org/raw/india-gig-work-economy-roundtable</a>
</p>
No publisherNoopur Raval, Anushree Gupta, Rajendra Jadhav, Sarah Zia, and Simiran LalvaniGenderDigital LabourResearchPlatform-WorkFuture of WorkNetwork EconomiesResearchers at WorkMapping Digital Labour in India2020-05-19T06:36:34ZBlog EntryNoopur Raval and Rajendra Jadhav - Power Chronography of Food-Delivery Work
http://editors.cis-india.org/raw/noopur-raval-rajendra-jadhav-power-chronography-of-food-delivery-work
<b> Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This essay by Noopur Raval and Rajendra Jadhav is the fourth among a series of writings by researchers associated with the 'Mapping Digital Labour in India' project at the CIS, supported by the Azim Premji University, that were published on the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC).</b>
<p> </p>
<p><em>Originally published by the <a href="http://blog.castac.org/category/series/indias-gig-work-economy/" target="_blank">Platypus blog</a> of CASTAC on August 15, 2019.</em></p>
<p><em>The ethnographic research was conducted by Rajendra and this short essay was collaboratively produced by the field researcher and Noopur (co-PI). The accompanying audio recording has been produced by Noopur.</em></p>
<h4>Summary of the essay in Hindi: <a href="https://www.youtube.com/watch?v=OPIfIvp2000" target="_blank">Audio</a> (YouTube) and <a href="http://blog.castac.org/wp-content/uploads/sites/2/2019/08/Rajendra-Hindi-Transcript-.docx" target="_blank">Transcript</a> (text)</h4>
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<p>This post presents the observations around the design of temporality within app-based food-delivery platforms in India. It draws on semi-structured interviews by field-researcher Rajendra and his time spent “hanging out” with food-delivery workers who are also often referred to as “hunger saviors” and “partners” in the platform ecosystem in India. Like in the <a href="https://cis-india.org/raw/simiran-lalvani-workers-fictive-kinship-relations-app-based-food-delivery-mumbai" target="_blank">earlier post by Simiran Lalvani</a> on food-delivery workers in Mumbai, we also observed that app-based work was structured and monitored along similar lines. However, in this post, we go into a detailed description of how work-time and temporality of work are configured in order to fulfill the promises that app companies make to customers in urban India. Before such app-based services came into existence, there were some popular claims around delivery-time (“30 minutes or free pizza” by Domino’s) but the entire process of food preparation, travel and delivery had not been made as transparent and quantified in a granular way as they are now through popular apps such as Swiggy, Zomato and UberEats. While such companies exist in the other parts of the world and make the promise of “anytime work” to potential workers, as we observed during fieldwork, app-based food delivery-work is anything but flexible. People could indeed start working at any time of the day, but it had real consequences to earn a living wage. While they were free to logout or switch off their app also at their convenience, they would be constantly nudged in the form of calls by warehouse managers as well as through text messages telling them how they were missing out on earnings. It is also important to note that, in India especially, food-delivery as a standardized form of work, exists in a regulatory grey space. In that sense, there is not a lot of clarity on the maximum limit of working hours in a day and in a week. In the following sections, I provide details about how work is structured temporally in this system.</p>
<h3><strong>Shift-based Work</strong></h3>
<p>When Rajendra spoke to workers in the Delhi-NCR region, they reported that they could choose to work different kinds of shifts like part-time (8 AM – 3 PM or 7 PM – 12 AM), full-time (11 AM -11 PM) or ultra full-time (7 AM -11 PM). While workers could pick their timings or slots on weekdays, it was mandatory to work on the weekends. As mentioned earlier, while companies claimed that riders could log in and out at any time of the day, their pay depended on the number of deliveries they make and the hours they worked. But it’s not that simple. It is not just the wholly quantified units (an hour, a day) that become exigent and overbearing; it was in fact how these rules demanded high levels of alertness and care from the workers. Any kind of carelessness, not paying attention (to time, text message announcements) could be detrimental to claiming pay for the work they had done already. For instance, like a worker described, if he even logged out a minute before the end of the shift, he would lose out on his incentive. Another worker added,</p>
<blockquote>If you log off even five minutes before eleven (pm), a call comes from the company and they ask you to log back in immediately.</blockquote>
<p>In such cases, those managing the backend systems even make these calls to shield workers from the eventuality of losing pay and the hassle of resolving disputed payments later by simply urging and pushing workers to stay on-time and online. In that sense, there is not only an expectation of punctuality and always being-on as a desirable thing, but it is also imperative for the workers to meet these expectations while they interact with the app itself.</p>
<p> </p>
<img src="http://editors.cis-india.org/CIS_APU_DigitalLabour_PlatypusEssays_NRRJ_01.jpg/image_preview" alt="CIS_APU_DigitalLabour_PlatypusEssays_NR-RJ_01" class="image-left image-inline" title="CIS_APU_DigitalLabour_PlatypusEssays_NR-RJ_01" />
<h5>Sticker provided by a food-delivery platform to promote its brand. <em>Source: Noopur Raval, author</em>.</h5>
<p> </p>
<h3><strong>Time of Eating, Time of Sleeping</strong></h3>
<p>Typically, restaurants and food businesses in Indian cities are heavily regulated, especially in terms of closing times. While these rules differ for each city, in and around Delhi, restaurants are expected to close down by 10 pm, and those that seek to remain open for longer need special permissions. With the arrival of app-based delivery companies, the time of food production and consumption has stretched. Also, with the right kinds of permits, cloud kitchens and home-based producers are also allowed to operate through these platforms, thus making multiple food choices and cuisines available until as late as 4 am in the morning. Whose consumption needs are being serviced at these late hours is a question beyond the scope of this post, but it also means that there is opportunity/compulsion for workers to stay up late at night, making deliveries. Not surprisingly, it is also often these late-night shifts that are better incentivized, not just money-wise but also because there is less traffic at night (a constant source of stress in day-time shifts). As other studies have also noted, platform companies, especially food-delivery services that mostly engage bike and scooter riders (Lee et al. 2016) globally, enforce this cruel temporal inversion where being a service-worker in this economy also means working on others’ (customers’) time of leisure and/or comfort. Especially in Delhi, where the winters get brutally cold, ironically, the profitability of delivering hot food increases. However, it is not that straightforward. One worker Rajendra spoke to in March (springtime) explained,</p>
<blockquote>I am not going to work with any of the food delivery company from April onwards because of the hot summer in Delhi, it is very difficult to ride in a day time of summer.</blockquote>
<h3><strong>Temporary Work</strong></h3>
<p>Temporariness is the dominant temporal fate of gig-work at-large—workers in our study (food-delivery as well as ride-hailing) often insisted how gig-work was only temporary until they could become business-owners, find a better job, or fund their education and so on. However, as we observed in food-delivery work, there was also a lot of seasonal movement of workers, a reminder of the contextual, ecological and urban migration continuities that inform, support and shape who comes to the reserve force/waiting zone of gig-work. In classic labour terms, the push and pull factors that move people out of agricultural labour or other kinds of work must be studied with an eye to new forms of easy-entry jobs such as gig-work. On the other hand, there were also other considerations on time such as responsibilities and social obligations to family that made food-delivery work (fast paced, inhering a certain amount of recklessness and the willingness to put oneself at risk) less attractive to some (older men and women with a family) and more to some others (younger single men). This made us think of the way in which Sarah Sharma (2011) emphasizes temporal power over speed discourses (she offers the term ‘power-chronography’) where, the ways in which food-delivery work is temporally arranged, distributed and rewarded, privileges certain actors (the customers but also some kinds of workers) over others in the city’s labour market.</p>
<h3><strong>References</strong></h3>
<p>Lee, Do J., et al. “Delivering (in) justice: Food delivery cyclists in New York City.” <em>Bicycle Justice and Urban Transformation</em>. Routledge, 2016. 114-129.</p>
<p>Sharma, Sarah. “It changes space and time: introducing power-chronography.” <em>Communication Matters: Materialist Approaches to Media, Mobility and Networks</em> (2011): 66-77.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/noopur-raval-rajendra-jadhav-power-chronography-of-food-delivery-work'>http://editors.cis-india.org/raw/noopur-raval-rajendra-jadhav-power-chronography-of-food-delivery-work</a>
</p>
No publisherNoopur Raval and Rajendra JadhavDigital LabourResearchPlatform-WorkNetwork EconomiesPublicationsResearchers at WorkMapping Digital Labour in India2020-05-19T06:33:39ZBlog EntryAnushree Gupta - Ladies ‘Log’: Women’s Safety and Risk Transfer in Ridehailing
http://editors.cis-india.org/raw/anushree-gupta-ladies-log-women-safety-risk-transfer-ridehailing
<b>Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This essay by Anushree Gupta is the third among a series of writings by researchers associated with the 'Mapping Digital Labour in India' project at the CIS, supported by the Azim Premji University, that were published on the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC). The essay is edited by Noopur Raval, who co-led the project concerned.</b>
<p> </p>
<p><em>Originally published by the <a href="http://blog.castac.org/category/series/indias-gig-work-economy/" target="_blank">Platypus blog</a> of CASTAC on August, 1, 2019.</em></p>
<h4>Summary of the essay in Hindi: <a href="https://www.youtube.com/watch?v=ty0a_u9lzCE" target="_blank">Audio</a> (YouTube) and <a href="http://blog.castac.org/wp-content/uploads/sites/2/2019/07/Blog-Post-Audio-Transcript-Devanigiri.docx" target="_blank">Transcript</a> (text)</h4>
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<p>Mumbai, India’s financial capital, is also often considered one of the safest cities for women in India, especially in contrast with New Delhi which is infamously dubbed as the “rape capital” within the country. Sensationalised incidents of harassment, molestation and rape serve as anecdotal references and warnings to other women who dare to venture out alone even during the daytime. The Delhi government recently proposed a policy for free transport for women in public buses and metro trains with the objective of increasing women’s affordability and access and to ensure safety in public transportation. [1] Despite such measures to increase women’s visibility and claims to public utilities and spaces, women who use public transport have historically suffered groping and stalking on buses and trains, which uphold self-policing and surveillance narratives. The issue of women’s safety in India remains a priority as well as a good rhetorical claim and goal to aspire to, for public and private initiatives. Ironically, the notion of women’s safety is also advanced to increase moral policing and censure women’s access to public spaces, which also perpetuates exclusion of other marginalised citizens (Phadke 2007). Further, and crucially, whose safety is being imagined, prioritized and designed for (which class of women are central to the imagination of the safety discourse) is often a point of contention.</p>
<p>In this context, ridehailing services offered by Uber and Ola have come to be frequently cited as safer and more reliable options for women to traverse the cityspace, compared to overcrowded buses and trains. Their mobile applications promise accountability and traceability, enforcing safety standards by way of qualified and well-groomed drivers, SOS buttons and location-sharing features. However, it has increasingly become common knowledge that these alternatives are prone to similar, if not worse, categories of crimes against women. While reports of violence against women in cabs have mostly been outside of Mumbai, due to “platform-effects,” such incidents have widespread ramifications for drivers across the country. Cab drivers who operate via cab aggregator platforms have come under heavy scrutiny not only by the corporate and legal infrastructures of aggregator companies but also in the public eye. On the other hand, platform companies independently, and in partnership with city and state administrations, continue to launch “social impact” initiatives aimed at women’s safety as well as employment (through taxi-driving training). [2] Incidents of violence against women present jarring narratives of risk not only for female passengers but also for the platform-workers, both of whom are responsible for abiding by the constructed notions of safety for women in urban spaces.</p>
<p>In this post, I explore women’s presence as workers as well as passengers/customers in the ridehailing platform economy, in the context of women’s safety, situating the analysis with a focus on Mumbai. The related discourses around risk for female commuters give rise to various interventions and women-centric services through female-only cab enterprises and training more women drivers to mitigate this risk. Through these, I will think through the figure of the woman in the ridehailing economy in Mumbai and by extension in India.</p>
<h3><strong>Platforms in Gendered Cityscapes</strong></h3>
<p>Mumbai’s public transport is comprised of the local train network, BEST buses and auto rickshaws, with the metro being the newest addition to the mix. Unlike in most of India, kaali-peelis (black-yellow cabs) have been a permanent feature of Mumbai’s landscape since the 1950s and, taking a cab is not necessarily a luxury. Against this backdrop, platform companies have sought to make the claims of democratizing public transport and providing safer travel options to women in the city.</p>
<p>Cab drivers on ridehailing platforms in Mumbai are usually domestic male migrants or Muslim drivers from within and outside the city, who are more often than not overworked and stressed due to the falling incomes and rising debts. It is important to recognise the ‘veiled masculinities’ (Chopra 2006) which labor to service the emergent platform economy and the hierarchies of caste and class which are sustained through their labor. The incongruence between the masculinity of a working class man and the demands of the service economy (Nixon 2009) exacerbates emotional pressures in customer-facing services, which can offer an explanation for angry outbursts and conflicts between drivers and customers.</p>
<p> </p>
<img src="http://editors.cis-india.org/CIS_APU_DigitalLabour_PlatypusEssays_AG_01.jpg/image_preview" alt="CIS_APU_DigitalLabour_PlatypusEssays_AG_01" class="image-left image-inline" title="CIS_APU_DigitalLabour_PlatypusEssays_AG_01" />
<h5>Uber’s ad on a billboard in Mumbai promises earnings of more than Rs. 1 lakh per month. Using a woman’s image illustrates the extent of their potential for transforming lives and livelihoods. <em>Source: Drivers’ Union Telegram Group</em>.</h5>
<p> </p>
<p>While Uber and Ola claim that a large number of women drivers work on their platforms, actual experiences of passengers and the male drivers I spoke to, suggested otherwise. Ironically, mass driver-training programs are seen as a quick way to make low-skilled and migrant male workers employable in Indian cities while, despite public-private partnerships to train women, it has been impossible to retain women drivers due to stereotypical perceptions of gender and persistent social stigma. [3] This made the ridehailing passenger woman (upper middle class, affording professional) a stakeholder to design for, while female drivers (but all female workers) appeared as liability for platforms.</p>
<p>These narratives speak directly to the construction of insecurity and risk for women (Berrington and Jones 2002) on public transport systems as they highlight vulnerabilities due to public exposure of women’s bodies. Pandering to a moral panic standpoint and creating personalised or ‘inside’ safe spaces for women to manage risk (Green and Singleton 2006), these platforms can then be imagined as a boundary-setting exercise. Access to public spaces is encouraged but it is delimited by confining the woman’s body to a singular vehicle in the custody of the cab driver. Autonomy and access afforded by the platform manages to transform women—particularly upper class and upper caste women who can afford these services—into potential customers. Their agency is bounded though by tasking the driver to ferry her across the otherwise hostile cityscape filled with ‘unfriendly bodies’ (Phadke 2013). The production of the city’s gendered space goes hand in hand with the confinement/erasure of female bodies in the public space as they embody patriarchal norms even in a city as ‘progressive’ as Mumbai. As demonstrated by studies mapping the movement of women in the city (Ranade 2007), the spatio-temporal factors lend themselves to creating gendered bodies in order to keep patriarchal norms intact. These norms, as I argue in this post, are detrimental not just to women but also other marginalised sections of the urban population, in this case platform workers.</p>
<h3><strong>Terms of Safety</strong></h3>
<p>Male drivers’ social identities as lower class, lower caste individuals do not inspire confidence in the standards of safety boasted by these companies in the eyes of their predominantly upper caste and upper class customer base. Risk to female passengers is further exaggerated due to the closed space in which the service is provided, highlighting the proximity to a potential aggressor by way of these platforms. In specific situations wherein a female passenger is inebriated or is travelling alone at night, drivers report being extra cautious and helpful towards her. Many respondents proudly mention going out of their way to make sure women get home safely, for instance, prolonging waiting time or escorting them to the entrance of their residential buildings or involving the security guard at the gate.</p>
<p>However, there have also been cases wherein the driver has been under scrutiny either by an overly careful passenger or by the public. One driver reported being surrounded by a crowd at a traffic signal, only to realise that he was being suspected of foul play with the female passenger who had fallen asleep on the backseat of the car. In contrast to their western counterparts, the class differences between drivers and passengers in India exacerbate doubts, fears and insecurities in India which tend to take a caste-purity angle as well. The woman’s body undergoes an exchange of custody in these instances wherein she is deemed incapable of taking care of herself and requires external assistance. Imagining a deterrence effect of ridesharing services (Park et. al 2017) reinforces the logic of guardianship and protectionism for the woman. The risk of carrying her in the vehicle in these situations is borne by the cab driver, operating under a framework of overbearing protectiveness which holds him culpable for any misgivings, assumed or otherwise.</p>
<p> </p>
<img src="http://editors.cis-india.org/CIS_APU_DigitalLabour_PlatypusEssays_AG_02.jpg/image_preview" alt="CIS_APU_DigitalLabour_PlatypusEssays_AG_02" class="image-left image-inline" title="CIS_APU_DigitalLabour_PlatypusEssays_AG_02" />
<h5>Cautionary listicles advise women to not take a cab alone at night, carrying pepper sprays/umbrellas as tools for self-defence, refrain from conversations with drivers or talk continuously on the phone, among other things. The onus of the woman’s safety is either on the individual herself or the driver who is ferrying her. Moreover, the driver is a likely assailant whom the woman should guard against as well. <em>Source: <a href="https://www.hellotravel.com/stories/10-ways-for-women-to-ensure-safety-when-boarding-cab" target="_blank">HelloTravel</a></em>.</h5>
<p> </p>
<p>Notions of safety and risk are embodied in everyday interactions in urban spaces and mediated by disparate infrastructures of knowledge across distinctions of caste, class and gender. These distinctions define constraints which govern social interactions between actors of these categories. Interactions between lower caste or Muslim men and upper caste/class women are circumscribed by what Tuan (1979) describes as ‘landscapes of fear’. Be it the apprehensions about sharing a ride with a passenger of the opposite sex (Sarriera et. al 2017) or reports of gang-rapes by cab drivers, the boundaries of social conduct are laid out clearly by constructing narratives of risk and safety. The protection of the female body and her sexual safety is not her responsibility alone but that of the society as a whole. The so called preventive measures for rape and violence against women produce the dichotomies of frailty and strength (Campbell 2005) in so far as they project the woman as always at risk with the shadow of a potential assault always looming large.</p>
<p>When asked about interactions with women as customers or fellow drivers, drivers performed exaggerated respectability for women. The catch in these narratives however was that drivers justified and extended respect only to ‘good’ customers, where a ‘good’ woman was a certain kind of a moral actor.</p>
<p>Given the prevailing discontent with redressal mechanisms for workers on the platforms, it was not surprising to witness a group of drivers at the Uber Seva Kendra (help centre) in Mumbai, debating whether they should be accepting requests from any female customers at all. Drivers also had to attend mandatory training sessions for ‘good conduct’ with customers wherein they underwent behavioral correction and gender sensitisation lessons. [4] The gendering of the platform economy is baked into these instructions and trainings that reproduce male drivers as figures of safety and constant positive affect.</p>
<h3><strong>Gender, Safety, and Enterprise</strong></h3>
<p>In my fieldwork, I also came across a slew of ventures run by fleet owners and others that sought to service women passengers and employ women drivers exclusively. Claiming to fill in the gaps of inadequate vetting mechanisms in existing platforms, these alternate ventures purportedly smoothened out some anxieties by eliminating the risk of interacting with a man from different socio-economic strata. The premium charged by these companies was telling of the value of safety and affordability of these services for a large section of their intended audience, namely women with higher disposable incomes residing in metropolitan cities.</p>
<p>On the flipside, these enterprises encouraged women to break stereotypical perceptions about women drivers, also giving a nod to increasing and diversifying opportunities of employment for women. However, these ideas remained attractive only in principle and fizzled out sooner or later as most of these ventures did not succeed. A severe capital crunch due to unsustainable business models, limited funding options and lack of substantial supportive ecosystems for training and upkeep are possible reasons for failure. [5] Even so, the idea of a women-centric service continues to remain valuable because of the promise of safety which is produced through considerations of class, caste, gender and religion (Phadke 2005). Any alternative to avoid interaction with men from a lower class or caste background or from another religion (especially Hindu/Muslim in Mumbai) is welcome in a society which is deeply stratified and entrenched in caste-class systems of religion and economy alike.</p>
<h3><strong>Conclusion</strong></h3>
<p>The pervasiveness of the discourses of safety and risk in the ride hailing space became apparent to me during field research. Respondents indicated a heightened awareness of my gender, referring to me as “madam” and taking measures to ensure my safety. They advised me to use a separate phone to interact with drivers and moderated my interactions with drivers on the Telegram group (run by one of the Unions in Mumbai). Union representatives were also diligent in moderating the group to filter out abusive language as a token of respect for women. My apprehensions in interacting with drivers, most of whom were older men from a lower class/caste community, were also indicative of my social conditioning as an upper class and upper caste woman. Self-policing and boundary setting in both physical and virtual interactions, while necessary to some extent, were often rendered useless as the shifting of risks became apparent to me in my interactions with the drivers.</p>
<p>In this piece, I have tried to show how gendered norms govern the construction of safety and risk which in turn regulate social interactions. Limiting exposure in a personal cab as opposed to a public bus/train also heightens considerations of intimacy and proximity to a potential aggressor (often from a marginalised sociocultural background). Women-centric cab services mitigate this by promoting the image of the female driver who breaks social norms. However, these services dwindle till they completely disappear due to a capital crunch or insufficient infrastructural support. Patriarchal contexts reaffirm the woman as a risky object by highlighting narratives of vulnerabilities and insecurities in the ridehailing space. Besides the woman, the cab drivers are held accountable for bearing this risk and ensuring her sexual and physical safety. These patriarchal hierarchies of protectionism are sustained by platform workers’ affective labour which lubricate the wheels of the platform economy.</p>
<h3><strong>Endnotes</strong></h3>
<p>[1] <a href="https://www.thehindu.com/news/cities/Delhi/free-rides-for-women-only-the-starting-point-say-activists/article28111938.ece" target="_blank">https://www.thehindu.com/news/cities/Delhi/free-rides-for-women-only-the-starting-point-say-activists/article28111938.ece</a></p>
<p>[2] <a href="https://www.olacabs.com/media/in/press/ola-foundation-launches-drive-to-enable-sustainable-livelihoods-for-500000-women-by-2025" target="_blank">https://www.olacabs.com/media/in/press/ola-foundation-launches-drive-to-enable-sustainable-livelihoods-for-500000-women-by-2025</a></p>
<p>[3] <a href="https://www.buzzfeed.com/soniathomas/girl-power" target="_blank">https://www.buzzfeed.com/soniathomas/girl-power</a></p>
<p>[4] <a href="https://yourstory.com/2018/11/uber-gender-awareness-sensitisation-driver" target="_blank">https://yourstory.com/2018/11/uber-gender-awareness-sensitisation-driver</a></p>
<p>[5] <a href="https://www.livemint.com/Companies/bo4534H8mOWo0oG6VQ0xbM/As-demand-for-womenonly-cab-services-grow-challenges-loom.html" target="_blank">https://www.livemint.com/Companies/bo4534H8mOWo0oG6VQ0xbM/As-demand-for-womenonly-cab-services-grow-challenges-loom.html</a></p>
<h3><strong>References</strong></h3>
<p>Berrington, E. and Jones, H., 2002. Reality vs. myth: Constructions of women’s insecurity. Feminist Media Studies, 2(3), pp.307-323.</p>
<p>Campbell, A., 2005. Keeping the ‘lady’ safe: The regulation of femininity through crime prevention literature. Critical Criminology, 13(2), pp.119-140.</p>
<p>Chopra, R., 2006. Invisible men: Masculinity, sexuality, and male domestic Labor. Men and Masculinities, 9(2), pp.152-167.</p>
<p>Green, E. and Singleton, C., 2006. Risky bodies at leisure: Young women negotiating space and place. Sociology, 40(5), pp.853-871.</p>
<p>Nixon, D., 2009. I Can’t Put a Smiley Face On’: Working‐Class Masculinity, Emotional Labour and Service Work in the ‘New Economy. Gender, Work & Organization, 16(3), pp.300-322.</p>
<p>Park, J., Kim, J., Pang, M.S. and Lee, B., 2017. Offender or guardian? An empirical analysis of ride-sharing and sexual assault. An Empirical Analysis of Ride-Sharing and Sexual Assault (April 10, 2017). KAIST College of Business Working Paper Series, (2017-006), pp.18-010.</p>
<p>Phadke, S., 2005. ‘You Can Be Lonely in a Crowd’ The Production of Safety in Mumbai. Indian Journal of Gender Studies, 12(1), pp.41-62.</p>
<p>Phadke, S., 2007. Dangerous liaisons: Women and men: Risk and reputation in Mumbai. Economic and Political Weekly, pp.1510-1518.</p>
<p>Phadke, S., 2013. Unfriendly bodies, hostile cities: Reflections on loitering and gendered public space. Economic and Political Weekly, pp.50-59.</p>
<p>Ranade, S., 2007. The way she moves: Mapping the everyday production of gender-space. Economic and Political Weekly, pp.1519-1526.</p>
<p>Raval, N. and Dourish, P., 2016, February. Standing out from the crowd: Emotional labor, body labor, and temporal labor in ridesharing. In Proceedings of the 19th ACM Conference on Computer-Supported Cooperative Work & Social Computing (pp. 97-107). ACM.</p>
<p>Sarriera, J.M., Álvarez, G.E., Blynn, K., Alesbury, A., Scully, T. and Zhao, J., 2017. To share or not to share: Investigating the social aspects of dynamic ridesharing. Transportation Research Record, 2605(1), pp.109-117.</p>
<p>Tuan, Y.F., 2013. Landscapes of fear. U of Minnesota Press.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/anushree-gupta-ladies-log-women-safety-risk-transfer-ridehailing'>http://editors.cis-india.org/raw/anushree-gupta-ladies-log-women-safety-risk-transfer-ridehailing</a>
</p>
No publisherAnushree GuptaDigital LabourResearchPlatform-WorkNetwork EconomiesPublicationsResearchers at WorkMapping Digital Labour in India2020-05-19T06:29:12ZBlog EntrySarah Zia - Not knowing as pedagogy: Ride-hailing drivers in Delhi
http://editors.cis-india.org/raw/sarah-zia-not-knowing-as-pedagogy-ride-hailing-drivers-in-delhi
<b>Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This essay by Sarah Zia is the second among a series of writings by researchers associated with the 'Mapping Digital Labour in India' project at the CIS, supported by the Azim Premji University, that were published on the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC). The essay is edited by Noopur Raval, who co-led the project.</b>
<p> </p>
<p><em>Originally published by the <a href="http://blog.castac.org/category/series/indias-gig-work-economy/" target="_blank">Platypus blog</a> of CASTAC on July 18, 2019.</em></p>
<h4>Summary of the essay in Hindi: <a href="https://youtu.be/KSYcT8XD0H4" target="_blank">Audio</a> (YouTube) and <a href="http://blog.castac.org/wp-content/uploads/sites/2/2019/07/CASTAC_Sarah_audiotranscript.docx" target="_blank">Transcript</a> (text)</h4>
<hr />
<p>Ride-hailing [1] platforms such as Olacabs and Uber have “disrupted” public transport in India since their arrival. It has been almost seven years since app-based ride-hailing became a permanent feature of urban and peri-urban India with these aggregators operating in over a 100 Indian cities now. Akin to the global story, much has happened – there was a period of boom and novelty for passengers and drivers, then incentives fell. Ride-hailing work has become increasingly demanding with reduced payouts. But what hasn’t received enough attention (especially outside the US) is how these platforms create a deliberate regime of information invisibility and control to keep the drivers constantly on their toes which works to the companies’ advantage. What then are the implications of this uncertainty, which is fueled by app design as well as by the companies’ decision that drivers need little or no information about users? How does service delivery operate in a context where those actually delivering it have little or no idea about the workings of the system?</p>
<h3><strong>When algorithms make us not know</strong></h3>
<p>Algorithmic interactions form the core of the technology in ride-hailing apps through which service seekers and providers interact. As Lee et al. (2015) describe, “Algorithmic management allows companies to oversee myriads of workers in an optimized manner at a large scale, but its impact on human workers and work practices has been largely unexplored… Algorithmic management is one of the core innovations that enables these (cab-riding) services.”</p>
<p>Algorithms are procedural logics that produce different effects depending on the data they receive and the outputs they are optimized for (Wilson, 2016). Moreover, platform companies are not transparent about how their business logics contribute to these “optimizations”, which makes it difficult for all the stakeholders (passengers, drivers, police personnel, etc.) to make an accurate assessment of their functioning. This essay, then, explores how the lack of transparency around algorithmic structures not only prohibits drivers from knowing completely and surely about their work (“why did I get this ride?”, “why did my ratings drop?”) but also how they build tactics of coping and earning from a place of unknowing. Algorithms act as a regulator of work and their inherent structure constrains drivers from knowing fully about their work. Unknowing thus has two aspects: first, drivers do not have access or means to gather information; second, it is difficult to be sure of the existence of the said information in the first place.</p>
<p>In my research on ridehailing in the Delhi-National Capital Region (NCR), there were three things that I asked drivers about which led to ambiguous and inconsistent replies: how rides were allocated, how fares were determined and how ratings worked. While some drivers told me upfront they did not know how these systems worked, others offered explanations that they had devised or heard from somewhere else. For instance, not knowing what they will make per trip means that drivers plan their day in terms of target earnings instead of number of trips. Nearly all drivers I spoke to said they aimed to make Rs 1500-2000 (approx USD 20-25) per day in order to break even, irrespective of whether that goal requires 10 or 15 trips in a day. Yet not knowing what the next trip will earn them means they can’t refuse rides easily. Many drivers expressed discomfort about this fact, especially when compared to other means such as auto-rickshaws and traditional cabs where drop destination is known beforehand and fares can also be pre-negotiated, Unlike ride-hailing drivers, auto rickshaw drivers have the right to refuse passengers.</p>
<p>Many drivers now call passengers after accepting their booking to find out the destination. According to some drivers, this call also helped them understand the kind of passengers they were about to get and sometimes even allowed re-negotiation of the drop location to a mutually convenient spot if it was originally in a congested area. They also felt that assessing passengers before a trip was important so that they could act as mediators in the information gatekeeping process, because the passengers would have seen the fare already. For a driver, the lack of information added many layers of constant negotiation in a single trip—starting from the call to find out the destination to conversations during the trip to gauge potential earnings to finally suggesting alternative drop locations if there are any constraints in accessing the original destination—before they can claim their rightful earnings.</p>
<p> </p>
<img src="http://editors.cis-india.org/CIS_APU_DigitalLabour_PlatypusEssays_SZ_01.jpeg/image_preview" alt="CIS_APU_DigitalLabour_PlatypusEssays_SZ_01" class="image-left image-inline" title="CIS_APU_DigitalLabour_PlatypusEssays_SZ_01" />
<h5>Ridehailing drivers only get the user’s name and pickup location as details about an upcoming trip. <em>Photo by Noopur Raval</em>.</h5>
<p> </p>
<p>Knowing the terms of work—such as when work ends and begins, how the good jobs are being allocated and to whom, and an explanation of one’s income—is a foundation of formal and informal work. Such information is crucial because it allows us to separate our work and personal lives. Knowledge of these obviously quantifiable parameters can help drivers plan their earnings and investments and, crucially, when they can take a break based on much more or less work they have to do in order to meet their income targets.</p>
<p>Furthermore, as drivers showed me, ride-hailing companies spontaneously change the revenue model for “driver-partners” (as they are called) by sending them an SMS right before the change happens, thereby altering trip and mileage targets frequently to keep a degree of unknowability in drivers’ work. This unknowability disincentivizes drivers from going off the road as per their will and helps maintain a steady supply of cabs on the road. As Alex Rosenblat has demonstrated in her study of US Uber and Lyft drivers, they are compelled to accept rides without knowing their profitability. While the app design gives them an option to “choose” to accept or reject a ride, drivers are constrained by lack of adequate information pertaining to the trip as well as the rider in making this choice. The ‘information asymmetry’, as Rosenblat calls it, also feeds into drivers’ mistrust of the companies and their policies (Rosenblat, 2018). Moreover, these feelings and the uncertainty fed by unknowing were not limited to drivers. Passengers also noticed that a ride between two points could cost different prices at different times of day and they were not sure why or how this cost was calculated.</p>
<h3><strong>Unknowability as a form of knowing: A pedagogy of coping</strong></h3>
<p>As I observed in my interactions with drivers online and offline, new drivers often struggled with the degree of uncertainty and unknowability while more experienced drivers had accepted ‘not knowing’ and the opacity of the system as features of their work.</p>
<p> </p>
<img src="http://editors.cis-india.org/CIS_APU_DigitalLabour_PlatypusEssays_SZ_02.jpg/image_preview" alt="CIS_APU_DigitalLabour_PlatypusEssays_SZ_02" class="image-left image-inline" title="CIS_APU_DigitalLabour_PlatypusEssays_SZ_02" />
<h5>Not knowing enough about how much will a ride earn them means drivers are forced to be on the roads, often without a break. <em>Photo by author</em>.</h5>
<p> </p>
<p>Similar to what Rosenblat, Gray et al. and others have observed in the US, in India drivers were constantly engaged in meaning-making through communicative labor, i.e., sharing their experiences with other local drivers online and offline. Agreeing, reassuring, and repeating that drivers actually do not know enough through these discussions also gave them shared confidence in their own abilities and how they were approaching work despite being firmly rooted in unknowing. For instance, when I asked one Uber driver about how ratings worked, they said that all 5-star drivers were matched with 5-star passengers. Another Uber driver said that the higher a passenger’s ratings, the less time they would have to wait for pick-up.</p>
<p>Other forms in which this kind of unknowing manifested was the lack of a fare chart or any minimum or uniform rating system, leaving drivers to offer their own interpretations and coping strategies. For instance, a driver pointed out how very few rides are likely to be available in a specific suburb during hot afternoons and therefore he avoided dropping passengers to that location after 2PM.</p>
<p>How, then, does one learn to cope with such unknowable systems as a worker? And what values does such a pedagogy of coping with algorithmic opacity imbibe? In my fieldwork, apart from answering my questions, drivers were extremely interested in talking about the companies, including news about companies’ stock value, their futures, profits, etc. A persistent rumour in the field was that Reliance, the country’s largest telecom provider, was soon coming up with a competitor ride-hailing app, suggesting that there could be an incentive boom again. In online Facebook groups, drivers often discussed company CEOs’ salaries, comparing them to their own. On the flipside, when videos of ride-hailing and food-delivery drivers getting beaten up or arrested or cheated surfaced, drivers would comment with advice on how to safeguard oneself, how to deal with errant customers and so on. I interpret these practices of making sense of long and short-term work, framed as responses to constant ambiguity and uncertainty, as the development of an “algorithmic gut”.</p>
<p>This gut responds to the anxieties produced by platform infrastructure through a keen awareness of the shifts, the tweaks, the changes and the errors. And it orients how drivers approach and cope with their work by acknowledging that there is a lot unknown (and unknowable) in this kind of daily work. It also guides how drivers focus on the short-term (daily) goal of making profit, such as by tuning into peer groups both online and offline where grievances are discussed, collective action planned, and floating rumours assessed. This gut is an affective, sensorial attunement to how platforms are allocating and shifting power among drivers and plays a generative role in guiding drivers’ work decisions.</p>
<h3><strong>Conclusion</strong></h3>
<p>Uncertainty is an embedded part of a ride-hailing cab’s model of service delivery. For ride-hailing drivers, this ambiguity translates into less control over everyday negotiation of work as well as planning of financial assets for the future.</p>
<p>In my interactions, I discovered that drivers are certain that they will never know more than the company. What this has led to is a driver who is cynical but not entirely pessimistic. Drivers acknowledge that while companies and their structures may be problematic, what will keep them employed is passengers’ appetite for a service like this. They would like to imagine the future of their work but are cognizant of the dual challenge of the present: making money while struggling for self-preservation in order to perform immediate activities. Drivers are cognizant of an ambiguous future and even hesitant to engage in long-term planning. For now, they would prefer better earnings and greater control over how they perform labour. Hence, their focus is on devising specific strategies for known, short-term challenges instead of running after an unknown future.</p>
<h3><strong>Endnotes</strong></h3>
<p>[1] Uber and homegrown Ola both started operations in India as ride-hailing services with the sharing options being added in 2015. Hence, the term ride-hailing has been used to describe these services which also includes ride sharing.</p>
<h3><strong>References</strong></h3>
<p>Davis, Jenny L. 2014. “Triangulating the Self: Identity Processes in a Connected Era.” Symbolic Interaction 37 (4): 500-523.</p>
<p>Dodge, Martin and Kitchin, Rob. 2005. “Codes of life: identification codes and the machine-readable world.” Environment and Planning D: Society and Space 2005 (23): 851-881</p>
<p>Gray, Mary L., et al. 2016. “The Crowd is a Collaborative Network.” Proceedings of the 19th ACM conference on computer-supported cooperative work & social computing. ACM, 2016.</p>
<p>Kitchin, Rob. 2017. “Thinking critically about and researching algorithms.” Information, Communication & Society 20 (1): 14-29.</p>
<p>Lee, Min Kyung, et al. 2015. “Working with Machines: The Impact of Algorithmic and Data-Driven Management on Human Workers.” Proceedings of the 33rd Annual ACM Conference on Human Factors in Computing Systems.</p>
<p>Rosenblat, Alex & Stark, Luke. 2016. “Algorithmic Labor and Information Asymmetries: A Case Study of Uber’s Drivers.” International Journal of Communication 10: 3758–3784.</p>
<p>Ruckenstein, Minna and Mika Pantzar. 2017. “Beyond the Quantified Self: Thematic exploration of a dataistic paradigm.” New Media & Society 19(3): 401-418.</p>
<p>Willson, Michele. 2016. “Algorithms (and the) everyday”. Information, Communication & Society 10.1080/1369118X.2016.1200645</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/sarah-zia-not-knowing-as-pedagogy-ride-hailing-drivers-in-delhi'>http://editors.cis-india.org/raw/sarah-zia-not-knowing-as-pedagogy-ride-hailing-drivers-in-delhi</a>
</p>
No publisherSarah ZiaDigital LabourResearchPlatform-WorkNetwork EconomiesPublicationsResearchers at WorkMapping Digital Labour in India2020-05-19T06:35:21ZBlog EntrySimiran Lalvani - Workers’ Fictive Kinship Relations in Mumbai App-based Food Delivery
http://editors.cis-india.org/raw/simiran-lalvani-workers-fictive-kinship-relations-app-based-food-delivery-mumbai
<b>Working in the gig-economy has been associated with economic vulnerabilities. However, there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. This essay by Simiran Lalvani is the first among a series of writings by researchers associated with the 'Mapping Digital Labour in India' project at the CIS, supported by the Azim Premji University, that were published on the Platypus blog of the Committee on the Anthropology of Science, Technology, and Computing (CASTAC). The essay is edited by Noopur Raval, who co-led the project concerned.</b>
<p> </p>
<p><em>Originally published by the <a href="http://blog.castac.org/category/series/indias-gig-work-economy/" target="_blank">Platypus blog</a> of CASTAC on July 4, 2019.</em></p>
<h4>Summary of the essay in Hindi: <a href="http://blog.castac.org/wp-content/uploads/sites/2/2019/07/Role-of-fictive-kinship-in-Mumbai-Hinglish-audio.mp3" target="_blank">Audio</a> (mp3) and <a href="http://blog.castac.org/wp-content/uploads/sites/2/2019/07/Fictive-Kinship-Gig-Work-Transcript.docx" target="_blank">Transcript</a> (docx)</h4>
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<p>Anthropologists have studied the role of kinship relations at the workplace in terms of how employers (De Neve, 2008) and workers use them (Parry, 2001). By contrast, digital labour scholars focus more on economic wellbeing and questions of fair work. But we know from the work of Mauss, Hart (Hart, 2000; Mauss, 2002) and others that all economic exchanges are also social relations. Additionally, economic and moral logics are different manifestations of the same ‘kernel of human relationships’ (Kofti, 2016). In the context of app-based food delivery work in Mumbai, workers’ actions and decisions were guided by them putting themselves in another’s shoes. Such moral acts of understanding and having understood were, as I will demonstrate, instances of Max Weber’s conception of verstehen or interpretative understanding which was important to understanding individuals’ participation in social relationships. This led me to explore gig-workers’ kinship relations at work, and their role in the existence and reproduction of these workers and this ‘new’ work.</p>
<p>This essay unpacks the values and expectations from the kinship term <em>bhai (brother)</em> in order to understand the morality invoked through its usage by app-based food delivery workers in Mumbai. In doing so, it considers the implications of such kinship sedimentations on the experience of workers in the gig economy, their negotiation with the discipline imposed by the employer and the experience of women workers who operate out of these kinship ties. I was compelled to notice the figure of the <em>bhai</em> – a male friend or acquaintance who would not only recruit but also provide various kinds of support on the job, helping app-based platforms maintain their workforce. I also interviewed female delivery workers in Mumbai and noticed that this brotherhood did not extend to them in the same way.</p>
<p><em>Bhai</em> is a Hindi word for ‘brother’ but in Bambaiyya Hindi (a non-canonical form of Hindi spoken in Mumbai) it signifies an influential or respected male figure who offers support and is trustworthy due to relatedness. <em>Bhai</em> and variations like <em>bhaiyya</em> lubricate daily transactions between auto-rickshaw drivers, grocers, watchmen or any unrelated man and woman with a sociality of kinship.</p>
<h3><strong>The role and functions of understanding by bhais in gig work</strong></h3>
<p>Acts of brotherly help and disciplining reveal that material actions are intertwined with an ethic of care, thereby illustrating the role of kinship as central to the economic work in the gig economy. Historically, the informal work of food delivery in Mumbai has been organised along the lines of caste, region (Quien, 1997) and familial networks. Within gig work, belonging to the city is a requirement as <em>bhais</em> recruit, advice and protect new joinees from their neighbourhood or communities as older brothers. Team leaders who occupy a position between the worker and the middle management at these companies are <em>bhais</em> that discipline, control and maintain the workforce for the company.</p>
<p>Prior to joining, newbies would ask friends about their experience and even make deliveries with their friends to understand the work. Bhais offer support by riding pillion, arriving at ‘unsafe’ delivery locations at night or assisting a worker if the customer was drunk or unwilling to pay for their order.</p>
<p>Like other gig work communities that network to produce tacit knowledge about work (Gray, Suri, Ali, & Kulkarni, 2016) the relationships of brotherhood in food delivery help workers gain knowledge about the rules of the company, while also helping them <em>find a way</em> around the rules. A <em>bhai</em> might offer to make an ID on behalf of those who were unable to do so due to lack of documents or offer an existing ID to those who may have been disabled or blocked by the company.</p>
<p><em>Bhais</em>, on the basis of relatedness due to experience of gig work, understand the needs of other gig workers. I suggest that this is <em>verstehen</em> and not simply a reflexive <em>understanding</em> since they, much like sociologists, also <em>understood</em> the nature of the situation (Tucker, 1965) that creates this relationship of relatedness and the importance of such a relationship in sustaining their future in this work as well as the future of this work.</p>
<h3><strong>Leaning on brotherhood to ‘safely’ deliver food as gig workers</strong></h3>
<p>Companies push a narrative of how working-class, male food delivery workers are safe to interact with because this work leads to working class men now arriving at the doorstep of the protected middle-class domestic sphere. Discourses of safety and trustworthiness are crucial to companies due to the middle-class, Indian anxiety around the separation of working-class men, considered dangerous and potential perpetrators of crime, from middle-class women, the victims of such crimes (Phadke, 2007).</p>
<p> </p>
<img src="http://editors.cis-india.org/CIS_APU_DigitalLabour_PlatypusEssays_SL_01.jpg/image_preview" alt="A sign written in Hindi reads " class="image-left image-inline" title="CIS_APU_DigitalLabour_PlatypusEssays_SL_01" />
<h5>In India, leaving one’s footwear outside before entering ‘sacred’ spaces like homes and temples is considered respectful. A notice outside an Uber Dost office in suburban Mumbai reads jootey-chhapal baahar nikaley or please leave your footwear outside – revealing an extension of the sacredness associated with familial spaces to the work place. (Image credit: author)</h5>
<p> </p>
<p>Since working class men are considered dangerous occupants of public space, how do workers feel safe and carefree in the everyday? The <em>bhai</em> who <em>understands</em> offers material support, protects and guides workers but <em>is also understood</em> as enabling a carefreeness in workers that makes this work and working-class men’s navigation of the public possible. Consider the case of Adarsh, an 18-year-old app-based worker who makes deliveries using a bicycle. Workers started helping him by offering to drop him to the delivery location on their motorcycles if they were headed in the same direction. As he described to me, he felt at ease knowing someone had his back: <em>Abhi ye log support ke liye rehte hai toh apne ko tension nahi rehta hai chalo bhai support ke liye apne peeche khada hai. (One does not feel tense if one knows that there is a brother backing one up)</em>.</p>
<h3><strong>Exclusions from brotherhood in the gig economy</strong></h3>
<p>App-based food delivery has opened up the historically male-dominated line of work to women in India but that has not insulated it from patriarchal norms.</p>
<p> </p>
<img src="http://editors.cis-india.org/CIS_APU_DigitalLabour_PlatypusEssays_SL_02.jpg/image_preview" alt="A banner outside a Domino's pizza franchise in India seeking delivery personnel reads: VACANCY (Only for boyys)" class="image-left image-inline" title="CIS_APU_DigitalLabour_PlatypusEssays_SL_02" />
<h5>Food delivery work in Mumbai has historically been male dominated work – be it the ubiquitous dabbawallas (carriers of home-cooked meals) or those working as delivery ‘boys’ in udupis, restaurants, fast food companies and with hawkers. (Image credit: author)</h5>
<p> </p>
<p>One married woman worker expressed her discomfort with male riders referring to women workers as <em>bacchi</em> (Bambaiyya slang for younger brother) since it collapsed a sense of formality and familiarity that could be acceptable to young, unmarried girls. Women workers were aware that women have a high attrition in food delivery. They cannot afford to reject kinship constructions because such relations make work possible and tolerable in the everyday so they modulate the correct amount of kinship ties with a ‘respectable distance.’</p>
<p>The brotherhood of workers is not uniform or homogeneous since men’s ability to participate in this fictive kinship can be constrained either due to their identities or inability to support strikes.</p>
<p>Brotherhood absorbs risks for workers and allows workers to be <em>bindaas</em>, presenting an opportunity for tactical resistance. Leveraging brotherhood as a <em>platform</em> (Gillespie Tarleton, 2010), workers would strike and companies having understood the role of brotherhood too, would offer the position of 'team leader' to leaders of such strikes. Most <em>bhais</em> chose moral and affective bonds of brotherhood over such a 'promotion.'</p>
<p>Working in the gig-economy has been associated with economic vulnerabilities, however there are also moral and affective vulnerabilities as workers find their worth measured everyday by their performance of—and at—work and in every interaction and movement. Such a display of <em>verstehen</em> by the delivery workers is a response to engaging with a world of work that continuously measures one’s credibility and ties it to material rewards. It can be read as an attempt to secure an income and guard one’s sense of self.</p>
<h3><strong>References</strong></h3>
<p>De Neve, G. (2008). ‘We are all sondukarar (relatives)!’: Kinship and its morality in an urban industry of Tamilnadu, South India. Modern Asian Studies, 42(1), 211–246. <a href="https://doi.org/10.1017/S0026749X0700282X">https://doi.org/10.1017/S0026749X0700282X</a></p>
<p>Gillespie Tarleton. (2010). Politics of Platforms. New Media and Society, 12(3). <a href="https://doi.org/10.1177/1461444809342738">https://doi.org/10.1177/1461444809342738</a></p>
<p>Gray, M. L., Suri, S., Ali, S. S., & Kulkarni, D. (2016). The Crowd is a Collaborative Network. Proceedings of the 19th ACM Conference on Computer-Supported Cooperative Work & Social Computing – CSCW ’16, 134–147. <a href="https://doi.org/10.1145/2818048.2819942">https://doi.org/10.1145/2818048.2819942</a></p>
<p>Hart, K. (2000). Kinship, Contract and Trust: The Economic Organization of Migrants in an African City Slum. In D. Gambetta (Ed.), Trust: Making and Breaking Cooperative Relations (pp. 176–193). University of Oxford.</p>
<p>Kofti, D. (2016). Moral economy of flexible production: Fabricating precarity between the conveyor belt and the household. Anthropological Theory, 16(4), 433–453. <a href="https://doi.org/10.1177/1463499616679538">https://doi.org/10.1177/1463499616679538</a></p>
<p>Mauss, M. (2002). The gift: The form and reason for exchange in archaic societies. London: Routledge.</p>
<p>Parry, J. P. (2001). Ankalu’s Errant Wife: Sex, Marriage and Industry in Contemporary Chhattisgarh. Modern Asian Studies, 35(4), 783–820. <a href="https://doi.org/10.1017/S0026749X01004024">https://doi.org/10.1017/S0026749X01004024</a></p>
<p>Phadke, S. (2007). Dangerous Liaisons: Women and Men: Risk and Reputation in Mumbai. Economic and Political Weekly, 42(17), 1510–1518.</p>
<p>Quien, A. (1997). Mumbai’s Dabbawalla: Omnipresent Worker and Absent City-Dweller. Economic and Political Weekly, 32(13), 637–640.</p>
<p>Tucker, W. T. (1965). Max Weber’s Verstehen. The Sociological Quarterly, 6(2), 157–165. <a href="https://doi.org/10.1111/j.1533-8525.1965.tb01649.x">https://doi.org/10.1111/j.1533-8525.1965.tb01649.x</a></p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/simiran-lalvani-workers-fictive-kinship-relations-app-based-food-delivery-mumbai'>http://editors.cis-india.org/raw/simiran-lalvani-workers-fictive-kinship-relations-app-based-food-delivery-mumbai</a>
</p>
No publisherSimiran LalvaniDigital LabourResearchPlatform-WorkNetwork EconomiesResearchers at WorkMapping Digital Labour in India2020-05-19T06:25:54ZBlog EntryCISxScholars Delhi - William F. Stafford (Nov 03, 6:30 pm)
http://editors.cis-india.org/raw/cisxscholars-delhi-william-f-stafford-thursday-nov-03
<b>We are delighted to have William F. Stafford, PhD candidate in UC Berkeley, present on "Public Measurements, Private Measurements, and the Convergence of Units" at the CIS office in Delhi on Thursday, Nov 03, at 6:30 pm. Please RSVP if you are joining us: <raw@cis-india.org>.</b>
<p> </p>
<p><em>CISxScholars are informal events organised by CIS for presentation, discussion, and exchange of academic research and policy analysis.</em></p>
<hr />
<h2>Public Measurements, Private Measurements and the Convergence of Units</h2>
<p>In this discussion I will focus on a comparison between the standard government prescribed meters for autorickshaws and taxis and the role of ridesharing apps as instruments which take measurements, as the basis for the calculation of fares, and the more general questions which arise for commerce, technology and their regulation. I will organise the paper around the observations of a paratransit operations engineer on the distinction between public and private instruments, and explore the possible implications of new forms of commercialisation of location and proximity and reactions to such developments for understanding questions of fairness and corruption.</p>
<h2>William F. Stafford</h2>
<p>William F. Stafford, Jr., is a PhD candidate in the Department of Anthropology, UC Berkeley. William's research focuses on the auto-rickshaw meter in New Delhi, as a way to engage with classical questions concerning the relationship between measurement, quantification and delimitations of domains of labour. William's general interests concern the analytics of labour and the reconfiguration of what are often taken as its axiomatic aspects. Before joining Berkeley, he studied Sociology at Jawaharlal Nehru University and the Delhi School of Economics.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/cisxscholars-delhi-william-f-stafford-thursday-nov-03'>http://editors.cis-india.org/raw/cisxscholars-delhi-william-f-stafford-thursday-nov-03</a>
</p>
No publishersumandroCISxScholarsData SystemsDigital EconomyResearchers at WorkDigital LabourNetwork EconomiesHomepageEvent2019-03-13T00:30:39ZEventPolicy Shaping in the Indian IT Industry: Recommendations by NASSCOM on Transfer Pricing, 2014-2016
http://editors.cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-on-transfer-pricing
<b>This is the final part of a series of three blog posts, authored by Pavishka Mittal, tracking the engagements by NASSCOM and iSPIRT in suggesting and shaping the IT industry policies in India during 2006-2016. This post aims to explain the law of transfer pricing in India, and the suggestions made by NASSCOM regarding the same. Transfer pricing is regarded as one of the most controversial operations of multinationals resulting in tax avoidance and arbitrage.</b>
<p> </p>
<p><strong>1.</strong> <a href="#1">Introduction</a></p>
<p><strong>2.</strong> <a href="#2">Method of Operation of Tax Avoidance through Invalid Transfer Prices</a></p>
<p><strong>3.</strong> <a href="#3">The Law of Transfer Pricing in India</a></p>
<p><strong>4.</strong> <a href="#4">Recommendations by NASSCOM in its Pre-Budget Memorandum, 2014-2015</a></p>
<p><strong>5.</strong> <a href="#5">Recommendations by NASSCOM in its Pre-Budget Memorandum, 2015-2016</a></p>
<p><strong>6.</strong> <a href="#6">Recommendations by NASSCOM in its Pre-Budget Memorandum, 2016-2017</a></p>
<p><strong>7.</strong> <a href="#7">Endnotes</a></p>
<p><strong>8.</strong> <a href="#8">Author Profile</a></p>
<hr />
<h2 id="1">1. Introduction</h2>
<p>The following blog post, the third part in the series on ‘Policy Shaping in the Indian IT Industry’ aims to explain the law of transfer pricing in India and the suggestions made by NASSCOM regarding the same. Transfer pricing is regarded as one of the most controversial operations of multinationals resulting in tax avoidance and arbitrage. The blog post proceeds with explaining how transfer pricing is used by MNCs to avoid tax. The applicable legislations and government notifications are stated to better understand the policy recommendations. The law discussed is applicable to all business concerns, including the IT industry. Judicial development as to tests for valid comparables, arms length prices discussed is with particular reference to the software industry.</p>
<p> </p>
<h2 id="2">2. Method of Operation of Tax Avoidance through Invalid Transfer Prices</h2>
<p>When an entity of a multinational organization sells goods, provides services etc to another entity of the same organization in another country, the price charged for these goods/services is called ‘transfer price’. Since transactions involving transfer pricing are between controlled or related legal entities within an enterprise, these prices may be entirely arbitrary and completely unrelated to the costs incurred in the supply of these goods/services. This is done to transfer profit made in a jurisdiction which has higher taxes to another entity of the same organization in another jurisdiction where taxes are low. Essentially, revenue is shifted to lower profits in a division of an enterprise located in a country that levies high income taxes and raise profits in a country that is a tax haven that levies no (or low) income taxes causing concern for government taxing authorities. The MNC as a whole maintains higher profits in the form of tax saving. Ideally, a transfer price should match either what the seller would charge an independent, arm's length customer, or what the buyer would pay an independent, arm's length supplier. Transfer pricing, also referred to as base erosion and profit shifting (BEPS), is a major tool for corporate tax avoidance. The Organisation for Economic Cooperation and Development (OECD) has fairly comprehensive guidelines which have been adopted with some modification by many countries.</p>
<p> </p>
<h2 id="3">3. The Law of Transfer Pricing in India</h2>
<p>The Finance Act 2012 rendered domestic transactions between related entities also subject to the law of transfer pricing, to avoid tax arbitrage between states.</p>
<p>Sections 92 to 92F of the Income Tax Act 1961, largely based on the OECD’s guidelines, deal with the law of transfer pricing for intra-group cross border and specific domestic transactions. Income or expenses arising from these international or specified domestic transactions have to be computed according to the principles applicable for the determination of the arms length price. Section 92F defines an Arms Length Price as the price applied, or proposed to be applied to transactions between persons other than associated enterprises in ‘uncontrolled conditions’ <strong>[1]</strong>.</p>
<p>The concept of a range of values representative of an Arms Length Price (ALP) is not acceptable under Indian law, a single price has to be submitted by the taxpayer by the calculation of the arithmetic mean in case of multiple values. Range benefit percentage, applicable in differences between the transfer price and the ALP, is released for each individual industry, starting from FY 2012-13. Since the burden lies on the taxpayer to prove that the deemed Transfer price is the ALP, he is required to maintain documents and information on an annual basis as specified under Rule 10D of the Income Tax Rules, 1962. Section 10D does not have to be complied with for international transactions below INR 10 million and specified domestic transactions below INR 50 million. However, the taxpayer should possess sufficient data to substantiate the ALP. Safe harbour rules, to be released by the CBDT, would obviate the need for companies to carry detailed comparability and benchmarking exercises. In Vanenburg Group B.V. and Dana Corporation, the Authority for Advance Rulings held that income not subject to tax in India would not have to comply with TP regulations of India. However, the same does not extend to entities enjoying a tax holiday in India. Thus, the transfer pricing regulations would have to be complied with by IT firms in SEZ’s etc. The use of foreign comparables is not permitted under Indian law.</p>
<p> </p>
<h2 id="4">4. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2014-2015</h2>
<p>In the pre-budget memorarandum on transfer pricing issues, published on June 2014, NASSCOM made the following recommendations <strong>[2]</strong>:</p>
<ol type="a">
<li><strong>Use of Multiple Year Data:</strong> Current Indian TP regulations, Rule 10B (4) of the Income tax Rules 1962 (Rules) provide for use of data of the financial year in which the international transaction has been entered into. It further permits use of multiple year data (period not being more than two years prior to such financial year), if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared. NASSCOM argued that single year data may not adequately reflect the business conditions, performance of the taxpayer and multiple year data is useful to even out the fluctuations caused by business, economic and product life cycle. Further, if relevant data is not available in the public databases at the time when the benchmarking exercise is undertaken, multiple/prior year data should be accepted. Relevant clarifications should be incorporated in the regulations that clearly permit use of multiple year data for comparability analysis.<br /><br /></li>
<li><strong>Use of Interquartile Range instead of Arithmetic Mean:</strong> Indian transfer pricing regulations stipulate an arithmetic mean of the margins of all comparables to determine the arm's length margin in case more than one comparable is identified. It was argued that Arithmetic mean of margins leads to a skewed determination of arm’s length margins as it is influenced by outliers. While median is acceptable globally, inter-quartile range is also used in many countries as the outcome is less sensitive to extremes in the sample. The TP regulations be amended to permit application of the concept of an arm’s-length range of prices, similar to provisions contained in the OECD regulations or allow use of inter quartile range as those of other developed nations which would be more indicative of market realities.<br /><br /></li>
<li><strong>Retention of Tolerance Band as Standard Deduction:</strong> The newly inserted subsection 2A to section 92C through the Finance Act 2012 with effect from 1st April 2002 clarifies that the benefit of 5 % is not a standard deduction and overturns the laws as interpreted by various Tribunals. The tolerance band limits have themselves been amended to the price at which the international transaction or specified domestic transaction has actually been undertaken, provided that the transaction price does not exceed one per cent, in case of wholesale traders; and does not exceed three per cent, in all other cases. NASSCOM recommended that since the law requires the arm’s length price to be the arithmetical mean and does not prescribe inter quartile range which is a globally accepted best practice, the provision of tolerance band as standard deduction be retained.<br /><br /></li>
<li><strong>Certain and Consistent Guidelines should be Issued by the Board after Giving Due Consideration for the following factors:<br /><br /></strong>
<ol><li><strong>Inter-Company Loans</strong>: there should not be requirement for charging interest loans which a) are quasi-equity in nature (these loans should be regarded as equity), and b)are provided out of surpluses of the Indian parent. Global practices for benchmarking interest rates to be charged, if any, by considering comparable interest rates prevailing in the borrower’s country.<br /><br /></li>
<li><strong>Guarantee / Letter of Comfort / Undertaking:</strong> Arms length price should be determined in terms of the future benefits to be received by the company furnishing the guarantee and the business rationale involved. The association of the parent company for securing contracts as a group should not be construed as resulting in international transactions between the Indian Company and the overseas subsidiary.<br /><br /></li>
<li><strong>Headquarter and Regional Headquarter Cost Allocations:</strong> There is lack of data in the public domain as to industry benchmarks related to management payouts, guidance as to specific documentation should be given.<br /><br /></li>
<li><strong>Adjustments for Differences in Functions and Risks:</strong> Clear guidelines on carrying out economic and risk adjustments with proper methodology required. Due consideration should be awarded to business strategies and commercial realities such as market entry strategies, non-recovery of initial set-up costs and other legitimate business peculiarities while determining the arm’s length pricing.<br /><br /></li>
<li><strong>Guidance as to the Meaning of Restructuring Required to be Laid down:</strong> Section 92B considers a transaction of business restructuring or reorganization as an international transaction. However, there is no definition of restructuring or reorganization in the Act. Further, there is no clarity as to whether a transaction of business restructuring or reorganization would need to be reported if the act of business restructuring results in the enterprises becoming an AE.<br /><br /></li>
<li><strong>Invalidity of Extension of Transfer Pricing Provisions to Corporate Actions:</strong> Transactions such as issue, buyback and redemption of shares are capital transactions and are not subject to income tax, except in the case of capital gains arising out of these transactions. The understanding is that these corporate actions are initiated by the shareholders of the company and do not have a bearing on the taxable income of the entity. However, the Revenue without any rationale has been classifying these as international transactions which have to be benchmarked and documented. If this is continued, transactions such as issue of bonus shares (ratio of bonus issue), and rate of dividend declared, or discount/premium on issue or redemption of preference shares etc. may also get covered within the purview of transfer pricing provisions. NASSCOM stated that guidance as to the rationale of this transfer pricing application is necessary. Further, guidance as to the terms and conditions to be complied with in instances of issue, buyback or redemption of share to mitigate the exposure to transfer pricing litigation is required.<br /></li></ol>
</li>
<li><strong>Enlarged Scope of “International Transaction” Retrospectively:</strong> The intent of TP regulations being the reduction of tax avoidance, the provision to bring the business restructuring transactions within the transfer pricing ambit should be withdrawn. The definition of intangibles being too broad and open for interpretation needs to be rationalized. Guidance as to the appropriate methodologies to evaluate ALPs of intangibles is required. Given the increasing quantum of cross border financing and inter-company lending etc., appropriate guidance should be issued in this regard. Further, the amendment, being substantive in nature, shall be made prospective to achieve certainty and stability.<br /><br /></li>
<li><strong>Upward Revision in Monetary Threshold of TP Documentation Required:</strong> For aggregate value of transactions exceeding INR 10 million, TP documentation is required. This monetary threshold has not been altered since the introduction of TP Regulations in the Income-tax Act, 1961. Due to the increasing quantum of cross border transactions, the prescribed limit is low considering the rise in the value of software traded, requiring almost all companies in this sector to maintain onerous documentation.<br /><br /></li>
<li><strong>Penalty Provisions:</strong> Penalty provisions have been made more stringent vide Finance Act 2012. Transfer Pricing Officer can now ask the taxpayer to pay penalty under section 271AA at the rate of 2 per cent of value of international transaction due to failure to keep information in addition to another 2 per cent under section 271G for not furnishing the information besides regular penalty under section 271(1)(c) of the Act. NASSCOM suggested that the penalty should be restricted to tax in dispute and not linked to the value of transaction.<br /><br /></li>
<li><strong>Domestic Transfer Pricing:</strong> Section 92BA has been inserted vide Finance Act 2012 by which the coverage of transfer pricing has been expanded to include certain 'Specified Domestic Transactions' if the aggregate amount of all such transactions entered by the assessee in the previous year exceeds Rs. 5 crores in the previous year. NASSCOM suggested that the threshold limit be extended to Rs. 15 crore.<br /><br />
The term ‘Specified Domestic Transactions’ has a very wide coverage and a relatively low monetary threshold for exemption. It would include any expenditure in respect of which payment has been made or is to be made to a related party referred to in clause (b) of sub-section (2) of section 40A of the Act. Since such expenditure would include capital expenditure, a clarification as to the applicability of these provisions to revenue expenditure only has to be made. Further, the scope of the provision is not in sync with the SC decision in the case of Glaxo SmithKline. The Supreme Court had held that TP should be applicable to transactions between a profit making and a loss unit / company and between units / assesses having different tax rates. Other than the scenarios contemplated above, a corresponding adjustment should be allowed and hence provided for on the statute.<br /><br />
This amendment also covers a scenario wherein the payment of remuneration by the company to its director or relative of such directors is also required to be at arm's length which casts an onerous responsibility on the company vis - à- vis justification of the arm's length nature of such payments.<br /><br />
A clarification as to ambiguity in relation to the definition of the term ‘closely connected persons’ as described in section 80IA (10) of the Act is required. Guidance for benchmarking directors remuneration should be provided. Further, clarity should be provided with regard to inter-unit allocation of costs between eligible and non-eligible units i.e. whether corporate cost allocations from a non-tax holiday unit of a company to a tax holiday unit of the same company would get covered within the provisions of Section 80-IA and consequently need to be reported as a specified domestic transaction.<br /><br />
The Advance Pricing Agreement (APA) provisions, only applicable to only international transactions presently, should be extended to domestic transactions governed by TP regulations.<br /><br /></li>
<li><strong>Changes in Dispute Resolution Panel:</strong> The DRP issues directions with the stated objective of keeping the issues alive since the Revenue has filed appeals before the High Court / Supreme Court which is contrary to the objective of dispute resolution. It is structurally suffering from impaired independence owing to the fact that the DRP is a constitution of CIT/DIT. It is not able to fulfil its central purpose of dispute resolution due to the fact that CIT/DIT has to discharge their regular duties in addition to these duties involving revenue collection targets. NASSCOM recommended that DRP be constituted as an ‘independent’ judicial board with panelists from economic, legal and accounting backgrounds having knowledge of income tax matters. To avoid actual or perceived bias, specific provisions may be inserted to restrain a jurisdictional Commissioner/ Director from being appointed as a member of the DRP hearing cases falling within his/ her jurisdiction. Further cases which are covered by decisions of courts and are found to be without merit should be withdrawn suo-moto.<br /><br /></li>
<li><strong>Absence of Article 9(2) in DTAAs with Belgium, Germany, France, Singapore, and the Republic of Korea:</strong> The Tax administration has to follow the practice of not admitting cases of economic double taxation under Mutual Agreement Procedure and Advance Pricing Agreements. Negotiation of bilateral APAs (in case an Indian entity has associated enterprises in such countries), MAPs are disallowed in such countries. Though the OECD has stated that two sovereign states can mitigate double taxation arising out of TP adjustments through invoking Article 25(3), India has had reservations with such an approach on the ground OECD Model Tax Conventions do not represent internationally agreed guidance. India suggested an Inter-Governmental Commission with a balanced representation from the Governments of developing and developed countries to take decisions with regard to these provisions. To ensure continued trade with these countries, advice is needed from the government on how to address challenges arising from the absence of these provisions in tax treaties.<br /><br /></li>
<li><strong>Rollback for APAs:</strong> Currently an application for APA, once agreed upon is prospective in the sense that they are applicable for the years agreed upon in the agreement. It is recommended that once an APA is finalized, the tax payer should be allowed to close the open years for which assessment proceedings have not yet been initiated and years for which assessment or appeal proceedings are pending before the TPO, DRP/CIT (A), having regard to the agreement reached in the APA.<br /><br /></li>
<li><strong>Safe Harbour Rules and its Impact on Assessments:</strong> In contrast to APAs, the Safe harbour notifications have had limited uptake.<br /><br />
<ol><li><strong>Rationalization of Margins:</strong> The current margins varying from 20 to 30 percent depending on the characterization of the entity are very high and are not indicative of ALPs. More feasible margins should be declared after taking into account the rationalization of margins by the higher appellant authority. The imbalance APA and the Safe Harbour scheme has to be restored, especially for small and medium enterprises, to reduce unnecessary pressure on the APA system as the preferred route.<br /><br /></li>
<li><strong>Overlaps between R&D and Software Development:</strong> Both are separate categories having different limits under the safe harbour rules. The substantial overlaps between the above activities due to a very fine line of distinction between the two are not reduced through the present ambiguous definitions, subject to interpretation. Due to the exclusion of research and development from software development, information technology enabled services and knowledge process outsourcing services in the draft rules, new litigation on the classification of such service providers would arise. NASSCOM, thus, recommended that both the categories be merged and revised safe harbour rules be notified.<br /><br /></li></ol>
</li>
<li><strong>Levy of Penalty on Single Transaction to be Rationalized:</strong> Since penalty provisions are implemented with the intention to get the tax payer to adhere to the provisions of the Act rather than cause considerable hardship, only single penalties should be levied to avoid duplication of penalty. In the event that a tax payer has not maintained the documents, such taxpayer should be penalized only under section 271AA and not under both section 271 AA and section 271 G. Further, penalty should not be imposed for non-reporting of transactions which gets covered under the purview of international transaction by virtue of retrospective amendments, due to impossibility of performance.<br /><br /></li>
<li><strong>Non-Processing of Refunds when Notice Issued u/s 143(2):</strong> The Finance Act 2012 has inserted clause 1(D) to section 143 of the Act, specifying that the processing of a return under section 143(1) of the Act shall not be necessary, where a notice has been issued under section 143(2) of the Act. Though the language of the aforesaid provision suggests that it is directory and not mandatory in nature, however, it has been observed that the Tax Office is not processing any refunds under section 143(1) because of this provision. Further, in case of the aforesaid entities, a draft assessment order is passed and typically it takes almost one year more to get the final assessment order. Following the above, excess taxes if any paid over the final tax liability by any entity gets stuck for ~ five financial years. In case the final assessment order is high or there is an undue demand, assesses are required to pay further taxes without getting the refund originally due causing undue hardship to assessees. NASSCOM recommended that the clause prescribing a time limit of four years from the end of the financial for the completion of assessment of entities to which transfer pricing provision applies be deleted. This provision is also causing undue pressure on the Revenue in the form of interest liability for a longer period.<br /><br /></li></ol>
<p> </p>
<h2 id="5">5. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2015-2016</h2>
<p>In addition to repeating the key contentious issues highlighted in the previous pre-budget memorandum, some additional issues were brought up <strong>[3]</strong>. NASSCOM requested the government to make the revised to be issued Transfer Pricing Policy retrospective in nature and in sync with global practices. The Finance Minister had announced significant changes in Transfer Pricing rules and policy in the July 2014 Budget with an aim to address disputes and litigations around estimating ALPs.</p>
<ol type="a">
<li><strong>Applicability of Transfer Pricing on Companies Eligible for Tax Holiday u/s 10A/10AA:</strong> NASSCOM contended that the assessing officers are “arbitrarily and/or mechanically” invoking the transfer pricing provisions even in cases where the assessees are eligible for tax relief’s u/s 10A/10AA or have related party transactions with well-regulated tax jurisdictions. It recommended that transfer pricing provisions shall not be invoked against tax payers:
<ul>
<li>who are entitled to tax holidays (section 10A/10AA reliefs) in India,</li>
<li>In respect of transactions with countries as listed in a “white list” (to be prescribed) which shall include jurisdictions having higher tax rates/best tax practices.<br /><br /></li></ul>
</li><li><strong>Filing of Form 3CEB by Foreign Companies:</strong> As per the existing Indian Transfer pricing provisions, there are conflicting views, on whether, the foreign companies are required to file Transfer Pricing report in Form 3CEB in India, even if income subject to an international transaction is not chargeable to tax in India or where the transaction entered with the foreign entity is already reported by the Indian entity in its Form 3CEB as per the provisions of the existing Indian transfer pricing law. In principle, the foreign residents not having a permanent establishment in India should not be required to file Transfer Pricing report (Form 3CEB) in India keeping in view the compliances done by the Indian entity. NASSCOM recommended the government to clarify that that the provisions of Indian transfer pricing would not apply to foreign companies/foreign residents unless they have a permanent establishment in India.<br /><br /></li></ol>
<p> </p>
<h2 id="6">6. Recommendations by NASSCOM in its Pre-Budget Memorandum, 2016-2017</h2>
<p>In addition to repeating the key contentious issues highlighted in the previous pre-budget memorandum, some additional issues were brought up <strong>[4]</strong>:</p>
<ol type="a">
<li><strong>Changes Proposed in the Rules for the Computation of the Arms Length Price:</strong> The draft rules released continue to deviate from global norms and associated statistical concepts. NASSCOM stated that the prescribed percentile range of 35th to 65th, mandating minimum number of comparables to qualify for use of range and multiple year data will not have a significant impact on the current situation.<br /><br />
<ul><li><strong>Applicability of Range and Multiple Year Data on Selected Methods:</strong> The rules restrict the application of the following to Transactional Net Margin Method, Resale Price Method and Cost Plus Method used to determine ALPs. This rule, being in contrast to international practice wherein no such restrictions on the method to be applied for using range and multiple year data for determining AlPs exist should be removed. New rules which do not confine the use of range, multiple year data to the above methods should be released.<br /><br /></li>
<li><strong>Number of Comparables for Applicability of “Range” Concept:</strong> The rules prescribe a minimum of 6 comparable companies, based on the similarity of their functions, assets and risks (FAR) with the tested party for the adoption of “range” concept which may be difficult for all transactions due to constraints such as data availability, business comparability, quantitative comparability, etc. Consequently, most taxpayers may not be able to adopt the range concept. Further, if during the audit stage the number of final comparables fall below the mandated 6, due to rejection of certain comparable companies, the method of determining ALP will change from “Range” concept to Arithmetic mean which will add to complexities and increased litigation. NASSCOM stressed that the OECD Guidelines do not outline a minimum number of comparable entities to be considered for calculation of range. NASSCOM recommended that the rules should not specify any minimum number of comparable entities as a prerequisite for the use of “range” concept. Alternatively, it suggested a reduction in minimum requirement of comparable companies for application of the range concept from 6 to 4 comparable transactions. A clarification may be issued as to the applicability of the arithmetic mean concept in case the number of comparables fall below 4. Further, guidance may be provided regarding the selection of appropriate comparables considering the various constraints thereby allowing flexibility to the taxpayers in preparing reliable set for comparable companies.<br /><br /></li>
<li><strong>“Range” between 35 to 65 Percentile instead of Inter-Quartile Range:</strong> The rules provide a range between 35 to 65 percentile of the data set which may not provide relative reliability on comparable price. The range of 35th to 65th percentile is narrow than interquartile range 25th to 75th percentile, restricting the set of finally selected comparables. Further, use of inter-quartile range (25th to 75th percentile) is amongst the globally accepted best practice and also closer to economic realities wherein prices, and or margins, are compared to those within a range and not at to a particular point. NASSCOM recommended that the rules be modified to provide that the interquartile range from the 25th to 75th percentile would be used to test the arm’s length nature of the transaction.<br /><br /></li>
<li><strong>Use of Multiple Rear Data:</strong> Rule 10B(4) as notified provides that the data to be used in analyzing the comparability of an uncontrolled transactions with an international transaction or a specified domestic transaction will be:<br /><br />
<ul>
<li>the data relating to the current year ; or</li>
<li>the data relating to the financial year immediately preceding the current year, if the data relating to the current year is not available at the time of furnishing the return of income by the assessee , for the assessment year relevant to the current year.<br /><br /></li></ul>
<p>Further data of the current year, shall be used during the transfer pricing audit if it becomes available at the time of assessment.</p>
<p>The above para prescribes the use of “Multiple year data” concept in case of only three methods viz. the Transactional Net Margin Method, Resale Price Method, or Cost Plus Method. NASSCOM highlighted that the requirement of use of the financial data of comparable companies which is not available in the public domain on or before the specified date, but which becomes available subsequently by the time of assessment, will not be in line with the contemporaneous documentation requirement under the Indian TP provisions. It is not clear whether at the time of assessment, the data of the current year can be used by both the taxpayer and the department. It further highlighted that the illustration to the notification provides for the use of the data of the current year and immediately preceding 2 years in contrast to the notification providing for the use of data of the current year or the data relating to the financial year immediately preceding the current year contributing to ambiguity. Also use of data of current year and the 2 preceding years is not in line with the global best practices which allow three years data to be used excluding current year’s data. It will be an issue for overseas tested parties, which follow rules for data as per their respective jurisdictions ( eg. previous three years data) to get and use current year data.</p>
<p>NASSCOM recommended that the taxpayer should be allowed to use data of prior three years (not including current year), which is available in the database at the time of preparation of TP documentation. Also it should be extended to CUP, PSM and other methods as well. The data of current year can be used only if it is available at the time of preparation of TP documentation and not subsequently at the time of assessment. The provision that use of data of the current year can be used during the transfer pricing assessment if it becomes available should be done away with as by that time pricing and commercial arrangements would have already been set keeping in mind the data available. The benefit of multiple year data should also be made available to past years whose assessment proceedings have not yet been completed i.e for FYE 2012, FYE 2013 and FYE 2014.</p>
</li></ul>
</li><li><strong>Concerns on APA Roll Back Provisions in cases of DTAAs Comprising Article 9(2):</strong> Rule 10 MA(3) of the APA rollback rules provides as follows: “Notwithstanding anything contained in sub-rule (2), rollback provisions shall not be provided in respect of international transaction for a rollback year, if – ….(ii) the application of rollback provisions has the effect of reducing the total income or increasing the loss, as the case may be, of the applicant as declared in the return of income of the said year.<br /><br />
NASSCOM contended that the above position of rollback is not justified in the case of bilateral APA applications wherein the treaty itself provides for corresponding deduction in the other contracting state for avoidance of double taxation, i.e., Article 9(2). It recommended that suitable modifications be made in the present rules, to allow rollback provisions which have the effect of reducing the total income or increasing the loss of the applicant for the relevant year.<br /><br /></li>
<li><strong>Risk Based Assessment Audits:</strong> NASSCOM stated that in relation to transfer pricing audits, presently a transaction value threshold is being adopted by the Revenue for case selection; which should be replaced by an objective risk based assessment approach which may be set out through instructions/circulars on an annual basis. The recent Instruction No. 8/2015 issued on October 16th, 2015 sets out that the Assessing Officer should apply more discretion in referring cases for scrutiny by the Transfer Pricing Officer. It would be helpful if some criteria or parameters are laid out based on which a referral could be made. Further, a transaction value based audit approach is not always an indicator of the need for scrutiny for such transactions and should be supplemented with some qualitative criteria for case selection.<br /><br /></li>
<li><strong>Safe Harbour Rules Not Effective for the Sector - Need for Rationalizing the Margins:</strong> Currently, the margins notified under the safe harbour vary from 20 to 30 percent depending on the characterization of the entity, which are high and are not reflective of market realities. Redefining safe harbour margins, which have so far remained ineffective, should be undertaken on a priority to encourage uptake by the Industry. Emphasizing the importance of safe harbours for easing the regulatory compliance for SMEs, NASSCOM recommended more practical and feasible margins (that are reflective of ALPs) be notified under the safe harbour rules, especially after taking into account the rationalization of margins by the higher appellant authority.<br /><br /></li>
<li><strong>Continued Aggressive Assessments:</strong> The Indian IT Industry has been facing several unwarranted assessments on account of transfer pricing adjustments. Tax authorities continue to pose problems by adopting different criteria of selecting comparables for benchmarking. Further, filters adopted by the authorities across jurisdictions are ignoring business conditions. Tax authorities use companies earning supernormal profits (margins 50% to 80%) and industry giants as comparables. Recent rulings and judgments passed in favour of the taxpayers are continued to be overlooked.<br /><br /></li>
<li><strong>Ambiguities in Domestic Transfer Pricing:</strong> The Finance Act 2015 increased the threshold for applicability of Domestic Transfer Pricing from INR 5 crores to INR 20 crores. However ambiguity around some provisions like directors’ remuneration and associated comparables continue. Domestic transfer pricing provisions should apply only in transactions involving income escaping tax and not in case tax neutral transactions i.e. where there is a transaction between two entities both of which pay tax, such a transaction will be tax neutral since a deduction in the hands of one entity will automatically be taxed in the hands of the other entity. Hence in such a case, domestic transfer pricing provisions should not apply and there should be a specific exemption introduced in the law to this effect. NASSCOM repeated its concerns highlighted in the previous pre- budget memorandum.</li></ol>
<p> </p>
<h2 id="7">7. Endnotes</h2>
<p><strong>[1]</strong> It prescribes the following methods for its computation:</p>
<ul><li>Comparable uncontrolled price (CUP) method,</li>
<li>Resale price method (RPM),</li>
<li>Cost plus method (CPM),</li>
<li>Profit split method (PSM),</li>
<li>Transactional net margin method (TNMM), and</li>
<li>Such other methods as may be prescribed.<br /></li></ul>
<p>
As notified by the CBDT, any such other method may be used which details the price for uncontrolled transactions between unassociated companies in similar circumstances after the consideration of all relevant facts.</p>
<p><strong>[2]</strong> See: <a href="http://www.nasscom.in/sites/default/files/policy_update/Transfer-Pricing_NASSCOM-Jun14.pdf">http://www.nasscom.in/sites/default/files/policy_update/Transfer-Pricing_NASSCOM-Jun14.pdf</a>.</p>
<p><strong>[3]</strong> See: <a>http://www.nasscom.in/sites/default/files/policy_update/NASSCOM%20pre-budget%20recommendations%20-%20Transfer%20Pricing.pdf.</a>.</p>
<p><strong>[4]</strong> See: <a href="http://www.nasscom.in/sites/default/files/policy_update/NASSCOM-pre-budget-recommendations-Transfer-Pricing.pdf">http://www.nasscom.in/sites/default/files/policy_update/NASSCOM-pre-budget-recommendations-Transfer-Pricing.pdf</a>.</p>
<p> </p>
<h2 id="8">8. Author Profile</h2>
<p>Pavishka Mittal is a law student at West Bengal National University of Juridical Sciences, Kolkata and has completed her second year. She takes contemporary dance very seriously and hopes to contribute to the dance community in India. Other than dancing, she indulges in binge-watching in her spare time.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-on-transfer-pricing'>http://editors.cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-on-transfer-pricing</a>
</p>
No publisherPavishka MittalTransfer Pricing PolicyNASSCOMNetwork EconomiesIndustrial PolicyResearchers at Work2016-07-29T08:39:48ZBlog EntryRBI and Regulation of Digital Financial Services in India, 2012-2016
http://editors.cis-india.org/raw/rbi-regulation-digital-financial-services-in-india-2012-2016
<b>The Reserve Bank of India (RBI) published its first guideline on mobile banking in 2008, and the conversation on integrating Aadhaar numbers with bank account numbers on one hand and mobile numbers on the other started as soon as UIDAI was established. However, it is the post-2010 period, with rapid growth of the e-commerce sector in India, that saw rise of digital financial services and intermediaries, and hence the demand for regulatory intervention in the sector. This essay by Shivalik Chandan tracks RBI policies and guidelines responding to and shaping the regulatory framework of the digital financial sector in India, including both mobile banking and online transactions.</b>
<p> </p>
<p>1. <strong><a href="#1">Introduction</a></strong></p>
<p>2. <strong><a href="#2">Mobile Banking in India</a></strong></p>
<p>2.1. <strong><a href="#2-1">Customer Enrolment Issues identified by the RBI</a></strong></p>
<p>2.2. <strong><a href="#2-2">Technical Issues identified by the RBI</a></strong></p>
<p>2.3. <strong><a href="#2-3">The Way Forward</a></strong></p>
<p>3. <strong><a href="#3">Online Payments in India</a></strong></p>
<p>3.1. <strong><a href="#3-1">Regulatory Response to Online Payment Instruments</a></strong></p>
<p>3.2. <strong><a href="#3-2">Infrastructure for Online Payments between Private Parties</a></strong></p>
<p>3.3. <strong><a href="#3-3">Infrastructure for Online Payments involving the Government</a></strong></p>
<p>3.4. <strong><a href="#3-4">The Way Forward</a></strong></p>
<p>4. <strong><a href="#4">Peer-to-Peer (P2P) Lending</a></strong></p>
<p>5. <strong><a href="#5">Conclusion</a></strong></p>
<p>6. <strong><a href="#6">Endnotes</a></strong></p>
<p>7. <strong><a href="#7">Author Profile</a></strong></p>
<hr />
<h2 id="1">1. Introduction</h2>
<p>The advent of new technology usually leads to innovation in industry. Regardless of the sector, new technology is almost always adopted to make tasks easier and more efficient, and this applies to the financial sector as well. Advancements such as credit cards and ATMs have fundamentally changed the process of banking and finance. The past few years have seen some major innovation in the sector, leading to a shift in the way people interact with the financial system of the country. Pursuant to the same, the Reserve Bank of India has responded to these advancements to make sure that they do not go unchecked.</p>
<p>The e-commerce industry in India has seen unprecedented growth over the last few years, largely because of a higher level of internet penetration among the population. From a worth of $3.9 billion in 2009, the worth of the Indian e-commerce market went up to $12.6 billion in 2013 <strong>[1]</strong>. The number of online shoppers was 35 billion in 2014, and is now expected to cross 100 million by the end of this year <strong>[2]</strong>. The newfound presence of the e-commerce industry in the country has led to a new form of payment: the online wallet. A more convenient method than using a credit card for every transaction, it is expected to achieve a compound annual growth rate of 68% this year <strong>[3]</strong>.</p>
<p>A priority of the RBI since the mid-2000s has been financial inclusion. The term is usually defined with respect to financial exclusion, which is construed as the inability to access necessary financial services in an appropriate form due to problems associated with access, conditions, prices, markets, or self-exclusion. In contrast, financial inclusion is the delivery of financial services at affordable costs to disadvantaged sections of society. There is no single metric that can determine the amount of financial inclusion, and specific indicators such as number of bank accounts and number of bank branches only provide a partial picture <strong>[4]</strong>.</p>
<p>In 2013, CRISIL launched an index (Inclusix) to measure the status of financial inclusion in India. The index combines branch penetration, deposit penetration, and credit penetration into one metric. The report was the first regional, state-wise, and district-wise assessments of financial inclusion ever measured, and the first analysis of inclusion trends over a three-year period. Some key conclusions found in the report were <strong>[5]</strong>:</p>
<ol><li>The all-India CRISIL Inclusix score of 40.1 is low, though there were clear signs of progress – this score had improved from 35.4 in 2009.</li>
<li>Deposit penetration is the key driver of financial inclusion – the number of savings accounts (624 million), is almost four times the number of loan accounts (160 million).</li></ol>
<h2 id="2">2. Mobile Banking in India</h2>
<p>Perhaps the biggest change in banking in recent times has been the introduction of mobile banking. The RBI issued its first set of regulatory guidelines to do with mobile banking in 2008, where banks were permitted to transfer funds from one bank account to another through the mobile platform. From 2010 to 2012, the number of users of mobile banking services grew 277.68% (from 5.96 million to 22.51 million) and the value grew a whopping 875.6% (from Rs. 6.14 billion to Rs. 59.90 billion). These figures clearly indicate that mobile banking in the country is growing at a very high rate. Yet, as of 2014, there were 350 to 500 million unique mobile subscribers and only 22 million mobile banking customers <strong>[6]</strong>.</p>
<p>The RBI clearly recognised the potential for a widespread increase in mobile banking as well as the opportunity of increasing financial inclusion in the country, and made recommendations for “addressing the consumer acquisition challenges as well as the technical aspects” <strong>[7]</strong>. Recommendations such as alternate channels for mobile registration such as ATMs, uniformity in the mobile registration process across banks, and standardisation and simplification of the MPIN generation process were made by the RBI. Despite the potential in mobile banking as a channel for financial services, and financial inclusion, the RBI identified several challenges with the platform, which were of two types – customer enrolment related issues, and technical issues.</p>
<h3 id="2-1">2.1. Customer Enrolment Issues identified by the RBI</h3>
<p>The following customer enrolment issues were identified by the RBI:</p>
<ul><li><strong>Mobile Number Registration:</strong> In order to avail mobile banking services, the customer needs to go to a branch of the bank or an ATM of that bank to register their mobile number. The RBI recommended that registration be made possible through other channels as well, and that registration forms be made uniform to ease the customer experience.</li>
<li><strong>MPIN Generation:</strong> The process for MPIN generation is different across banks, and requires a visit to the bank branch in some cases. The RBI recommended that the process be standardised and that the MPIN be intimated to the customer through their handset without necessitating a visit to the bank.</li></ul>
<p>These recommendations were implemented by the RBI in its Master Circular issued in December 2014 <strong>[8]</strong>.</p>
<h3 id="2-2">2.2. Technical Issues identified by the RBI</h3>
<p>One of the major technical issues identified by the RBI was the fact that there is a large disparity in the type of mobile handset, and consequentially, the technology most customers have. The majority of handsets in the country are GSM or CDMA enabled, and a comparatively small number have GPRS technology. The RBI identified three major ways of mobile banking utilised by most banks as SMS, USSD, and application based banking. The problems the RBI identified with the SMS method were that the service is not encrypted, and that it may become inconvenient for customers to remember the syntax required for the commands. The USSD system solves the complexity issue, as it presents an interactive menu and is much faster than SMS. However, it is still not a secure means of communication. A big step forward for the USSD system has been the implementation of the National Unified USSD Platform by the National Payments Corporation of India with a single short code (*99#) to utilise the common USSD channel for mobile banking for all banks <strong>[9]</strong>.</p>
<p>The RBI conceded that application based mobile banking is the best way to offer the service both in terms of user friendliness as well as security, but stated that developing these applications requires a large amount of research and development due to the extremely high number of permutations and combinations of handsets and operating systems available on the market, and that smartphones are in the minority as far as type of handsets go. To resolve these issues, the RBI suggested that banks continue offering all three services, so that the largest number of people can take advantage of mobile banking services. The RBI also recommended that all banks implement a uniform mobile banking system across all three architectures (SMS, USSD, and applications) for the ease of consumers <strong>[10]</strong>.</p>
<h3 id="2-3">2.3. The Way Forward</h3>
<p>In the two years since these recommendations were published, smartphones and GPRS connections (both required for application-based mobile banking) have become a lot cheaper and have permeated a larger section of the Indian society. Hopefully, this trend will gradually reflect in the banking sector and lead to a boom in application-based mobile banking. The next challenge that the RBI will face in the coming years in the field of mobile banking is the replacement of credit cards with smartphones. Both Apple and Google (with Apple Pay and Android Pay) are utilising NFC technology in smartphones to enable customers to store their credit card information on their smartphone and simply tap it onto a terminal to complete the transaction, and even though it is available in a small number of countries presently, it is only a matter of time before it is introduced in India, and this development has been addressed by the RBI in the ‘Vision 2012-2015’ document, where they have addressed the requirement of updating all PoS terminals at the merchant ends, as well as developing an open standard for all NFC transactions, regardless of the payment system operators <strong>[11]</strong>.</p>
<p>The RBI has announced its intention to review the guidelines for mobile banking to address issues relating to customer registration, safety and security of transactions, risk mitigation, and customer grievance redressal measures, with the intention of promoting mobile phones as access channels to payment and banking services. The policy efforts will also focus on ensuing that mobile banking services are provided to non-smartphone users across the country as well <strong>[12]</strong>.</p>
<p> </p>
<h2 id="3">3. Online Payments in India</h2>
<p>The National Payments Corporation of India was set up in 2009 as an umbrella organisation for all retail payment systems (under section 25 of the Companies Act) with the core objective of consolidating and integrating the multiple systems with varying service levels into a nation-wide, uniform, and standard business process for all retail systems <strong>[13, 14]</strong>. In 2012, the RBI, in its Vision 2012-2015 document, recognised the development of new e-payment systems and the increasing proportion of transactions taking place through these systems. The introduction of technology such as cloud computing, mobile telephony, service oriented architecture, and an increasing popularity of the virtual world would, according to the RBI, lead to significant changes in the way payments would be processed in the future. The document elucidated the possibility of the movement away from cash transactions to electronic transactions, leading to their goal of a ‘less-cash economy’ <strong>[15]</strong>. The RBI set the objective of innovating towards the convergence of products and services which should be available across all delivery channels to all, in a low-cost, safe, and efficient manner. The RBI held that its regulatory stance would be to promote innovation to achieve the goals of inclusion, accessibility, and affordability, while remaining technology neutral <strong>[16]</strong>.</p>
<h3 id="3-1">3.1. Regulatory Response to Online Payment Instruments</h3>
<p>The introduction of online wallets has provided consumers with a simpler and more efficient method to complete online transactions across a wide variety of merchants, and is growing at a considerable rate. A master circular was issued by the RBI in December 2014, outlining the guidelines that these wallets (which are considered a part of ‘pre-paid payment instruments’) must follow. In the circular, RBI defined three types of payment instruments or wallets.</p>
<ul><li><strong>Closed wallets</strong> can be issued by a company to a consumer for buying goods exclusively from that company, such as Flipkart or Amazon. They do not need any sort of permission or regulation from the RBI as they do not permit cash withdrawal or redemption, and hence are not classified as payment systems.</li>
<li><strong>Semi-closed wallets</strong> can be used to purchase goods and services at clearly identified merchant locations which have a specific contract with the issuer to accept the payment instrument. NBFCs can issue semi-closed wallets which need to be authorised by the RBI. The most commonly known online wallets (such as Paytm and Mobikwik) fall under this category.</li>
<li><strong>Open wallets</strong> can be used for the purchase of goods and services (including financial services) at any card accepting merchant terminal and can also be used for cash withdrawal at ATMs. However, these can only be issued by banks with approval from the RBI <strong>[17]</strong>.</li></ul>
<p>The RBI has classified three categories of pre-paid payment instruments that can be issued:</p>
<ul><li><strong>Up to Rs. 10,000</strong>, by accepting the minimum details of the customer, provided that the amount outstanding at any time does not exceed Rs. 10,000 and the total value of reloads per month does not exceed Rs. 10,000. These can only be issued in electronic form.</li>
<li><strong>From Rs. 10,001 to Rs. 50,000</strong>, by accepting any ‘officially valid document’ defined under rule 2(d) of the PML Rules, 2005, which are amended from time to time. These are to be non-reloadable in nature.</li>
<li><strong>Up to Rs. 1,00,000 with full KYC</strong>, and these can be reloadable in nature. The balance in the PPI should not exceed this amount at any time <strong>[18]</strong>.</li></ul>
<h3 id="3-2">3.2. Infrastructure for Online Payments between Private Parties</h3>
<p>Pursuant to the goal of enabling infrastructure for financial transactions between private parties, the NPCI implemented the Immediate Payment Service (IMPS) in 2010. The service offers an instantaneous, 24x7 interbank electronic fund transfer service, which can be utilised through mobile, internet, or an ATM. This service is superior to the previously used NEFT service, as NEFT transactions are settled in batches and hence are not in real time. Also, the NEFT service is only available during the working hours of the RTGS system, while the IMPS can be used at any time <strong>[19]</strong>.</p>
<p>Building on the IMPS service, the NPCI has developed the Unified Payments Interface (UPI), which will allow customers to transfer money and make payments almost as easily as they send messages. Multiple bank accounts can be linked to one application, and the need for sharing sensitive information such as bank account numbers, OTPs, or mobile numbers has been eliminated. This interface has been touted to have a large impact on the payment space, and help the economy move closer to a ‘less-cash’ economy <strong>[20]</strong>. On launch of the Interface in April of this year, 29 banks concurred to provide UPI services to their customers, and 21 of those banks have already joined the UPI as payment service providers.</p>
<p>On downloading the UPI application of a bank, a ‘virtual identifier’ is generated by the application which works as a payment identifier for sending and collecting money, and is protected by a single click two-factor authentication. The virtual ID is an email ID-like format: for example, if a customer named ABC had an account in HDFC bank, his virtual ID would be ABC@hdfc. However, the customer has the choice to use his/her mobile number or Aadhar number in place of the name. In order to protect the customer’s privacy, there is no account number mapper anywhere except the customer’s bank. When a customer selects UPI as the payment mode for an online transaction and the request reaches the merchant’s server, it is immediately passed onto the acquiring bank’s server where a UPI collection transaction is initiated on the customer’s virtual identifier. This request reaches the customer’s phone through the UPI server on the basis of the virtual identifier, and the customer authenticates it using the MPIN to complete the transaction <strong>[21]</strong>.</p>
<p>The UPI can be utilised for real-world transactions as well. Instead of handing over cash, the customer can simply tell the cashier his/her virtual ID. The cashier can then initiate a pay request through the UPI, and the customer can authenticate it on his/her phone, leading to the completion of the transaction <strong>[22]</strong>.</p>
<h3 id="3-3">3.3. Infrastructure for Online Payments involving the Government</h3>
<p>In the ‘Vision 2012-2015’ document, the RBI outlined an opportunity of developing a bill payment system for payments toward insurance premiums, utility payments, taxes, school fees, etc. To this end, a committee was set up to analyse the potential for an electronic GIRO (General Interbank Recurring Order) payment system in India. Under the recommendation of the Committee, a Giro Advisory Group (GAG) was set up with the objective of defining a framework which enables the creation of pan India touch points for bill payments, which submitted its report in March 2014. The GAG recommended a tiered system for bill systems in the country – a central unit which would set the standards, and various operating bodies which would work in accordance with the standards set by the central body. Draft guidelines for the Bharat Bill Payment System (BBPS) were published on the RBI website in August 2014 for public comments. Based on recommendations, the RBI published guidelines for the implementation of the BBPS in November 2014.</p>
<p>The BBPS will consist of two types of bodies, which will carry out distinct functions:</p>
<ul><li><strong>Bharat Bill Payment Central Unit (BBPCU):</strong> The single authorised body which will set the necessary technical, operational, and technical standards for the entire system and its participants, and will also undertake clearing and settlement activities. The NPCI will serve as the BBPCU.</li>
<li><strong>Bharat Bill Payment Operating Units (BBPOU):</strong> The authorised operational units, which will work in adherence to the standards set by the BBPCU.</li></ul>
<p>The objective of the BBPS is to implement an integrated bill payment system which offers interoperable and accessible bill payment systems to customers through a network of agents, enabling multiple payment modes, and providing instant confirmations of the payments. Hence, the RBI decided that all existing players (both banks and non-banks) catering to the requirement of bill payments as well as the aggregation of payment services will be a part of the BBPS <strong>[23]</strong>. Initially, the BBPS is expected to cover repetitive payments for everyday utility services such as electricity, water, gas, telephone, and DTH. The plan is to gradually expand the scope to include other types of repetitive payments like school/university fees, municipal taxes, etc.</p>
<p>On 20 October, 2015, the RBI issued a press release inviting applications from entities engaged in bill payments, for authorisation to operate as BBPOUs, stating the function as “facilitating collection of repetitive payments for everyday utility services, such as, electricity, water, gas, telephone and Direct-to-Home (DTH)” <strong>[24]</strong>.</p>
<p>As of May 2016, 33 companies were reportedly approved by the RBI to function as BBPOUs. PayU India, PayTm, Oxigen, SBI, ICICI bank, HDFC bank, Kotak Mahindra Bank, Bank of Baroda, Axis Bank and RBL Bank and TechProcess have confirmed their BBPOU license <strong>[25]</strong>. The system is expected to launch in July this year <strong>[26]</strong>.</p>
<h3 id="3-4">3.4. The Way Forward</h3>
<p>The RBI, in its ‘Vision 2018’ document, has outlined the future plans relating to pre-paid instruments. With an increase in the number of entities authorised to issue PPIs, there has been a growth in their usage for the purchase of goods and services as well as transfer of funds. The RBI plans to review the provisions relating to PPIs about KYC requirements, customer-facing aspects such as safety and security, risk mitigation measures, complaint redressal mechanisms, forfeiture of unutilised balances, and fraud monitoring. The RBI also plans to monitor developments in technology which impact the financial services industry, such as distributed ledgers, blockchain, etc. and develop regulatory frameworks as required <strong>[27]</strong>.</p>
<h2 id="4">4. Peer-to-Peer (P2P) Lending</h2>
<p>Another new development in the banking and finance sector is the introduction of peer to peer lending (hereinafter referred to as P2P lending). P2P lending is a form of crowdfunding which is essentially an online platform designed to bring together lenders and borrowers. A fee is charged from both and this fee goes to providing services such as collecting loan repayments and doing a preliminary assessment on the trustworthiness of the borrower. The RBI issued a consultation paper on this in April 2016 and invited responses from the various stakeholders.</p>
<p>The RBI identified that even though there is no credible data on the total lending through P2P platforms, close to 20 P2P lending platforms were launched in the last year, and there are presently around 30 such platforms in the country. After looking at the operational business model of these companies, the RBI found that the major regulatory concerns would relate to KYC and recovery practices.</p>
<p>After holding that regulation might lend credibility to P2P lending and therefore cause low-awareness lenders to make high-risk investments, and might stifle the growth of an innovative and efficient avenue for borrowers who either do not have access to or have been rejected by traditional loan mechanisms, the RBI argued for regulation in the following ways. Firstly, they held that in its nascent stage, the industry might disrupt the financial sector and it would be better to avoid such disruption. Secondly, the lower operational costs might lead to a softening of lending rates, and the RBI feels that it would benefit the P2P lending platforms if they were regulated. Thirdly, they identified the potential for unethical practices being adopted by any of the players in the market in the absence of regulation. Finally, the RBI held that borrows and lenders which are brought together by the P2P platform might be perpetrating an illegality under Section 45S of the RBI Act if they are unregulated.</p>
<p>Based on these considerations, the RBI recommended regulations on the P2P platforms in order to “facilitate the orderly growth of this sector so that its ability to provide an alternative avenue for credit for the right kind of borrowers is harnessed.” Some of the regulations proposed by the RBI were the limiting of P2P lending platforms to the role of an intermediary between lenders and borrowers, a requirement of a minimum capital of Rs. 2 crore and prudential limits on the maximum contribution by a lender (since they may include uninformed individuals), and the enforcement of adequate risk management systems to ensure smooth operations <strong>[28]</strong>.</p>
<h2 id="5">5. Conclusion</h2>
<p>The RBI, setting out a goal of financial inclusion and a less-cash economy, has kept up with developing technology in the financial sector, in order to ensure that consumers can glean the benefits of these advancements, and the goals it set out can be achieved.</p>
<p>Mobile banking is one of the largest opportunities for financial inclusion in countries, and the RBI, through its policy efforts, is trying to ensure that it reaches maximum penetration in the country. E-commerce is growing in the country, leading to a new financial space being created, which the RBI is privy to. The NPCI has been a boon in this sector, achieving a considerable amount since it was launched. P2P lending, a new and relatively untested development is gaining momentum in the country, and the RBI has begun to take concrete steps to make sure it does not get out of hand.</p>
<p>Technological advancements will continue to change all industries, including the financial services industry, and it is the task of the RBI to make sure that these advancements are utilised to the best of their abilities, so as to benefit the customers in the country as best as possible.</p>
<h2 id="6">6. Endnotes</h2>
<p><strong>[1]</strong> PwC, (2014). <em>Evolution of E-commerce in India</em>. [online] Available at: <a href="http://www.pwc.in/assets/pdfs/publications/2014/evolution-of-e-commerce-in-india.pdf">http://www.pwc.in/assets/pdfs/publications/2014/evolution-of-e-commerce-in-india.pdf</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[2]</strong> The Times of India. (2014). "Online shoppers in India to cross 100 million by 2016: Study."[online] Available at: <a href="http://timesofindia.indiatimes.com/tech/tech-news/Online-shoppers-in-India-to-cross-100-million-by-2016-Study/articleshow/45217773.cms">http://timesofindia.indiatimes.com/tech/tech-news/Online-shoppers-in-India-to-cross-100-million-by-2016-Study/articleshow/45217773.cms</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[3]</strong> Singh, A. (n.d.). "Mobile Wallets – Market, Opportunities and Challenges." [online] Altimetrik.com. Available at: <a href="http://www.altimetrik.com/wisdometrik/mobile-wallets-market-opportunities-and-challenges/">http://www.altimetrik.com/wisdometrik/mobile-wallets-market-opportunities-and-challenges/</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[4]</strong> Thorat, Usha. (2008). "Financial Inclusion and Information Technology". Keynote address by Deputy Governor of the Reserve Bank of India, at the "Vision 2020 – Indian Financial Services Sector" event hosted by NDTV, in Mumbai, September 12. Available at: <a href="http://www.bis.org/review/r080917d.pdf">http://www.bis.org/review/r080917d.pdf</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[5]</strong> CRISIL, (2013). "Finance Minister launches ‘CRISIL Inclusix’." [online] Available at: <a href="http://www.crisil.com/Ratings/Brochureware/News/CRISIL-Inclusix-launch-pr_250613.pdf">http://www.crisil.com/Ratings/Brochureware/News/CRISIL-Inclusix-launch-pr_250613.pdf</a> [Accessed 8 Jul. 2016].</p>
<p><strong>[6]</strong> Reserve Bank of India, (2014). <em>Mobile Banking - Report of the Technical Committee</em>. [online] Available at: <a href="https://rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=760">https://rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=760</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[7]</strong> Ibid.</p>
<p><strong>[8]</strong> Reserve Bank of India, (2014). <em>Master Circular - Mobile Banking Transactions in India - Operative Guidelines</em>. [online] Available at: <a href="https://rbidocs.rbi.org.in/rdocs/notification/PDFs/65MNF052B434ED3C4CE391590891B8F3BE66.PDF">https://rbidocs.rbi.org.in/rdocs/notification/PDFs/65MNF052B434ED3C4CE391590891B8F3BE66.PDF</a> [Accessed 8 Jul. 2016].</p>
<p><strong>[9]</strong> National Payments Corporation of India. (n.d.). "Overview of *99# Service." [online] Available at: <a href="http://www.npci.org.in/Product-Overview-NUUP.aspx">http://www.npci.org.in/Product-Overview-NUUP.aspx</a> [Accessed 8 Jul. 2016].</p>
<p><strong>[10]</strong> Supra note <strong>[6]</strong>.</p>
<p><strong>[11]</strong> Reserve Bank of India, (2012). <em>Payment Systems in India: Vision 2012-15</em>. [online] Available at: <a href="https://www.rbi.org.in/Scripts/PublicationVisionDocuments.aspx?Id=678">https://www.rbi.org.in/Scripts/PublicationVisionDocuments.aspx?Id=678</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[12]</strong> Reserve Bank of India, (2015). <em>Payment and Settlement Systems in India: Vision 2018</em>. [online] Available at: <a href="https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/VISION20181A8972F5582F4B2B8B46C5B669CE396A.PDF">https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/VISION20181A8972F5582F4B2B8B46C5B669CE396A.PDF</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[13]</strong> National Payments Corporation of India. (n.d.). "About Us - National Payments Corporation of India." [online] Available at: <a href="http://www.npci.org.in/aboutus.aspx">http://www.npci.org.in/aboutus.aspx</a>. [Accessed 6 Jul. 2016].</p>
<p><strong>[14]</strong> See also: Bihari, D. and Chandra, S. (2015). "The Electronic Banking Revolution in India." Journal of Internet Banking and Commerce, [online] (20), p.110. Available at: <a href="http://www.icommercecentral.com/open-access/the-electronic-banking-revolution-in-india.php?aid=59261#corr">http://www.icommercecentral.com/open-access/the-electronic-banking-revolution-in-india.php?aid=59261#corr</a> [Accessed 8 Jul. 2016].</p>
<p><strong>[15]</strong> The term ‘less-cash economy’ was possibly first used in the context of national regulatory framework by the Bank Indonesia in 2006, and was implemented through the ‘Ayo ke Bank’ program [<a href="http://www.adb.org/sites/default/files/publication/156004/adbi-wp149.pdf">http://www.adb.org/sites/default/files/publication/156004/adbi-wp149.pdf</a>]. Its usage by the European Payments Council in 2009 [<a href="http://www.sepaitalia.eu/uploads/making_sepa_a_reality_v.3.pdf">http://www.sepaitalia.eu/uploads/making_sepa_a_reality_v.3.pdf</a>], and the Aite Group in context of the USA [<a href="http://aitegroup.com/report/less-cash-society-forecasting-cash-usage-united-states">http://aitegroup.com/report/less-cash-society-forecasting-cash-usage-united-states</a>] gave it international attention. RBI first used the term in its 'Payment Systems in India: Vision 2012-15' document.</p>
<p><strong>[16]</strong> Supra note <strong>[8]</strong>.</p>
<p><strong>[17]</strong> Reserve Bank of India, (2014). <em>Master Circular – Policy Guidelines on Issuance and Operation of Pre-paid Payment Instruments in India</em>. [online] Available at: <a href="https://rbidocs.rbi.org.in/rdocs/notification/PDFs/116MCPPI20062014FL.pdf">https://rbidocs.rbi.org.in/rdocs/notification/PDFs/116MCPPI20062014FL.pdf</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[18]</strong> Supra note <strong>[9]</strong>.</p>
<p><strong>[19]</strong> National Payments Corporation of India. (n.d.). "IMPS - Background." [online] Available at: <a href="http://www.npci.org.in/aboutimps.aspx">http://www.npci.org.in/aboutimps.aspx</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[20]</strong> Nair, V. (2016). "NPCI’s unified payment interface to start in April." [online] Available at: <a href="http://www.livemint.com/Industry/ZA9pPkeGdY9wrChh1BDQhN/NPCIs-unified-payment-interface-to-start-in-April.html">http://www.livemint.com/Industry/ZA9pPkeGdY9wrChh1BDQhN/NPCIs-unified-payment-interface-to-start-in-April.html</a> [Accessed 6 Jul. 2016].</p>
<p><strong>[21]</strong> Mathew, G. (2016). "Unified Payments Interface system: Faster, easier and smoother."[online] The Indian Express. Available at: <a href="http://indianexpress.com/article/technology/tech-news-technology/unified-payments-interface-upi-payment-system-faster-easier-and-smoother-2754125/">http://indianexpress.com/article/technology/tech-news-technology/unified-payments-interface-upi-payment-system-faster-easier-and-smoother-2754125/</a> [Accessed 7 Jul. 2016].</p>
<p><strong>[22]</strong> The Hindu. (2016). "RBI's Unified Payments Interface makes payments easier than ever." [online] Available at: <a href="http://www.thehindu.com/business/Economy/unified-payments-interface/article8470746.ece">http://www.thehindu.com/business/Economy/unified-payments-interface/article8470746.ece</a> [Accessed 7 Jul. 2016].</p>
<p><strong>[23]</strong> Lakshminarasimhan, P. (2016). "Bharat Bill Payment System likely to be launched in July." [online] The Financial Express. Available at: <a href="http://www.financialexpress.com/article/industry/companies/bharat-bill-payment-system-likely-to-be-launched-in-july/257040/">http://www.financialexpress.com/article/industry/companies/bharat-bill-payment-system-likely-to-be-launched-in-july/257040/</a> [Accessed 7 Jul. 2016].</p>
<p><strong>[24]</strong> Reserve Bank of India, (2015). "RBI invites Applications for authorising Bharat Bill Payment System Operating Units (BBPOUs)." [online] Available at: <a href="https://www.rbi.org.in/Scripts/FS_PressRelease.aspx?prid=35274&fn=9">https://www.rbi.org.in/Scripts/FS_PressRelease.aspx?prid=35274&fn=9</a> [Accessed 7 Jul. 2016].</p>
<p><strong>[25]</strong> Srivastava, V. (2016). "RBI Grants License to 33 Companies For Bharat Bill Payment System." [online] Thetechportal.com. Available at: <a href="http://thetechportal.com/2016/05/17/rbi-grants-license-33-companies-operate-bharat-bill-payment-system/">http://thetechportal.com/2016/05/17/rbi-grants-license-33-companies-operate-bharat-bill-payment-system/</a> [Accessed 7 Jul. 2016].</p>
<p><strong>[26]</strong> Supra note <strong>[23]</strong>.</p>
<p><strong>[27]</strong> Supra note <strong>[10]</strong>.</p>
<p><strong>[28]</strong> Reserve Bank of India, (2016). Consultation Paper on Peer to Peer Lending. [online] Available at: <a href="https://rbidocs.rbi.org.in/rdocs/Content/PDFs/CPERR280420162D5F13C3A2204F4FB6A2BEA7363D0031.PDF">https://rbidocs.rbi.org.in/rdocs/Content/PDFs/CPERR280420162D5F13C3A2204F4FB6A2BEA7363D0031.PDF</a> [Accessed 6 Jul. 2016].</p>
<h2 id="7">7. Author Profile</h2>
<p>Shivalik Chandan is a student at National Law University, Delhi, who has completed two years of the B.A. LLB course. He enjoys watching movies, playing the drums, and listening to (almost all genres of) music in his spare time.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/rbi-regulation-digital-financial-services-in-india-2012-2016'>http://editors.cis-india.org/raw/rbi-regulation-digital-financial-services-in-india-2012-2016</a>
</p>
No publisherShivalik ChandanUnified Payments InterfaceOnline PaymentsReserve Bank of IndiaMobile BankingResearchNetwork EconomiesP2P LendingResearchers at Work2016-07-11T06:27:23ZBlog EntryPolicy Shaping in the Indian IT Industry: Comparative Analysis of Recommendations by NASSCOM and iSPIRT, 2013-2016
http://editors.cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-and-ispirt-2013-2016
<b>This is the second of a series of three blog posts, authored by Pavishka Mittal, tracking the engagements by NASSCOM and iSPIRT in suggesting and shaping the IT industry policies in India during 2006-2016. This post conducts a detailed comparative analysis of NASSCOM’s and iSPIRT’s specific policy recommendations from 2013-2016. To facilitate comparison, the blog post is written thematically on the lines of major issues highlighted by market players in the IT industry.</b>
<p> </p>
<p><strong>1.</strong> <a href="#1">Introduction</a></p>
<p><strong>2.</strong> <a href="#2">Taxation Issues in the Software Industry</a></p>
<p><strong>2.1.</strong> <a href="#2-1">Issue of Double Taxation in the Software Industry</a></p>
<p><strong>2.2.</strong> <a href="#2-2">NASSCOM's Tax Concerns</a></p>
<p><strong>2.3.</strong> <a href="#2-3">iSPIRT's Tax Concerns</a></p>
<p><strong>3.</strong> <a href="#3">Concerns with Respect to the Regulatory Mechanism for E-Commerce (B2B Commerce)</a></p>
<p><strong>4.</strong> <a href="#4">Other Policy Recommendations</a></p>
<p><strong>5.</strong> <a href="#5">Endnotes</a></p>
<p><strong>6.</strong> <a href="#6">Author Profile</a></p>
<hr />
<h2 id="1">1. Introduction</h2>
<p><a href="http://www.ispirt.in/">Indian Software Product Industry Roundtable, or iSPIRT</a>, is a think tank formed in early 2013 by about 30 product companies and individuals to protect the interests of the Indian software product industry. The organization believes that the market for software products is bound to grow in the future, both globally and locally, whose benefits should be derived of through cost efficiencies and resource optimization through the mechanism of free markets. This blog post, second in a series on ‘policy shaping in the Indian IT industry’, conducts a detailed comparative analysis of NASSCOM’s and iSPIRT’s specific policy recommendations from 2013-2016. The author has examined the more contentious issues due to difficulties in stating all the policy recommendations of these organizations over a period of four years in a single post. The law is explained, wherever necessary. Further, in the absence of reliable data on a particular policy position of either organization, no assumptions regarding the same have been made. To facilitate comparison, the blog post is written thematically on the lines of major issues highlighted by market players in the IT industry. Transfer pricing issues will be examined in the next blog post.</p>
<h2 id="2">2. Taxation Issues in the Software Industry</h2>
<h3 id="2-1">2.1. Issue of Double Taxation in the Software Industry</h3>
<p>There has been a general practice of the payment of both VAT and Service Tax on sale of software, which involve the provision of maintenance services etc along with the product. The applicable law on taxation has been explained below for a better understanding of the policy positions of the deemed organizations. Section 65B(44) of the Finance Act 2012, which defines ‘services’ includes ‘declared services’ under section 66E <strong>[1]</strong> and excludes ‘deemed sales’ under Article 366(29-A)(b) <strong>[2]</strong> of the Constitution involving a transfer of title in goods. A combined reading of all the provisions reveal that every transfer of goods on lease, license, hire under section 66E(f) does not result in the transfer of right to use goods under Article 366. It has been held that the transfer of right to use the goods under Article 366 involves a transfer of possession and effective control over the goods <strong>[3]</strong>. Thus, a license to use software which does not transfer ‘the right to use software’ would not qualify to be a sale/ deemed sale under law and would be governed by section 66E(f). Thus, from a general reading of the law, it can be concluded that the terms of the agreement involving transfer of pre-packaged or canned software under a license to use the software would have to be examined to decide the applicability of article 366 of the Constitution, that is, to decide whether the license to use packaged software involves the ‘transfer of right to use’ the deemed software.</p>
<p>The Madras HC in Infotech Software Dealer Association v. Union of India <strong>[4]</strong> held that licensing agreements involving the transfer of rights to use software to a licensee who is not permitted to sell, license or distribute the software by the licensor who retains copyright and hence ownership rights in the goods will not be sale or ‘deemed sale’ transactions as per article 366(29A)(d) of the Constitution as no transfer of software is made out from the transaction. The test of effective control as to the transfer of right to use the goods has been followed by the Madras HC. In the present case, it was held that software owner while retaining copyright protection entered into master end use licensing agreements which enabled the petitioner association to market the software to individual end users, thus, Article 366(29A)(d) was not attracted in the absence of transfer of software. Restraints/ conditions on the free enjoyment of the software in the licensing agreement indicate service tax liability. Any imposition of service tax on ‘goods’ would not be deemed to be unconstitutional without examination of the transaction. The source of confusion remains in the fact that notwithstanding software are goods, the transaction involving its transfer would have to be examined for taxation purposes. Manner of delivery is also of consonance in the determination of character of the transaction. It has been held that delivery of online content would only be a service in contrast to transfer of software through media, or embodied in the computer itself.</p>
<p>To summarise, jurisprudence and legislations have recognized packaged or canned software as tradable goods for the purposes of VAT/Sales Tax. “IT Software’ has also been recognized as goods under the Indian Central Excise Tariff Act. Further, Packaged or canned software is recognized as a ‘packaged commodity’ for the purposes of the Legal Metrology Act, 2009 on the basis of which the manufacture of such is generally subject to Central Excise valuation on an MRP/Retail Sales Price basis in accordance with s 4A of the Central Excise Act, 1944. This is in contradiction to the premise that software supplied digitally is a service. The argument remains that basic operational character, marketability and commercial value of software remains unchanged, whether it is supplied over the counter in a shop or supplied digitally.</p>
<h3 id="2-3">2.2. NASSCOM's Tax Concerns</h3>
<p>NASSCOM in its pre budget recommendations for the year 2013-2014 suggested that deviations from the existing provisions should be allowed for matters that warrant the adoption of an alternative approach for tax reform. Consultative groups such as the Tax Administration Reform Commission (TARC) should continue to operate. The IT Industry possesses certain specific tax concerns due to its unique business models which aim to overcome geographical distances. Software product companies are practically SME’s which struggle to maintain cash flow due to imposition of additional tax. All firms, including SMEs are forced to hire a specific employee for tax compliance alone. Further, they prefer to pay the deemed penalty rather than opt for litigation due to added costs, which is not sustainable in the long run.</p>
<p>The CBEC’s Guidance Notes dated 20th June, 2012 clarified many issues arising out of the new provisions in the Service Tax law introduced on 1st July 2012. As laid down by the SC in TCS v. State of AP <strong>[5]</strong>, ‘sale’ of prepackaged/ canned/shrink wrapped software would not be a provision of service. NASSCOM’s earlier request for a clarification as to the taxation of onsite services was fulfilled with the guidance notes treating development of onsite software under the category of development of Information Technology Software as a declared service under section 66(e)(d) of the Finance Act.</p>
<p>NASSCOM suggested clarity in the deemed provisions which allow for dual taxation and ambiguity in the characterization of the transaction. VAT should be levied on the product alone and the service tax should only be payable on the additional services rendered, if any. New business models involve the provision of services along with the product which further increase the possibility of dual taxation. Provision of standard software, including license to use such software, whether electronically or on a media, should not be subject to dual levies, and in case VAT is applied, it would not be liable to Service tax. For software transactions which involve both a product and associated services, the services component should be subject to service tax alone, and the product value should be subject to VAT only. Given the stand taken by the Central Government on the treatment of software supplied electronically, it may be clarified that service tax is applicable on sale of software which is downloaded electronically and Central Sales Tax is not applicable on the same if the transaction is interstate transaction.
Other recommendations included:</p>
<ol><li>The Finance Act 2012 introduced certain retrospective amendments which are unfair to the industry involving TDS and associated penalties arising out of royalty implications. The introduction of payment of royalty on Internet downloads of software, services of maintenance, upgrade and telephone services has to be aligned with International standards.</li>
<li>The 10% TDS payable by SMEs and startups in the IT Industry is high due to the low profitability of such ventures and the cash flow crunch faced subsequent to such payment due to the need for investment prior to the start of operations in the product development industry. Often, the actual tax liability is lower than the TDS liability, which results in income tax refunds later while reducing liquidity in operations before. NASSCOM suggested reduction of TDS liability and adjusting pending refunds to future TDS liability. Further, banks should offer loans to software companies by treating the pending TDS refunds as book debts taken by the state. The ideal approach would be the complete exemption of the software industry from TDS u/s s 194J of the Income Tax Act.</li>
<li>Section 194J of the Income Tax Act prescribes that TDS @10% has to be deposited on payment made for the acquisition of software for amount greater than Rs 30,000 in a financial year. NASSCOM recommended that the prescribed limit for the computation of the TDS liability is not indicative of the pricing trends in the current business environment and thus the minimum threshold limits be increased to 3 lakh in a financial year. Further, the relevant criteria of setting these limits should be released in the public domain which would enable the industry to share data for the timely updation of the prescribed limits.</li>
<li>Clause 4 of the second explanation to Sec 9(1)(vi) of the Income Tax Act, 1961 states that Royalty would include consideration for the rendering of services which include the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill. Royalty indicates consideration for ‘user rights’ rather than ownership rights. NASSCOM in 2014 stated that Software Ancillary Services such as AMC’s, Upgrade Fees, Subscriptions, etc. which do not involve transfer of rights, or grant of license but involve only payments of consideration for services is deemed to be “Royalty” for the purposes of the Income Tax Act and demanded that a clarification be issued under this regard.</li>
<li>Abatement of 15% is allowed from Retail Sale Price (RSP) to arrive at the value of Packaged Software or Canned Software, for payment of excise duty <strong>[6]</strong>. This notified abatement of 15% does not take into account the incidence of taxes on the product <strong>[7]</strong>. The taxes on the product amount to ~22% of the RSP and the notified abatement of 15% is not adequate. NASSCOM recommended that the abatement of 15% allowed under the said notification be increased to 30%. High Packaged/Canned software products are sold through a multilayer dealer/distribution chain through which they are delivered to the ultimate consumer. High trade discounts are incurred due to the presence of multiple intermediaries in the supply chain.</li>
<li>The IT Act in recognition of the compulsions and limitations of the SME and start-ups have notified several thresholds below which provisions are not applicable. Unfortunately, these are not revised and lose their relevance in the evolving business environment. NASSCOM requested for the institutionalization of a periodic review mechanism, which would ensure that the thresholds are revisited at predefined frequencies and altered accordingly.</li>
<li>Review of the foreign tax credit provisions are necessary in light of emerging Indian MNCs. The existing tax treaties need to be reevaluated to delete differential tax treatment discouraging domestic investment and contributing to the increased round tripping in the economy.</li>
<li>A separate regulatory approach with respect to Angel Investments needs to be formulated as they serve as the key source of funding for IT firms in the absence of access to public financial institutions.</li>
<li>NASSCOM has also highlighted multiple procedural issues in its prebudget recommendations for the year 2015-16 <strong>[8]</strong>.</li>
<li>NASSCOM expressed its disappointment over the manner of implementation of the Fringe Benefit Tax bringing a lot of legitimate business expenditure on employee welfare in the tax net, resulting in non-investment in the long term benefit of workers by businesses <strong>[9]</strong>.</li></ol>
<h3 id="2-3">2.3. iSPIRT's Tax Concerns</h3>
<p>iSPIRT stated that the Indian government by adopting a piecemeal approach to the taxation system in the country has contributed to its increased fragmentation. The present tax structure cannot deal with the evolution of the digital economy in India which is increasingly using innovation in its business models.</p>
<p>All prepackaged software are considered to be goods due to an associated tariff code (ITS/HS Code). All other categories of software, are to be treated as services by default through a logic of exclusion, (other than customized software) by virtue of not being included in the tariff code list. There is no recognition of other models of SaaS, PaaS etc. The central government has not given adequate remedies to the issue of the charging of VAT by the State governments. Even when software is defined as a service, its transfer is often held to be deemed sale as per Article 366(29A) of the constitution. ‘SaaS’ software is taxed only under the service tax component when procured through a service partner, as against service tax plus VAT when procured directly. Differential taxation treatment of the same product/service creates immense frictions for ease of doing business for digital goods and services.</p>
<p>iSPIRT identifies the root cause for such confusion to be the non-recognition of intangibles to be at par with tangibles. Technically, by treating them to be ‘goods’ and subjecting them to the Sale of Goods Act, they cannot be treated as services by definition. However, the result of the piecemeal approach is the non recognition of software products as products (effectively), due to their intangible nature. This can be seen by the imposition of royalty from income derived from the sale of software under the Finance Act 2012, which indicates that the transaction of sale of software is considered to be one of transfer of copyright rather than a sale of product.</p>
<p>iSPIRT gave arguments as to the inefficiency of the proposed GST bill to deal with the taxation issues in the software industry, the bill not taking cognizance of the root cause of absent definition of a digital good which treats intangibles at par with tangibles. Practical challenges will arise due to differences in the value chain of use and consumption of ‘goods’ and ‘services’. The tax structuring is not done exclusively for the either software or the digital business. The tax authorities are prone to provide for differential rates under pressure of lobbying in the presence of new sectors in the industry which leads to amendments of rules and increased confusion. With the non-deletion of Clause (29A) of Article 366 in the proposed constitutional amendment, the concept of sales and deemed sales may be misused or may not give way to the concept of supply as envisaged in the GST Bill. Further, the CBEC is expected to use the existing frameworks even if the GST bill is proposed to be passed to the detriment of the software industry.</p>
<p>iSPIRT’s solution involved the transfer of focus to ‘digital’ products and services. It formulated the COG-TRIP test which can be used to define software products as distinct from software services <strong>[10]</strong>. Software products would be pervasive in the future and would be an essential component of the ‘digital economy’. Software is not necessarily a standalone computer program and may work with either data, audio or video products. Hence software products, sounds, images, data, documents or combinations of them may exist as a ‘digital product/goods’. This ‘digital economy’, would be overwhelmed with trade of not only ‘digital goods’ and ‘digital services’, but also the trade of ‘right to use’ or ‘transfer of right to use’ just as there is ‘deemed sales’ or ‘transfer of right to use’ of tangible goods. Due to inevitable inseparability of software and digital products, the taxation issues of Software product industry should be dealt in a unified ‘digital economy’ domain to prevent the formulation of a temporary, patchwork solution. Focusing on ‘digital’ will provide strategic solution to the problem at policy formulation level.</p>
<p>iSPIRT thus proposed a ‘digital goods’ and ‘digital services’ definition in the tax system <strong>[11]</strong>. These “digital goods,” or intangible goods have to be awarded the status of “goods” as defined in Article 366(12) of the Constitution. The digital goods, though intangible in nature, exhibit all properties of tangible goods generally acceptable in legal parlance viz. durability (perpetual or time bound), countability (number of pieces, licenses or users etc.), identifiability (standardised), movability and storage, ownership (IP or right to use), reproducibility, and marketability/tradability using an MRP as per the proposed COG TRIP test formulated by ISPIRT. This would be further related to the Sale of Goods Act 1930 and related article 366(29A) aspects. This would also be beneficial for the SaaS Industry which can now be defined under the product (digital goods) category as an industry. Once SaaS is recognized as Product (intangible goods) the next issue to be solved is asking for one single clear tax on a transaction be it “goods” or “services” based on the transaction. Other recommendations included the inapplicability of ‘royalty income’ under the garb of attached ‘copyrights’ in the Income Tax act to digital goods. This binding of ‘royalty income’ on software and ‘intangible/digital’ goods is a bottleneck to trade in a digital economy. Also, the tax system has to be digital in all aspects, i.e., ability to track transactions, levy of a clear single tax and digital collection—including taxes on international online transactions. it also recommended the commencement of taxation of online B2C sales by foreign companies.</p>
<p>iSPIRT expressed its disappointment in its post budget response over no attention being given to easing taxation norms of software companies where there is significant friction, the confusion on “goods” verses “service” tax on online downloads, TDS on sale of Software products and competition from foreign selling B2C products without any tax in India. Tax relaxation should be provided to startups on the basis of profitability rather than exemption in the initial 3 years of operations, when startups may not possess tax liability anyway. Loss making startups should not have to part with liquidity in the form of TDS payments which get refunded later. Relaxation in capital gains tax should not be just confined to investment in government schemes.</p>
<p>iSPIRT in its article dated November 24, 2014 <strong>[12]</strong> briefly explained the problem of duality of taxes on services. The constitutional framework regarding Indirect Taxes specifies that the manufacturing and services should be taxed by the centre and anything that is traded should be taxed by the states. Services are not tradable in nature in contrast to ‘rights to services’ which are tradable commodities. An example would be a vendor selling a recharge coupon. The actual service would be provided by the Telco, he is just selling the right to service. This would be tradable until the service is consumed. This transaction qualifies for both Service tax, imposed by the centre and the tax on tradable commodities imposed by states. ISPIRT had not yet proposed the digital goods and services definition to resolve these issues and its budget recommendations were similar to those of NASSCOM. It proposed that clarity is needed on the issue of tradability of service as “goods” and “service delivery” as “service”. Only after such clarity is achieved, the GST would be able to resolve the issues of duality of taxes.</p>
<p>Its article classified the taxation issues into direct and indirect.</p>
<p><strong>Direct Tax Issues:</strong></p>
<ol><li>According to the Finance Act 2012, any income arising out of the sale of software amounts to royalty, irrespective of the medium of sale making the said transaction liable for TDS deduction under s 194J. All software sold carries a license for end use without transfer of copyright in the software. The software product and the associated license is sold as a tradable commodity and not as a copyright. International practice treats the sale of software depending on how the rights/copyrights are transferred. This rights based approach shall distinguish between the nature of rights transferred in exchange for consideration.</li>
<li>A transfer of “copyright” would indicate that the payer is permitted to commercially exploit the copyright that would otherwise be the sole privilege of the copyright holder and would constitute infringement of copyright without such transfer. The payer, now the copyright holder, is permitted to reproduce, copy, modify, adapt or prepare derivative works based on the copyrighted software for sale or profit. This transaction is subject to payment of royalty in contrast to a transaction which only involves the transfer of a “copyrighted article”. The payer in this case is only permitted to operate the software product for personal consumption or for use within his business operations. Such payment should be treated as business income and not as royalty.</li>
<li>iSPIRT proposed the repeal of the said amendment and introduction of provisions which differentiate between ‘copyright’ and ‘copyrighted articles’ for the purposes of determination of royalty impositions. Further, it proposed specific exclusion through the addition of an explanation to the deemed provision for income arising from the sale of ‘copyrighted articles’ including shrink wrap software, software licenses, downloadable software, software bundled with hardware. It also recommended that the term copyright be defined in the IT Act for royalty purposes to remove dependency on sections 14 and 52 of the Indian Copyright Act, with the exception of the applicability of the Indian Copyright Act in case of copyright infringement. If software product companies are being subject to a TDS there should be Tax credits available on service tax. It also stressed on the need for a mechanism to speed up the process of TDS refunds.<br /></li></ol>
<p><strong>Indirect Tax Issues:</strong></p>
<ol><li>iSPIRT demanded the amendment of the Mega Notification No. 25/2012 dated June 6, 2012 to provide that electronic delivery of packaged software through telecommunication networks are excluded from the ambit of service tax. Alternatively, an explanation could be attached to s 66E of the Finance Act to provide that the development of software under subclause (d) is “only in relation to customized software and any packaged software delivered online or downloaded on the Internet is specifically excluded from the provisions of section 66E and should not be chargeable to service tax.” Additionally, the “Taxation of Services: an Educational Guide” dated June 20, 2012 issued by the Central Board of Excise and Customs needs to be amended along with the addition of an explanation to chapter 85 of schedule I of the Central Excise Tariff Act stating that packaged software delivered online or downloaded from the internet is also included in the meaning of ‘IT Software’ for the purposes of heading 8523.</li>
<li>iSPIRT made the same recommendation as NASSCOM as to the inadequate rate of abatement from RSP to arrive at the value of packaged/canned software, falling under the Central Excise Tariff Heading, 85239020 of the Central Excise Tariff Act, 1985, for payment of excise duty under s 4A of the Central Excise Act, 1944. It recommended that serial No. 93A in Notification No. 49/2008 dated December 24, 2008 be amended to increase the abatement from the existing 15% to 35%.</li></ol>
<h2 id="3">3. Concerns with Respect to the Regulatory Mechanism for E-Commerce (B2B Commerce)</h2>
<p>The existing FDI norms in India do not permit FDI in multi-brand retail companies. The new rules indicate that 100% FDI is permitted in online retail of goods and services under the ‘market place model’ through the automatic route, rendering legality to the many present e-commerce businesses in India. Since the business entity in focus is only an intermediary which provides the sellers of the goods with a platform for the sale of their products, online retail in the form of the inventory model remains illegal, excepting single brand retail <strong>[13]</strong>. The present FDI policy aims to convenience sellers who can take advantage of the services of e-commerce giants including, but not confined to, warehousing, logistics, order fulfillment, call centre and payment collection <strong>[14]</strong>.</p>
<p>NASSCOM has suggested keeping the FDI norms for B2C Commerce at par with B2B Commerce. Further, the stipulations in the circular issued in 2015 by the DIPP which provided for the same conditions on SBRT applicable to brick and mortar stores be applicable to online stores which provided for 30% sourcing from local sources for retailers which had more than 51% FDI was opposed by NASSCOM, which reiterated that unviable regulations only restrict trade and development. It stated that e-commerce can be aligned to the objectives of national development by providing impetus to manufacturing sector, order consolidation and distribution, facilitating and supporting SMEs, improving outreach and access to buyers/sellers, bringing traceability and transparency in transactions, empowering consumers with information and data and finally creating new job opportunities. E-commerce has only enabled the creation of unique businesses which has created demand resulting in greater private consumption and market demand in inaccessible areas in consonance with the ruling governments ‘Make in India’ scheme. Further, a transparent audit trail and the resulting efficient tax collection can be better ensured through the medium of online banking and credit cards.</p>
<p>As companies have no control on consumer buying behaviour and will have no say in the choices made by them, there should be no mandate to conclude sale of products sourced from India. Instead, companies will continue to offer local products on their website, but linking it to buying behaviour would be unfair and difficult to comply with. Hence, the policy should stipulate that companies should offer 30% locally sourced products, without any criteria related to sourcing from SMEs.</p>
<p>The government should recognize and support the growth of e-commerce companies who are dedicated to Indian ethnic products, helping MSMEs and artisans to expand their outreach. Presently, the FDI in retail policy gives power to the states to decide. In the context of e-commerce, any geographical limitations will go against the basic tenet of outreach and market access that e-commerce promises. Further any restrictions imposed by states will serve to deprive it from the inherently efficient processes and infrastructure development opportunities, contributing to employment and revenue generation opportunities. Market development is an important priority for the Internet economy and is akin to infrastructure development in the physical world. NASSCOM has been actively engaging with the government to evolve a policy concerning Foreign Direct Investment (FDI) in e-Commerce that encourages smaller technology players to foray into the market.</p>
<p>It recommended:</p>
<ol><li>Allowing 100 per cent FDI in B2C e-Commerce, as in the case of B2B e-Commerce.</li>
<li>Removing the ‘minimum investment threshold’ and conditions of investment in the back-end since e-Commerce requires investment in technology and supply chain for promised efficiencies. Since there is no investment required in creating physical store fronts, there is no need for such a stipulation.</li>
<li>Allowing existing e-Commerce firms to raise capital, in addition to permitting investment in greenfield projects.</li>
<li>Removing geographical limitations that go against the basic tenet of outreach and market access that e-Commerce promises.<br /></li></ol>
<p>NASSCOM also suggested the following restrictions to exclude organisations that are:</p>
<ol><li>Receiving orders on the telephone, facsimile or conventional email.</li>
<li>Are not complying with the rules on FDI in retail in toto.</li>
<li>Pure play e-Commerce ventures that are foraying into physical retail, but not complying by the rules on FDI in retail.<br /></li></ol>
<h2 id="4">4. Other Policy Recommendations</h2>
<ol>
<li>iSPIRT stated that the complex procedures for share allotment etc should be revised to enable the software companies to concentrate on core business functions.</li>
<li>In May 2016, ISPIRT cautioned the use of patents in India, citing the overuse of patents in USA with corporations whose sole purpose of existence is to register patents and demand royalty payments from unsuspecting users. If India allows software patents under the Patent Cooperation Treaty, it would have to give priority to the existing patents filed in other countries and would enable MNCs to exclude Indian companies from using their ‘inventions’. To enable the Indian software industry to innovate without worrying about patent lawsuits, software patents should not be permitted. iSPIRT lauded the revised guidelines issued by the Indian Patents Office in 2016 which prevent the digital colonization of India by MNCs. order issued by the Controller General of Patents, Designs and Trademarks dated February 19, 2016 finalising the guidelines for Examination of Computer Related Inventions lays down clear tests for recognizing patents.</li>
<li>India has to build a favourable business environment to retain the software products business and its intellectual property, which is highly mobile, within its domestic territory. Among the solutions are liberalized ownership rules with exemptions from regulatory filings and specific regimes (FDI/VCI/FII, etc.), specific exemptions from capital gains and dividend taxes for investors and tax exemption on foreign income of Indian software product companies. The idea of a fully liberalized virtual special economic zone for ownership and operation of software product companies, with India signing an iron-clad double-taxation avoidance agreement should not be rejected.</li>
<li>As was the case with Flipkart, larger buyers and clients withhold payment intentionally until suppliers are forced to grant unreasonable discounts. Large buyers are aware that suppliers would not act upon their rights to preserve business relationships and to avoid unnecessary time consuming and expensive litigation. According to iSPIRT, 98% of Indian SMBs extended goods and services on credit to their clients in 2015 leading to a situation wherein the most exclusive businesses can demand payments upfront. Giving the example of IMAI, which has proposed the establishment of a payment recovery mechanism for the digital communication service industry which would enforce meaningful out of court payment protections, iSPIRT has asked for solutions to the problem at hand in its article dated May 18 2016.</li>
<li>iSPIRT formulated a Stay-in-India checklist as a part of its Startups Bridge India campaign which identifies 34 key issues to be resolved to prevent startups from relocating abroad <strong>[15]</strong>. The Checklist includes requests for favourable IP tax regime, harmony in taxation of listed and unlisted securities, relaxed external commercial borrowing norms, faster incorporation and liquidation processes, and permitting convertible notes, indemnity escrows, and deferred consideration in foreign investment transactions.</li>
<li>NASSCOM applauded the National Intellectual Property Rights policy, approved by the cabinet on 13 May 2016 <strong>[16]</strong>for comprehensively covering all aspects of the domain including IPR awareness, generation, legislative framework, administration, commercialization, enforcement and adjudication, human capital and incorporating the suggestions of the associations on IPR policy made last year. According to the policy, the Department of Industrial Policy and Promotion (DIPP) would become the nodal point department for all IPR related developments in India, while respective ministries or departments will be responsible for actual implementation.
NASSCOM commented that this single umbrella approach will help leverage linkages between various IP offices. The proposal for a simple loan guarantee scheme to encourage start-ups based on IPRs as mortgage-able assets; financial support and securitization of IP rights for commercialization by enabling valuation of IP rights as intangible assets, the promotion of free and open source software and the support for IPR generation for information and communications technology , including those relating to cyber security for India are welcome. NASSCOM stated that it would partner with DIPP in the modernization efforts support an innovation led Industry in India.</li>
<li>NASSCOM in 2016 urged the SC to reconsider the ban on diesel taxis in the capital highlighting unresolved issues of the safety of the women workforce working in the IT industry and the lack of an adequate CNG infrastructure. Stating that the ban may cost the industry $1 billion, it suggested a deferred timeline for shifting diesel cabs to CNG or a phased implementation.<br /></li></ol>
<h2 id="5">5. Endnotes</h2>
<p><strong>[1]</strong> The following activities are ‘declared services’ under section 66E of the Finance Act:</p>
<ul><li>Section 66E (c) of the Finance Act, 1994 - Temporary transfer or permitting the use or enjoyment of an intellectual property right.</li><li>Section 66E(d) - Development, design, programming, customization, adaption, upgradation, enhancement, implementation of information technology software. (IT software has been defined in section 65B of the Act as “any representation of instructions, data, sound or image, including source code and object code, recorded in machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment.)</li><li>Section 66E(f)- Transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods.<br /></li></ul>
<p><strong>[2]</strong> Article 366(29-A) (b) of the Constitution states that a tax on the sale or purchase of goods includes a) a tax on the transfer of property in goods, b) a tax on the delivery of goods on hire purchase or any system of payment by installments, c) a tax on the transfer of the right to use any goods for any purpose, and d) a tax on the supply of goods. Such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made.</p>
<p><strong>[3]</strong> State of A.P. v. Rashtriya Ispat Nigam Ltd. MANU/SC/0163/2002, BSNL v. UOI, MANU/SC/1091/2006: 2006 2 STR 161 S.C.</p>
<p><strong>[4]</strong> The petitioner in the above case relied on TCS v State of Andhra Pradesh, (2005) 1 SCC 308 which held that software are goods, whether customized or non-customized, to argue that the Finance Act 2012 was unconstitutional to the extent that it imposed service tax on software. Since the states were imposing VAT on such transactions, the consequent levy of service tax by the Central government was unconstitutional. The dominant intention of the parties, as laid down in the BSNL case, would not have to be examined in such a situation. The Madras HC agreed with the contention that software is a ‘good’, as it is an article of value having regard to its utility and is capable of transmission, delivery, storage, possession and of being brought and sold and did not deviate from the position of law as laid down in the TCS case, its own earlier decision in the case of Infosys Technologies Vs. CTO (2008) TIOL 509 as well as the decision of the Karnataka High Court in Antrix Corporation Ltd. Vs. Assistant Commissioner of Commercial Taxes (2010) TIOL 515.</p>
<p><strong>[5]</strong> On making and marketing copies of software, the transaction would be subject to sales tax despite the retention of the copyright with the originator of the programme. The sale is not just of the media, but of the Intellectual Property stored on the media. As it is impossible to separate the transaction, the sale of software would be governed by the Sale of Goods Act 1930, being a ‘good’ under law. Goods sold can be both tangible, intangible/incorporeal. The test is whether they are capable of abstraction, consumption, use, transfer, transmission, delivery, storage, possession etc, fulfilled in the case of software.</p>
<p><strong>[6]</strong> This was notified in 2008, Serial No 93A of Notification No 49/2008-CE (NT) dated 24.12.2008, for valuation under Section 4A of the CEA, 1944.</p>
<p><strong>[7]</strong> VAT/CST rates ranging from 5.5% to 6.6%; Octroi/Entry Tax of 5.5% in State of Maharashtra; excise duty from 10% ad valorem and Education Cess.</p>
<p><strong>[8]</strong> See: <a href="http://www.nasscom.in/sites/default/files/policy_update/NASSCOM%20pre-budget%20recommendations%20-%20Procedural%20issues.pdf">http://www.nasscom.in/sites/default/files/policy_update/NASSCOM%20pre-budget%20recommendations%20-%20Procedural%20issues.pdf</a>.</p>
<p><strong>[9]</strong> See: <a href="http://articles.economictimes.indiatimes.com/2005-09-05/news/27476122_1_fbt-nasscom-kiran-karnik">http://articles.economictimes.indiatimes.com/2005-09-05/news/27476122_1_fbt-nasscom-kiran-karnik</a>.</p>
<p><strong>[10]</strong> Given below is the framework of COG-TRIP:</p>
<ul><li>1. Countability - Number of licenses/users/subscribers</li><li>2. Ownership and intellectual property rights</li><li>3. Qualification as an intangible good</li><li>4. Tradability: The software products (goods) can be sold through different delivery modes</li><li>5. Right of service / Right of Use</li><li>6. Identifiability</li><li>7. Production/development cost: All software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value<br /></li></ul>
<p><strong>[11]</strong> DIGITAL GOOD: The term 'digital good' means any software or other good that is delivered or transferred electronically, including sounds, images, data, facts, or combinations thereof, stored and maintained in digital format, where such good is the true object of the transaction, rather than the activity or service performed to create such good.</p>
<p>DIGITAL SERVICE: The term 'digital service' means any service that is provided electronically, including the provision of remote access to or use of a digital good.</p>
<p>For purpose of above definitions, the term:</p>
<ul><li>'Digital Goods' means 'Goods' as defined in 366(12) of the Constitution,</li><li>'Digital service' means a 'service' and that which is not a 'Digital Good,'</li><li>'Delivered or transferred electronically' means the delivery or transfer by means other than tangible storage media,</li><li>'Provided electronically' means the provision remotely via electronic means,</li><li>'Software' is a representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment, and</li><li>'Software Product” is a standardised set of such software bundled together as a single program or a Module that directs computer's processor to perform specific operations, exhibiting the properties of an intangible good that can be traded.</li></ul>
<p>EXPLANATORY NOTE: In legal parlance, the 'goods' exhibit the following properties as established under the COG TRIP test: 1) Durability - perpetual or time bound, 2) Countability – traded commodity can be counted as number of pieces, number of licenses used, number of users etc., 3) Identifiability – identified as a standardised product, 4) Movability and storage – can be delivered and stored and accounted as an inventory, 5) Ownership of the right to use, 6) Produced/reproduced through a process, and 7) Marketable/tradable - can be marketed and sold using standard marked price (except when volume discounts, bid pricing and market promotion offers are applicable).</p>
<p><strong>[12]</strong> See: <a href="http://pn.ispirt.in/tax-challenges-of-the-spisoftware-product-industry-and-budget-recommendations-made-by-ispirt/">http://pn.ispirt.in/tax-challenges-of-the-spisoftware-product-industry-and-budget-recommendations-made-by-ispirt/</a>.</p>
<p><strong>[13]</strong> The guidelines issued in November 2015 permitting a select 15 categories in Single Brand retail to sell their products online were further altered in March 2016 by the Department of Industrial Policy and Promotion to allow single brand retail by brick and mortar stores operating in India and Indian manufacturers. The impact of FDI policy on businesses can be understood with cases of alteration of business structure and distancing of e-commerce companies with their subsidiary sellers on allegations of violation of existing norms. The DIPP submitted to the Delhi HC that the ‘market place’ business models adopted by Amazon, Flipkart and Snapdeal etc were not recognized under law as they had resorted to direct sales to customers. Further, the legality of promotional funding would also be questioned on the ground that an intermediary cannot facilitate any scheme of discounts by bearing the difference in the price of the goods sold as to that extent, it is acting as the seller. This would not be in the interests of the consumers, who could earlier take advantage of the various discounts offered in the form of marketing cost reimbursement, bonus schemes etc. With such strong policies, the possibility of equality of prices between online and brick and mortar stores cannot be discarded.</p>
<p><strong>[14]</strong> <a href="http://www.livemint.com/Politics/hglep85yZOQzChj6KRrrCK/Govt-allows-100-FDI-in-ecommerce-marketplace-model.html">http://www.livemint.com/Politics/hglep85yZOQzChj6KRrrCK/Govt-allows-100-FDI-in-ecommerce-marketplace-model.html</a>.</p>
<p><strong>[15]</strong> See: <a href="http://pn.ispirt.in/sign-startup-bridge-petition-and-promote-stay-in-india-checklist/">http://pn.ispirt.in/sign-startup-bridge-petition-and-promote-stay-in-india-checklist/</a>.</p>
<p><strong>[16]</strong> See: <a href="http://articles.economictimes.indiatimes.com/2016-05-14/news/73083932_1_nasscom-software-industry-body-ip-rights"> http://articles.economictimes.indiatimes.com/2016-05-14/news/73083932_1_nasscom-software-industry-body-ip-rights</a>.</p>
<h2 id="6">6. Author Profile</h2>
<p>Pavishka Mittal is a law student at West Bengal National University of Juridical Sciences, Kolkata and has completed her second year. She takes contemporary dance very seriously and hopes to contribute to the dance community in India. Other than dancing, she indulges in binge-watching in her spare time.</p>
<p> </p>
<p>
For more details visit <a href='http://editors.cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-and-ispirt-2013-2016'>http://editors.cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-and-ispirt-2013-2016</a>
</p>
No publisherPavishka MittalNASSCOMResearchiSPIRTNetwork EconomiesIndustrial PolicyResearchers at Work2016-07-04T09:34:43ZBlog EntryPolicy Shaping in the Indian IT Industry: Recommendations by NASSCOM, 2006-2012
http://editors.cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-2006-2012
<b>This is the first of a series of three blog posts, authored by Pavishka Mittal, tracking the engagements by NASSCOM and iSPIRT in suggesting and shaping the IT industry policies in India during 2006-2016. This posts focuses on the policy activities of NASSCOM in 2006-2012 with specific reference to Special Economic Zones, E-Commerce Industry and Transfer Pricing, along with a few other miscellaneous important recommendations.</b>
<p> </p>
<p><strong>1.</strong> <a href="#1">Introduction</a></p>
<p><strong>2.</strong> <a href="#2">Tax Reforms in Special Economic Zones (SEZs)</a></p>
<p><strong>3.</strong> <a href="#3">E-Commerce Industry</a></p>
<p><strong>4.</strong> <a href="#4">Transfer Pricing Issues</a></p>
<p><strong>5.</strong> <a href="#5">Other Recommendations</a></p>
<p><strong>5.1.</strong> <a href="#5-1">Concerns with the Union Budget Proposals</a></p>
<p><strong>5.2.</strong> <a href="#5-2">Request for Clarity in Classification of Transactions and Guidelines</a></p>
<p><strong>5.3.</strong> <a href="#5-3">New Retrograde Obligations under Law</a></p>
<p><strong>6.</strong> <a href="#6">Endnotes</a></p>
<p><strong>7.</strong> <a href="#7">Author Profile</a></p>
<hr />
<h2 id="1">1. Introduction</h2>
<p>The National Association of Software and Services Companies (NASSCOM) was established in 1988 as a non-profit, global trade association registered under the Indian Societies Act 1860 representing the interests of the IT Industry, now with over 1500 members. Its objective is to facilitate trade in the software development and services, software products, IT enabled/BPO services and e-commerce. It also undertakes research projects for facilitating innovation in advanced software and maintains data on industry trends, even a national database of registered and verified knowledge workers in the industry. Nevertheless, its role of policy advocacy cannot be over emphasized. It regularly interacts with the Government of India to bring about a favourable business environment for the IT Industry.</p>
<p>This blog post, the first part in a series, discusses NASSCOM’s major issues with policies of the Government of India in the period 2006-2012. The concerns of the IT industry, as highlighted by NASSCOM in the period aforementioned are with reference to the Special Economic Zones, E-Commerce Industry and Transfer Pricing broadly along with other miscellaneous important recommendations. The subsequent blog posts will focus on specific tax issues post 2012 and will elaborately discuss transfer pricing related concerns.</p>
<h2 id="2">2. Tax Reforms in Special Economic Zones (SEZs)</h2>
<p>The ITes and BPO industry constitutes a sizable portion of the number of SEZs in the country <strong>[1]</strong> so much so that it has been argued that the IT industry alone reaps the benefits of the SEZs and STPIs to the exclusion of the other sectors <strong>[2]</strong>.</p>
<p>The most salient incentive in the SEZ Act enacted by the Government of India in 2005 had been income tax exemption of export profits which contributed to the scheme’s success in attracting major investments <strong>[3]</strong>. Further, exemption from minimum alternate tax had been provided under section 115JB of the Income Tax Act. However, in 2011, the government decided to impose a Minimum Alternate Tax upto the rate of 18.5% on the book profits of SEZ’s developers and units through the Finance Act 2012 by introducing amendments to the Income Tax Act 1961, to be effective from April 2012 <strong>[4]</strong>. NASSCOM took a strong stance against equality in corporate tax liability as such tax is sought to be imposed upon income derived from investments made with a commitment of tax exemption. The intention of the government in making such policies having regressive outcomes will be judged if key promised characteristics of SEZs were differential economic laws from the remaining domestic territory. For all practical purposes, they are deemed to be foreign territories for the levy of trade duties and tariffs <strong>[5]</strong>. In the case of Mindtree Limited v. Union of India <strong>[6]</strong>, software company Mindtree argued that the imposition of MAT in SEZs was against the concept of promissory estoppel and the doctrine of legitimate expectation, which rendered such taxes constitutionally invalid <strong>[7]</strong>. Even though a time limit was not prescribed for the above tax exemption, it was argued that SEZ policy was predicated on tax relief and the subsequent change in policy was arbitrary and unfair. Individual taxpayers and undertakings should not be affected by subsequent laws if they make sizable investments, modify business models and bear the added expenses of moving into or developing a SEZ. It cannot be disputed that this argument is untenable keeping in mind that the legislature cannot be bound by past promises in line with practical considerations and their independence with regard to the effective discharge of public functions. It was held that the legislature cannot be bound by the doctrine of promissory estoppel <strong>[8]</strong>.</p>
<p>The Adani group had also challenged the imposition of MAT in the Gujarat HC in 2011 on the ground that that any amendments to the SEZ Act can only be brought about by amendments to the SEZ Act itself, and not through the Finance Act <strong>[9]</strong>. The SC in Madurai District Central Cooperative Bank Ltd. <strong>[10]</strong> held that the parliament has the authority to introduce a new charge of tax even by incorporating it in any other statute other than the act. However, the fact remains that such policies lead to a volatile business environment and the importance of stable business policies cannot be overemphasized. In 2011, NASSCOM recommended that MAT be withdrawn as it is opposed to the government’s long term policy of SEZ’s growth <strong>[11]</strong>. Alternatively, it stated that the imposition of MAT be withdrawn to ensure the continued economic viability of the SEZs which have already been notified by the government <strong>[12]</strong>. It also stated that international norms should be applied for the determination of the MAT rate, which was 1/3rd of the corporate tax rates <strong>[13]</strong>.</p>
<p>Another concern highlighted by other stakeholders was the prescribed period of ten years for the setting of the MAT against regular tax liability. This MAT credit may expire or be on the verge of expiration for participants in SEZs who enjoy tax holiday for a prescribed number of years when they start operations due to absence of initial tax liability. Foreign investors will face difficulties in claiming tax benefits in their home jurisdictions for MAT paid in India. Further, the exemption granted to SEZ developers as to the levy of Dividend Distribution Tax @ 15% has been revoked by the Finance Ministry in 2011 severely affecting the IT industry.</p>
<p>The government finally took note of the increased disinvestment as a consequence of such taxes and proposed to make the imposition of MAT and Dividend Distribution Tax inapplicable to SEZ’s in 2015 <strong>[14]</strong>.</p>
<h2 id="3">3. E-Commerce Industry</h2>
<p>NASSCOM in 2012 suggested the lowering of the interchange tax rate on debit cards transactions by the RBI. Debit cards possess lower risk in comparison to credit cards, the transactions being concluded immediately and the same should be reflected in the form of differential taxes. A standard 1-2% interchange/transaction fees were generally levied by banks. NASSCOM also recommended the introduction of a 2% tax incentive on the purchase of products online to facilitate increased purchases and encourage consumers to even undertake small value transactions online. Further, it emphasized that the base of e-commerce users have to be expanded. It commented on the differences in the Internet usage costs between China and India, USD 10 and USD 15-20 respectively. High internet usage costs can only be indicative of reduced Internet access. However, this is not to state that the E-commerce industry is unsuited for India due to infrastructural inefficiencies. NASSCOM has stated that India as of 2012 possesses over 100 million Internet users. Technology has to be developed which would reduce dropout rates of transactions. Further it suggested the creation of an online receipt repository which would store all online transaction receipts, accessible through mobile phones or the internet. It would contribute in increasing customer confidence by enabling tracking of payment, delivery etc.</p>
<p>The RBI in response to the recommendations of NASSCOM and the Online Payment Advisory Group <strong>[15]</strong> and in consultation with all concerned stakeholders, decided to put a maximum limit on the Merchant Discount Rate (MDR) for transactions undertaken with a debit card [16].</p>
<h2 id="4">4. Transfer Pricing Issues</h2>
<p>Transfer Pricing has become the dominant international tax issue affecting multinational corporations operating in India [17]. As noted by NASSCOM, a steep rise in litigation and the number of transfer pricing adjustments with the Indian Revenue Authority (IRA) has been observed due to ‘increased scrutiny’ by the IRA who has been rejecting the profit declared by foreign companies accruing to Indian subsidiaries by applying very high markups in this sector. Increased complications in setting valid prices through this process have arisen due to the rising presence of ‘highly complex transactions’ involving intangibles and multi-tiered services across the world. The Finance Act 2012 extended the applicability of domestic party transactions to certain related domestic parties, if the aggregate value of such transactions exceeds INR 5 crore, to any expenditure with respect to which deduction is claimed while calculating profits and to transactions related to businesses eligible for profit-linked tax incentives, including SEZ units under section 10AA <strong>[18]</strong>.</p>
<p>NASSCOM has proposed a three pronged approach to the problem of backlog of cases and absence of certainty of price of transactions:</p>
<ol><li>Implementation of Safe Harbour provisions to resolve existing disputes.</li>
<li>Introduction of Advance Pricing Agreements <strong>[19]</strong> to set fair and transparent prices.</li>
<li>Initiation of review of the structure and procedure of the Dispute Resolution Panel <strong>[20]</strong>.<br /></li></ol>
<p>The Finance Act 2009 introduced section 92CB <strong>[21]</strong> in the Income Tax Act 1961 which provided for the subjection of the arms length price determined under section 92C or section 92CA to Safe Harbour Rules, to be declared by the Central Board of Direct Taxes (CBDT). For the valid determination of such a transfer price, the minimum transfer price that a taxpayer is expected to earn for international transactions is prescribed along with certain specific norms for particular transactions. The safe harbour transfer price for eligible transactions is subject to certain prescribed minimum ceilings <strong>[22]</strong>. A price determined in accordance with such guidelines would be deemed to be an Arms Length Price (ALP). To that extent the safe Harbour Rules are in the nature of ‘presumptive taxation’ and incentivises IT firms to avoid unnecessary litigation by opting for the same. Unilateral, bilateral and multilateral Advance Pricing Agreements, binding on the taxpayer and the revenue authorities for five consecutive years have been introduced with effect from 1 July 2012. Certain domestic transactions are inapplicable for APA’s in the absence of other monetary conditions/stipulations under law for entering into an APA. Documentation on comparables is required to be maintained to substantiate compliance with arms length principle.</p>
<p>The concerns of the prescribed rates include non-representation of industry benchmarks and economic realities in as much as the prescribed rates exceed the actual arms length prices, often leading to the risk of double taxation in foreign jurisdictions. The division of IT services into two components has also been criticized as many of the activities might overlap. NASSCOM has stated that it is not clear how the existing current issues are proposed to be resolved. The introduction of domestic parties as applicable parties to be subject to the transfer pricing regulations will only increase the complexity in the law. There has been subsequent judicial development involving the establishment of some principles for the valid determination of comparables for the purpose of identifying an acceptable transfer price which will be discussed in the next blog post.</p>
<h2 id="5">5. Other Recommendations</h2>
<h3 id="5-1">5.1. Concerns with the Union Budget Proposals</h3>
<p>NASSCOM summarized that the Union Budget Proposals 2012-13 focus on the reduction of the fiscal deficit through higher taxation rather than expenditure management. More specifically, it focuses on the following concerns of the IT Industry:</p>
<ul><li>The issues of tax simplification have not been resolved as no roadmap for the implementation of the Direct Taxes Code and the Goods and Services Tax Bill has been provided.</li>
<li>The increase in the Current Account Deficit should have incentivized the government to introduce measures which facilitate high value exports, which has been wholly ignored from the budget.</li>
<li>Increase in indirect taxes, namely excise duty and service tax is a retrograde policy measure.</li>
<li>Restrictive conditions in the SEZ Act 2005 which do not facilitate the setting up of small companies, have to be modified.</li>
<li>There is no mention of reduction of Tax Deducted at Source (TDS) for SMEs and introduction of non-profit linked incentives in the form of employment benefits etc. in the proposal.</li>
<li>Similar provisions should also be introduced for Tier II and III cities in the country.</li>
<li>Some announcements as to the simplification of service tax refund and the removal of the provisions involving dual levy of service tax and VAT are not sufficient to resolve ambiguities in law. NASSCOM, in light of the increasing delays of service tax, suggested exemption of export activity from such tax and the applicability of a simplified mechanism similar to CENVAT wherein exemption will be provided to exporters in proportion of their exports to total sales.</li></ul>
<h3 id="5-2">5.2. Request for Clarity in Classification of Transactions and Guidelines</h3>
<p>NASSCOM in its pre-budget recommendations had suggested that in light of the confusion of the characterization of software as goods or services and the resultant dual taxation, in the form of taxes paid to both the Central and the State Governments, the provision of software, whether customized or packaged should be treated as a service irrespective of the media and mode of transfer with the assurance from the States that no VAT shall be leviable on software. Further, guidelines have to be outlined for various e-commerce transactions like database subscription, cloud computing, webhosting and data warehousing. Onsite exporter of services are being denied the benefits of certain tax exemptions due to the sunset of STPI provisions, thus forming the need for a formal clarification by the government deeming these activities to be an integral component of the IT services industry.</p>
<h3 id="5-3">5.3. New Retrograde Obligations under Law</h3>
<p>NASSCOM emphasized that the introduction of certain provisions, related to GAAR, related party transactions and the withholding of tax in the Finance Bill, some of these retrospective in nature, enhance the difficulties faced by the IT industry. Increased obligations on the corporate tax payers in the form of imposition of additional taxes will only increase the scope of multiple interpretations of the provisions which will lead to the exercise of discretionary powers by the tax authorities.</p>
<h2 id="6">6. Endnotes</h2>
<p><strong>[1]</strong> As of September 2011, a significant majority of the 143 operational SEZs in the country belonged to the IT/ITeS and electronic hardware as per data released by the Ministry of Commerce and Industry.</p>
<p><strong>[2]</strong> See: <a href="http://articles.economictimes.indiatimes.com/2012-02-25/news/31099874_1_sez-unit-sez-promoters-multi-product">http://articles.economictimes.indiatimes.com/2012-02-25/news/31099874_1_sez-unit-sez-promoters-multi-product</a>.</p>
<p><strong>[3]</strong> Section 10AA of the Income Tax Act provides for 100% income tax exemption on export income for SEZ units for the first five years, 50% for the next five years and 50% of the ploughed back export profit for the next five years.</p>
<p><strong>[4]</strong> See: <a href="http://www.business-standard.com/article/economy-policy/govt-imposes-18-5-mat-on-sez-developers-units-111022800153_1.html">http://www.business-standard.com/article/economy-policy/govt-imposes-18-5-mat-on-sez-developers-units-111022800153_1.html</a>.</p>
<p><strong>[5]</strong> See: <a href="http://articles.economictimes.indiatimes.com/2005-07-08/news/27506703_1_special-economic-zone-act-sez-act-sez-bill">http://articles.economictimes.indiatimes.com/2005-07-08/news/27506703_1_special-economic-zone-act-sez-act-sez-bill</a>.</p>
<p><strong>[6]</strong> (2013)260CTR(Kar)146.</p>
<p><strong>[7]</strong> The doctrines of promissory estoppel and legitimate expectation, arising from legal relationships and reasonable expectation, respectively, are flexible equitable reliefs not defined in any statute. Judicial decisions have held that a party would not be entitled to go back on a clear and unequivocal promise which was intended to create legal relations, knowing or intending that it would be acted upon by the other party to whom the promise was made and acted upon by the other party under the doctrine of promissory estoppel. Legitimate expectation of a certain treatment arises against representation by an administrative authority, whether express (through promises), or implied (through consistent past practice) despite absence of any right otherwise.</p>
<p><strong>[8]</strong> It was held that the action of the government is legal as every tax exemption provision should also incorporate a sunset clause. The deletion of the exemption under law would only reduce the erosion of the tax base.</p>
<p><strong>[9]</strong> See: <a href="http://articles.economictimes.indiatimes.com/2011-05-11/news/29532409_1_sez-act-minimum-alternative-tax-mat">http://articles.economictimes.indiatimes.com/2011-05-11/news/29532409_1_sez-act-minimum-alternative-tax-mat</a>.</p>
<p><strong>[10]</strong> Madurai District Central Cooperative Bank Ltd. v. ITO (1975) 101 ITR 24(SC), the form and method of introduction of a legislation is not of importance provided the requirement of competence by the legislature to pass the deemed law with respect to its subject matter is satisfied. An amendment of a taxing statute, by an unconventional method of incorporation through an act of a different pith and substance is not unconstitutional. The primary purpose of the Finance Acts is to prescribe tax rates for taxes specified in the Income Tax Act. However, the above fact does not restrain the freedom of the legislature to impose an altogether new tax through the Finance Act or any other deemed legislation besides the Income Tax Act.</p>
<p><strong>[11]</strong> See: <a href="http://www.nasscom.in/nasscom-prebudget-recommendations">http://www.nasscom.in/nasscom-prebudget-recommendations</a>.</p>
<p><strong>[12]</strong> Ibid.</p>
<p><strong>[13]</strong> Ibid.</p>
<p><strong>[14]</strong> See: <a href="http://articles.economictimes.indiatimes.com/2015-02-13/news/59119589_1_sez-developers-and-units-minimum-alternate-tax-special-economic-zones">http://articles.economictimes.indiatimes.com/2015-02-13/news/59119589_1_sez-developers-and-units-minimum-alternate-tax-special-economic-zones</a>.</p>
<p><strong>[15]</strong> Formed in 2012 to examine the challenges faced by the E-commerce Industry in India and to recommend changes needed to facilitate the creation of a vibrant online payment sector.</p>
<p><strong>[16]</strong> Not exceeding 1 percent for transaction amount for value above 2,000. The directive was issued under section 18 of the Payments and Settlement Systems Act, with effect from July 1, 2012.</p>
<p><strong>[17]</strong> See: <a>http://www.pwc.com/gx/en/international-transfer-pricing/assets/india.pdf</a>.</p>
<p><strong>[18]</strong> This amendment would extend to any other transaction as may be specified and would be applicable for FY 2012-13 and subsequent years.</p>
<p><strong>[19]</strong> An Advance Pricing Agreement, generally covering multiple years, entered into between a taxpayer and at least one tax authority lays down the method of transfer pricing to be applicable to the taxpayer’s inter-company transactions which eliminates the need for transfer pricing adjustments for enclosed transactions provided the terms of the agreement are complied with.</p>
<p><strong>[20]</strong> The Finance Act 2009 inserted section 144C in the Income Tax Act which provides for the constitution of an alternative dispute resolution mechanism for transfer pricing taxation matters, namely a DRP (Dispute Resolution Panel) consisting of three commissioners rank officers.</p>
<p><strong>[21]</strong> Section 92CB defines Safe Harbour to be ‘circumstances under which the income tax authorities shall accept the transfer pricing declared by the assessee.’ The procedure for adopting safe harbour, the transfer price to be adopted, the compliance procedure upon adoption of safe harbours and circumstances in which a safe harbour adopted may be held to be invalid is specified in the new rules in 10TA to 10AG issued by the CBDT on 18th September 2013.</p>
<p><strong>[22]</strong></p>
<ul><li>Provision of software development services and information technology enabled services with insignificant risks- upto rs 500 crore- 20% or more on total operating costs, above rs 500 crore- 22% or more on total operating costs.</li><li>Provision of knowledge processes outsourcing services with insignificant risks-25% or more on total operating costs.</li><li>Provision of specified contract R & D services wholly or partly relating to software development with insignificant risks- 30% or more on total operating costs.</li></ul>
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<h2 id="7">7. Author Profile</h2>
<p>Pavishka Mittal is a law student at West Bengal National University of Juridical Sciences, Kolkata and has completed her second year. She takes contemporary dance very seriously and hopes to contribute to the dance community in India. Other than dancing, she indulges in binge-watching in her spare time.</p>
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For more details visit <a href='http://editors.cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-2006-2012'>http://editors.cis-india.org/raw/policy-shaping-in-the-indian-it-industry-recommendations-by-nasscom-2006-2012</a>
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No publisherPavishka MittalSpecial Economic ZonesTransfer Pricing PolicyNASSCOMResearchE-CommerceNetwork EconomiesIndustrial PolicyResearchers at WorkInformation Technology2016-07-04T08:11:05ZBlog Entry