Online Purchases Could Get Costlier? CAIT Urges Govt to Impose Luxury Tax on E-commerce Buys

Ordering that latest smartphone or luxury handbag online could soon pinch your wallet a little harder if the Confederation of All India Traders (CAIT) has its way. The traders’ body has urged the government to levy a ‘luxury tax’ on online purchases and bring them under the purview of Goods and Services Tax (GST). The goal of CAIT is to push for a level playing field between e-commerce giants and traditional retailers.

While speaking at a national conclave in New Delhi earlier this week, CAIT secretary general emeritus Praveen Khandelwal stated that the time had come to rein in the fast-expanding quick commerce and e-commerce sector, which he claimed was damaging small businesses through deep discounting and aggressive expansion.

The event, themed “The Cruel Face of Quick Commerce and E-commerce”, highlighted the concerns of small traders struggling to compete with platforms like Amazon, Flipkart, Blickit, and Zepto.

“We are asking the government for protection and promotion of small retail stores,” Khandelwal told reporters, according to a report by Mint. “Quick commerce is an entirely new sector, but there is no regulatory framework yet,” he noted.

The trader’s body has further said that it will submit some detailed recommendations to the Ministry of Commerce and Consumer Affairs to seek immediate enforcement of existing foreign direct investment (FDI) norms across both e-commerce and quick commerce platforms. It also renewed its demand for a long-awaited e-commerce policy and supporting regulations under the Consumer Protection Act.

What are the main concerns regarding Quick Commerce?

The urgency, as Khandelwal said, is rooted in the way quick commerce has disrupted local markets. Fintech platforms such as Zepto, Swiggy Instamart, and Blinkit, with a backing of heavy private investment have expanded rapidly, particularly in the urban areas.

The ability of such companies to promise doorstep delivery within 10 to 30 minutes has changed the way urban Indians shop, which is mostly ‘online’ now. This has left local kiranas outpaced and often out of business.

CIAT believes that while the growth of this sector is beneficial for some consumers, it has also created unfair market conditions for many small store owners who cannot match either the pace or pricing of these digital players.

What has CAIT proposed?

Among the many regulatory measures CAIT has proposed, the key ones are:

- A ban on inventory-led e-commerce models, arguing that platforms should operate strictly as third-party marketplaces, not sellers.

- Full transparency in algorithmic pricing, seller selection, and product visibility practices.

- An independent digital commerce regulator to oversee e-commerce and quick commerce platforms.

In addition to taxation and market practices, the trader’s body has also raised concerns on behalf of gig workers. As per the Mint report, CAIT said its allied groups, namely, All India Consumer Products Distributors’ Federation (AICPDF) and the All India Mobile Retailers Association (AIMRA) will approach the Human Rights Commission to highlight the plight of gig economy workers who are associated with online delivery platforms.

Will a Luxury Tax Hit Urban Shoppers?

This preposition by CAIT to introduce a luxury tax on online purchases has sparked some debate among the buyer and seller community. Though the specifics of such a tax remain unclear, any additional levy could directly impact the prices for e-commerce consumers, particularly those who heavily rely on such delivery fintech platforms for convenience and variety.

The industry leaders are still to weigh in this proposal. With platforms like Flipkart recently launching their own express delivery vertical ‘Minutes’, and others such as Amazon, Nykaa, and Myntra testing similar quick delivery formats, this shift in regulation with a ‘luxury tax’ could affect pricing, operations and even customer habits.

As of now there is no such tax. CAIT, with this proposal, is highlighting that the online retail in India has grown at the cost of small traders. However, if brought into practice this would definitely affect pricing and cost structure for the customers who frequently shop online for both small and big purchases.