1. E-commerce: Taxing times for Flipkart, others, as Kerala slaps Rs 54-crore penalty

E-commerce: Taxing times for Flipkart, others, as Kerala slaps Rs 54-crore penalty

The harshest penalty crackdown came on Flipkart at Rs 47.15 crore, followed by Jabong at Rs 3.89 crore, Vector E-commerce at Rs 2.23 crore and Robemall Apparels at Rs 36 lakh

By: | Thiruvananthapuram | Updated: January 25, 2015 12:28 PM
E-commerce companies provide a clear value to consumers, and have an important role to play in leveraging new technologies to enable broader economic development, and hence it is in the interests of all stakeholders to evolve approaches that can enable the growth of such enterprises.

The companies that have come under the scanner are Flipkart; Jabong; Vector E-commerce, which has a stake in Myntra; and Robemall Apparels, which operates garments retailer Zovi.com.

CLOSE on the heels of Karnataka government’s decision to ban Amazon’s Indian arm from selling electronics and a few other select products from its warehouses situated in the state, the Kerala state department has slapped a fine of up to Rs 54 crore on a slew of e-retail players for evasion of sales tax in 2012-13 and 2013-14.

The companies that have come under the scanner are Flipkart; Jabong; Vector E-commerce, which has a stake in Myntra; and Robemall Apparels, which operates garments retailer Zovi.com. The harshest penalty crackdown came on Flipkart—R47.15 crore. Meanwhile, Jabong has been fined R3.89 crore, Vector E-commerce R2.23 crore and Robemall Apparels R36 lakh.

Also read: E-commerce: Amazon, Flipkart, rival cos fuel commercial property boom in India

Last year, Jabong, Myntra, Flipkart and Snapdeal had stopped delivery to cities in Kerala as the state’s commercial taxes department had banned their cash on delivery (COD) mode. Despite a brief spell of vacuum in online retailing in the state, the companies had resumed their COD services. Officials, however, insist the ban was still in place.

The state’s commercial taxes department has reportedly said it will make the swoopdown on other online retailers too. “Since the online retail firms do not have brick-and-mortar showrooms, their websites will be treated as showrooms that display products and prices. If the products are sold to local customers, regional taxes will be applicable. All transactions are taxable,” said a senior official.

The sales tax department has said the companies have been penalised for evading taxes for the last two years and that they are looking at other online retailers too. Once found guilty, they will also be fined, tax officials.

As per Kerala’s department of commercial taxes, the online retail falls “under the purview of the definition of business, trade, goods and sales as per the General Clauses Act 1897, Sales of Goods Act 1930, Transfer of Property Act 1882 and Kerala Value Added Tax Act 2003. The state is confident that it will succeed even if the companies approach the court.

Offline traders in Kerala, who have high stakes—considering the state is among the country’s toppers in household monthly per capita expenditure as per annual studies conducted by the National Sample Survey Organisation – have also been complaining of sales tax evasion by online players. “Every day, at least R10 crore worth of products are sold by online retailers. Since they can evade the state’s tax net, they can pass on discounts to the tune of 16% to the customer in the state. They do business at the opportunity cost of offline traders, who also have to cough up on overhead costs like showroom and staff wages,” E Binny, president of the Kerala Samsthana Vyapari Vyvasayai Samithi, told FE.

Besides active consumption behaviour, which makes Kerala more vulnerable to online retail transactions, there is the high literacy rate and high Internet penetration. “In any case, a state, which is dependent on commodity taxes, cannot afford to ignore the tax revenue from online retail transactions,” said Jose Sebastian, faculty, Gulati Institute of Finance and Taxation.

Before Kerala’s taxmen, their counterparts in Karnataka had banned Amazon’s Indian arm from selling electronics and a few other select products from its warehouses situated in the state.

Meanwhile, a Flipkart spokesperson said: “It is our endeavour to be transparent in all our dealings with authorities. We are compliant with the laws of the land in which we operate and will work together with the authorities to ensure that there are no information gaps between us.”

  1. anon
    Jan 25, 2015 at 12:15 pm
    good work kerala. offline players are much more important to the economy than online players.
    Reply
    1. anon
      Jan 25, 2015 at 12:15 pm
      good work kerala. offline players are much more important to the economy than online players.
      Reply
      1. anon
        Jan 25, 2015 at 12:18 pm
        good work kerala. offline players are much more important to the economy than online players.
        Reply
        1. D
          deyan
          Sep 29, 2015 at 9:45 pm
          Online shopping is revolutionizing retail s. It brings manufacturers directly to end customer cutting everyone in between. This is going to be the mainstream a few years from now. So it is important that this business also follows the same rules as existing business and pay taxes. is a Kerala based ecommerce company playing by rules; paying taxes and shipping to every zip code. They even have the best prices compared to other major ecommerce players in several products including Prestige cookware like pressure cookers, stove tops, etc.
          Reply
          1. D
            deyan
            Sep 29, 2015 at 9:46 pm
            krayika
            Reply
            1. A
              amit j
              Jan 25, 2015 at 10:30 am
              Is penalty justified - govt is sending out wrong signal to businesses - new entrants shall think before investing in India - what about Make In India then. That's not the way to show rivalry - punish the culprit why businesses
              Reply
              1. G
                gpr
                Jan 25, 2015 at 3:38 pm
                these online players make nothin in India instead.............. nor the retailers.................
                Reply
                1. L
                  Lalith
                  Jan 25, 2015 at 2:29 pm
                  Good morning Kerala govt!
                  Reply
                  1. L
                    Lalith
                    Jan 25, 2015 at 2:29 pm
                    Good morning Kerala govt!
                    Reply
                    1. K
                      KUMAR
                      Jan 25, 2015 at 8:30 pm
                      Most of on line business are fake---BEWARE
                      Reply
                      1. K
                        KUMAR
                        Jan 25, 2015 at 8:30 pm
                        Most of on line business are fake---BEWARE
                        Reply
                        1. K
                          KUMAR
                          Jan 25, 2015 at 8:31 pm
                          most of the online business are fake
                          Reply
                          1. K
                            KUMAR
                            Jan 25, 2015 at 8:31 pm
                            most of the online business are fake
                            Reply
                            1. Shankar Shankar
                              Jan 25, 2015 at 6:00 pm
                              This is nothing but lobby of local businessmen, who use to squeeze customers who never come to know the real price of an item he intend to purchase. All these years this local businessmen were looting public without giving bills for the transactions.Once customers started getting huge discount through online purchases, these local businessmen started losing business and now they are using this tactics.This should be opposed by online purchasers as the loss government incur through online business is nil and it was local businessmen who were cheating public.
                              Reply
                              1. Sanjeev Mahajan
                                Jan 25, 2015 at 3:03 pm
                                This is a welcome step. All rules and regulations should be modified to plug loops of mobile transactions which include taxi services. No govt. should loose revenue as a result.
                                Reply
                                1. S
                                  Subrata Sarkar
                                  Jan 25, 2015 at 5:30 pm
                                  The ST Deptt.has a valid stand in this.The co.s cann't evade tax while executing business transactions.Business should be undertaken on level playing field for fair compeion.
                                  Reply
                                  1. V
                                    vimal
                                    Aug 18, 2015 at 6:19 am
                                    Where are we heading? One side we want to bring GST and other side we are allowing State to encash this fast growing business.
                                    Reply
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