Online retailer Flipkart on Thursday filed a petition before the high court questioning the authority of the state commercial tax department in demanding value added tax (VAT) from it. Orders issued by the department imposing a penalty of around Rs 47 crore was also challenged before the court.
In the petition, Flipkart contended that it was only engaged in providing the service of online market place and is not directly selling goods to customers. Goods are sold by various sellers listed on the website and it is the sellers who pay VAT or central sales tax as applicable, the petition said.
Flipkart does not own these goods and neither do they transfer the goods. Therefore, no sale of goods is undertaken by the company in order to be liable to pay VAT or central sales tax, it was claimed.
The notices demanding payment of VAT are illegal and have been issued without jurisdiction and authority of law, the petitioner alleges. At most, the company only has to pay service tax, which can be demanded only by the central government, Flipkart said.
By demanding tax directly, the commercial taxes department is attempting to tax transactions which have already been taxed in the hands of the seller in the state from which the sale of goods have originated, the Bengaluru-based e-commerce company alleged.
As per the petition, the commercial taxes department had issued a notice to Flipkart on November 11, 2013 seeking details of goods it sold in Kerala and its sellers. On December 23, 2013, Flipkart replied that it only operated an online marketplace and did not sell goods to customers directly. The department issued two notices to the company in November asking them to explain why penalties of Rs 9.49 crore and Rs 37.65 should not be imposed for violating Kerala Value Added Tax Act. The company gave a detailed reply
reiterating its stance and provided documentary evidence. However, on December 31, the department passed orders imposing penalties of Rs 9.49 crore and Rs 37.65 crore on the company.
The petition is likely to come up for admission hearing on Friday.
Source: Economic Times
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