1. Eyeing ecommerce cash cow: On CAG prod, Kerala to move on e-traders

Eyeing ecommerce cash cow: On CAG prod, Kerala to move on e-traders

VJ Gopakumar, deputy commissioner, office of the commissioner of commercial taxes said, “Flipkart, Myntra, Amazon, Snapdeal, Jabong and a couple of others have applied for registration.

By: | Bangalore | Updated: May 4, 2016 7:59 AM
Amazon, snapdeal, flipkart The commercial tax department in Karnataka too has asked e-retailer Amazon to pay sales tax though the online player has defended itself saying it is merely a platform. (AP)

The Kerala commercial tax department will appeal a decision of the Kerala High Court that quashed a fine imposed by the state government on e-commerce firms for non-payment of value-added tax (VAT) on goods sold online and delivered in the state. The move comes in the wake of a Comptroller and Auditor General (CAG) report ordering the state government to bring these firms into the tax net. The CAG has pegged the loss in revenues to the state exchequer due to non-registration of about 30 online firms at R174.33 crore. This is based on Kerala’s share of the estimated online trading in India of 1.48%.

Speaking to FE, VJ Gopakumar, deputy commissioner, office of the commissioner of commercial taxes said, “Flipkart, Myntra, Amazon, Snapdeal, Jabong and a couple of others have applied for registration. However, we have not given the approvals as we are awaiting the amendments to the Act and there is still some clarity required. AG has asked us to submit an appeal before the division bench on the same.”

The commercial tax department in Karnataka too has asked e-retailer Amazon to pay sales tax though the online player has defended itself saying it is merely a platform. As an alternative to being registered as a dealer, the department suggested Amazon disclose details of transactions on its website and take primary liability if a merchant evades VAT. Amazon, however, turned down this request.

A Flipkart spokesperson said, “At Flipkart, we have always been in compliance with all rules and regulations, and have paid taxes in accordance with the law of the land.”

In 2014, the Kerala government had slapped a penalty Rs 47.15 crore on Flipkart, Rs 3.89 crore on Jabong Rs 2.23 crore on Vector E-commerce for allegedly evading tax. The high court, however, quashed the case last October, ruling in favour of the e-commerce companies.

The CAG report, however, has noted that online sales fall under the purview of local sales and attract tax under the Kerala VAT Act for delivery within Kerala. It has observed that the state commercial tax department has failed to levy tax and has directed that the firms be registered with the commercial tax department so that their sales details can be scrutinised.

The commercial tax department has suggested an amendment to the Kerala VAT Information System so that the companies can file their monthly returns for scrutiny.

Many online retailers have stopped delivering goods to Kerala due to the lack of clarity on taxation. While e-commerce firms reported close to 40% business coming from South India, they said, Kerala accounted for less than 1% of their overall sales.

In November, Nitin Kochhar, VP at Shopclues, had told FE, “Southern states contribute close to 38-40% of our overall sales. While Tamil Nadu and

Karnataka contributes 7% each, AP is around 5-6% and Telangana 2-3%. Kerala is nil, but can easily account for 4% of the overall sale, if regulations are simplified.”

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