In
the case of E-commerce Marketplaces Vs Gujarat State Entry Tax, the Gujarat High
Court has reportedly granted some relief to the companies. The tax liability
can now be reduced to the extent of central sales tax paid in the state of
origin.
The
order was passed by a division bench of Justice MR Shah and Justice BN Karia of
Gujarat High Court, in a case relating to Flipkart and its group company
Instakart. The ruling will ensure that the total tax paid on the goods
purchased by consumers in Gujarat from ecommerce companies is equal to
the tax paid levied on similar goods in the state.
The
decision is in line with the judgement given by the Supreme Court on
November 11, 2016, wherein the states were allowed to impose an entry tax on
ecommerce goods, but also mandated to ensure that it should not discriminate
when compared with the tax imposed on similar goods by a state on its local
traders.
Long
Story Short.
The
Gujarat government passed the bill to levy entry tax on goods
purchased through ecommerce portals in March 2016. As per the government, the
previous bill affected the local traders as the goods on ecommerce websites
were sold at a much cheaper price as no taxes were levied on these goods.
The
ecommerce marketplaces including Flipkart, Amazon and Snapdeal
alleged that they are a facilitator and an intermediary. The tax, if
applicable, should be imposed on the merchant directly, and not on the
marketplace. However, looking at the innumerable transactions happening via
ecommerce marketplaces, states find it easier to impose the tax on the
marketplace or delivery entity instead of the seller.
After
Flipkart, Amazon too filed a case against Gujarat State Government for
imposing Entry Tax. Flipkart also sued the states of Uttarakhand,
Assam, Rajasthan, and Madhya Pradesh on similar lines.
Prior
to this, in October 2015, Flipkart, Amazon and Snapdeal had collectively
decided to stop delivering products exceeding INR 5,000 in value, in UP and
Uttarakhand. The decision was made citing the harassment by tax authorities,
wherein buyers needed to file VAT form and provide the details of vehicle
shipping good while purchasing goods from them.
Other
States With Taxes On Ecommerce Goods
Uttarakhand: In
December 2015, the Uttarakhand government had imposed 10% tax on all ecommerce
goods entering the state. In response, Flipkart filed a case against the
state of Uttarakhand for imposing this entry tax on ecommerce goods.
Jammu
and Kashmir: Tax is levied in case of non-registered dealers and
individuals for goods above INR 4,999.
Maharashtra:
The state has an entry tax on ecommerce goods.
Sikkim
and West Bengal: Both the states have 1% tax on ecommerce goods.
Bihar: Shipments
below INR 10,000 have tax applicable.
Himachal
Pradesh: If the TIN is not mentioned then entry tax is levied. A 5% entry
tax for individual & non-registered dealers, and 3% for government bodies.
Madhya
Pradesh: In his budget speech, Madhya Pradesh Finance Minister Jayant
Malaiya said the government wishes to impose an entry tax of 6% on goods purchased
online to compensate for the loss due to ecommerce.
Assam: According
to recent reports, Assam was also planning to levy a tax on ecommerce goods.
A
few state governments charge these taxes in form of octroi and the amount
ranges from 3% to 6% in different states. The situation is expected to become
clear with the induction of the GST in April 2017, provided ecommerce
marketplaces are defined correctly, so as to have the right kind of tax levied
on them.
The development is
first reported by ET.
