The current Value Added Tax Act is more confusing than figuring out what women want. But thankfully, this winter legislative session, the government of Karnataka plans to simplify the ambiguous laws around ecommerce.
This is slated to benefit the marketplace model, which is a business model where companies like Amazon provide a platform to online sellers to find buyers, and facilitate transactions. In addition, logistical facilities may be provided by the marketplace to its sellers. Flipkart, another major player in the ecommerce space, has a marketplace model, but it also conducts sales through a separate entity.
The point of contention has been that marketplaces don’t technically buy goods from sellers and then sell them, they only provide a service to facilitate buying and selling and hence marketplaces believe they should be exempted from paying VAT. VAT, after all, is an indirect tax on the domestic consumption of goods and services, compounded at each stage of production and distribution, fully borne by the end consumer.
However, officials from the state finance department uphold that companies like Amazon offer their platform and services for a commission, and commission agents, under the existing VAT act, have to pay tax. This contention would be settled once the state government’s amendment clarifies whether e-commerce players fall under that category.
This problem picked momentum last month when Amazon dealers showed Amazon’s warehouse as their additional place of business, which seemed like a tax evasive move to the tax officials.
The government wants all e-commerce firms to pay up, whether they call themselves dealers, aggregators, retailers, facilitators or commission agents. Tax experts, however, forewarn this may further complicate an already complex tax structure. “The indirect tax regime is complicated enough,” said Sandeep Ladda, India technology leader in consulting and audit firm PricewaterhouseCoopers (PwC).
The government however stands to benefit from this move since it would translate to an increase in revenue. But would this mean increased prices, and fewer discounts for customers?
Editor team is specialized in introducing the marketplace content targeting the Indian online sellers. They plan and coordinate to bring the appealing content for the small businesses on how to partner with the e-commerce sites like Amazon and Flipkart and strategies for improving their online business.
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