Parcel tax to give way to new levy

New e-commerce tax policies will take effect next month, which may lead to cheaper imported cosmetics but higher costs of food and baby products for Chinese consumers.

The move is the country's latest effort to tweak its e-commerce tax policy, in an attempt to create a level playing field for cross-border e-commerce sites and brick-and-mortar stores that sell imported goods.

Under the new tax policy, which the Ministry of Finance announced on Thursday, the government will remove the parcel tax, the only tax currently levied on imported items sold online.

Instead, it will levy an import value-added tax and consumption duties but with a 30 percent discount, as long as a purchase doesn't exceed 2,000 yuan ($307) and the annual gross transactions by an individual consumer are below 20,000 yuan.

But for deals above the cap, consumers will get no tax discounts and will also need to pay customs tariffs.

The new policy, which will take effect on April 8, comes a year after the government implemented the parcel tax to promote cross-border e-commerce in China.

The parcel tax rate for lower-end products such as food and infant items is 10 percent, according to Wang Wei, director of the Institute for Market Economy of the State Council Development Research Center.

"Such low tax rates are in fact giving cross-border e-commerce sites an unfair advantage over offline retailers," she said, adding that the government is trying to fix the problem step by step.

The move also comes as China is stepping up efforts to boost domestic consumption, especially for quality, high-end items. The government said last month it will open 19 new duty-free shops across the country to meet consumers' growing appetite for high-quality overseas products.

E-commerce site Alibaba Group Holding Ltd said on Friday that lower-end products such as food and baby products will be subject to heavier taxes after the tax adjustment.

"But overseas brands and retailers on our platform won't raise prices in the short term so that consumers can gradually adapt to the change," the company said in a statement.

Cross-border e-commerce is booming in China as the country's growing middle class increasingly desires products of higher quality.

Last year, online sales of imported goods reached 638 billion yuan and accounted for 17 percent of China's total online retail sales, according to data from Mintel Group Ltd, a London-based market research company.

The most popular categories of products purchased online in China are food, beauty products, consumer electronics, clothing and shoes.

Tan Naixun, an e-commerce analyst at Internet consultancy Analysys International in Beijing, said that although the new policy will increase the tax burden on some popular categories, the price of cosmetics may become cheaper if a single deal exceeds 100 yuan.

"For instance, if consumers buy beauty and personal care products worth 1,000 yuan, they (currently) need to pay 500 yuan in tax, given the current parcel tax rate of 50 percent for cosmetics. But once the new policy takes effect, they will only need to hand over 329 yuan in tax."