India’s proposed tax on third party sellers invite wide protest from online retailers such as Amazon and Walmart’s  Flipkart . They are demanding that India should scale back a proposed tax on third-party sellers on their platforms, saying the burden of compliance will hurt the fledgling industry, according to a document seen by Reuters.

The online retail industry is braced for a possible 1% tax on each sale made by sellers on their platforms from April if the proposal is approved by parliament next month. The move is part of a broader plan by Prime Minister Narendra Modi’s government to increase tax revenues and counter a sharp economic slowdown due to weakening consumer demand.

But the tax will hurt the country’s fledgling e-commerce sector, according to a presentation prepared by the Federation of Indian Chambers of Commerce and Industry (FICCI) for the government and reviewed by Reuters.

“(It) would cause irreparable loss to the entire industry with increased compliance burden,” the lobby group said on behalf of e-commerce companies. “This will also lead to reduced trading activity.”

 A spokesman for Bengaluru-based Flipkart said it was working with industry chambers to voice sellers’ concerns and highlight the increased cost of compliance.

Some third-party sellers are also pushing back against the tax, arguing it would negatively impact their working capital, adding that they already contribute to a nationwide sales tax.

This tax will be “extremely detrimental to the growth and sustenance” of small online sellers and make the model “unviable”, Unexo Life Sciences, a seller of healthcare products on Amazon’s India website, said in an email to the Central Board of Direct Taxes .Online vendors, or sellers with revenue of less than half a million rupees in the previous year, as well as brick-and-mortar retailers, will be exempted from the new tax, although they are subject to the nationwide sales tax.

India’s e-commerce sector is expected to reach $200 billion by 2026 as rising smartphone use and cheap data help hundreds of millions to shop online for everything from groceries to furniture. But companies such as Amazon and Flipkart have also had to face tighter regulations and an antitrust probe.