ONDC Delays Network Charge Installation Until April 1st

Nitin Konde, Varun Bhardwaj

06 Feb 2025 — 3 min read

ONDC Postpones Network Charge Implementation to April 1st

According to reports, the proposed network infrastructure and services tax has been delayed until April 1 by the government-backed Open Network for Digital Commerce (ONDC). According to a media report, this choice was made following input from stakeholders and network members. It should be noted that ONDC first announced plans in December of last year to impose a tax of INR 1.5 on any transactions exceeding INR 250 starting on January 1.

Extension will Help Stakeholders in Aligning Transaction Process

According to the article, which cited ONDC's communication to its network participants, the extension is meant to give stakeholders more time to synchronise their internal systems and guarantee a seamless transition. Only successful transactions over INR 250 that do not result in returns or refunds within the allotted time frame will be subject to the suggested transaction fee.

Orders that drop below the value barrier or are cancelled before fulfilment will not be charged the fee. The study also noted that up to January 31, ONDC had 173.5 million transactions. More than a month has passed since Thampy Koshy, the managing director and CEO of ONDC, stated that the company's transaction volume has increased by about three times since December 2023 and is predicted to increase by seven to eight times by December 2025.

How the Entire Tax Dynamics Work?

The ONDC is a non-profit that aims to be a self-sustaining utility that facilitates digital trade, the network informed a prominent media outlet by email on December 15, 2024. In the upcoming year, a network fee will be implemented to accomplish this, eventually making it self-sustaining.

As a convenience charge, it would be simpler for vendor apps to transfer it to buyer applications. According to a network participant who wished to remain anonymous, "If a seller app receives between 4,000 and 5,000 orders per month, absorbing the network fee would mean INR 6,000 per month."

According to ONDC, Shiprocket, Mystore, Magicpin, Growth Falcons, and a few more grocery players are among the top-selling applications in the food and beverage sector.

According to what the ONDC told the media outlet, its team works on protocol development and improvement, supports participants' product and feature rollouts, brings supply and demand together, drives industry councils to develop roadmaps, supports sellers' and network participants' outreach and marketing, develops and improves network-level policies, develops and monitors standard operating procedures for network health and ecosystem development, supports capacity building and training, and responds

Why the Network Fee Being Charged to Sellers?

In e-commerce, platform fees are typically assessed on buyers, but ONDC is charging merchants instead. According to a person with knowledge of the situation, who was mentioned in a media house's report on December 11 of last year, it is against one completed transaction that is collected at the seller's end because all receipts would eventually reach the seller. When asked whether the network cost would be passed on to the buyer in any way, he replied that the vendor makes that decision. According to a survey by ONDC shareholders, there are 72 seller apps.

Rahul Mathur, a member of the investment team at venture capital firm DeVC, claims that, like all businesses, it requires funding in order to expand its network. The platform charge is expected to generate at least INR 11.25 crore in income for ONDC annually. ONDC may be able to break even with additional scale and more targeted platform increases.