Karnataka not to relax tax laws for e-commerce firms

The Karnataka government will not relax the value added tax (VAT) for any e-commerce company or online marketplace.

Strict compliance measures initiated by the commercial tax department have proved beneficial, as many e-commerce companies have started paying taxes, says chief minister (CM) Siddaramaiah.

“We are not under pressure to leave any e-commerce company, including Amazon India, from the payment of tax. All of those companies have shown a favourable response to our tax notices and are paying taxes,” the CM told the legislative assembly on Monday.

ENTER THE JUNGLE
  • Amazon had let out retail space to member-retailers at a fulfilment centre, a breach of state VAT laws, Karnataka government had said
  • 75 retailers on the Amazon platform had been issued notices
  • Amazon attracted the attention of Karnataka tax authority when it was found the company was not paying VAT for transactions on its online platform, saying it was not doing business directly.
  • It asked dept to collect VAT from sellers directly
  • After that, the department had stopped issuing fresh registrations to new dealers for doing transactions on Amazon's e-commerce platform.

Replying to a discussion on the state budget, he said the government had issued tax notices to many online marketplaces, including Flipkart, Amazon India, and Myntra. Most had responded favourably. Flipkart has paid a tax of Rs 226 crore this financial year. There is no question of giving concession to any, he said.

On Amazon, he said, “We are examining the case. We will not leave anyone.”

Denying allegations by the opposition that the government had yielded to pressure and transferred Ajay Seth, former commissioner of the commercial taxes department, he said there was no such pressure. “Seth was not transferred. He has gone on a long leave to prepare his daughter for exams.”

Seth had issued tax notices to e-commerce companies, including Amazon India. The e-commerce firm had let out retail space to member-retailers at a fulfilment centre, which was a breach of the VAT law, Seth had said. More than 75 retailers on the Amazon platform had been issued notices.

Amazon had also refused to accept it was a commission agent, but officials insisted anybody issuing a tax invoice was liable to pay. Amazon attracted the attention of tax authorities when it was found the company was not paying VAT for transactions on its online platform, saying it was not doing business directly. It asked the department to collect VAT from sellers directly.

After that, the department had stopped issuing fresh registrations to new dealers for doing transactions on Amazon's e-commerce platform. According to departmental officials, the point is who should be assessed for tax —Amazon or its dealers? They say Amazon is performing more than only the role of a facilitator or a logistics provider for the goods booked and sold on its platform. It is also raising invoices on behalf of dealers, packing the goods, and delivering these at customers’ doorsteps, officials noted.

The department also wanted to know how the place of business for so many dealers was the same one. They had all stocked their goods at Amazon’s fulfilment centre, at Hoskote on the outskirts of this city.

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