The Akhilesh Yadav government has imposed a 5% entry tax on all e-commerce purchases by consumers in Uttar Pradesh. The decision, which is also extended to courier services, was taken in a Cabinet meeting here on Tuesday.
The matter will be put before both houses of the state legislature, following which it will finally be sent to the governor for his approval, before it comes into force. Currently, the online market in the state is pegged at approximately Rs 12,000 crore and it is estimated that by 2020, the figure would rise fourfold.
While several other states such as Uttarakhand, Bihar, West Bengal and Himachal Pradesh have already imposed varying taxes on goods sold over e-commerce platforms, the UP government had so far dithered on the issue. But taking into account the huge sales volumes generated by e-commerce companies and the huge value added tax (VAT) tax potential, the state trade tax department has proposed imposing entry tax on the sale of such goods.
Talking to FE, an official of the trade tax department said the state would stand to collect almost `600 crore in taxes through such transactions during 2016-17.
“Most states have already started imposing tax on sale of goods over e-commerce and some others are actively considering imposing VAT,” he said, adding that VAT was the main source of revenue collection for the state and so far e-commerce companies had virtually been enjoying a tax holiday.
“The state infrastructure like road is used in the delivery of goods and although it is a business transaction, there had been no tax imposed in this case,” he added.
Traders and retailers in the state had been demanding a level playing field vis-à-vis e-commerce companies. They always harboured a grouse that while brick-and-mortar retailers are required to pay several taxes and duties, the goods sold by e-tailers were comparatively cheaper due to lower or no tax liability, thereby cutting into their sales.