Etailers may have to submit vendor sales data to state governments

The big fishes of the booming ecommerce ocean like Amazon, Flipkart, Snapdeal, Ebay etc are soon going to face some trouble by getting caught in the net of state government taxation system. Some states like Delhi, Kerala and Uttar Pradesh have already initiated their moves by introducing new disclosure norms addressing the need for the above mentioned marketplaces to provide the monthly sales data of their registered vendors conducting their business in or out from the respective states, to stay in compliance with the overseas investment rules. With more and more states leaning towards following the lead, it is looking very likely to take a countrywide shape in near future, may be in coming couple of years time.

Confusion Regarding Tax Levied on Etailers

The ecommerce marketplace model, due to its intricate web delivery structure, has led to some confusion regarding the state levied sales tax and value added tax (VAT), which is also evident in the mentioned levied taxes in the provided online purchase invoices. Moreover, with leading credit rating agency like Credit Rating Information Services of India Limited (CRISIL) estimating annual Indian ecommerce growth of 55% to a staggering INR 50,000 in next three years, state governments do not want miss out on any opportunity to collect revenue from it and make sure no evasion of levied taxes.

Governments Setting Up New Disclosure Norms and Taxation Regime

While the Narendra Modi government is looking to boost Indian commercial and industrial sector through its wide array of stringent rule relaxations, some of the state governments like that of Kerala, Uttar Pradesh and most notably, Delhi, the capital of the country, has decided to go a bit way ward to the ongoing theme by adding an extra layer of scrutiny on the ecommerce companies by levying the new disclosure norms and taxation structure.

At a time when Amazon India is already embroiled in a tax tangle with Karnataka Government regarding imposition of value added tax (VAT) on goods sold by registered vendors through its platform and also its “fulfillment” centre model, this move by the state governments come as an even greater shock wave towards the ecommerce giants. The Delhi government has already issued a deadline of July 20 for the ecommerce companies to file their first return regarding the sales conducted by their vendors inside the state and also from their local distribution points to the outside as well.

While Kerala has made mandatory for the ecommerce companies to register with the state tax department and file their monthly disclosure returns unveiling their transaction details of the sell of goods transported to and from Kerala, Uttar Pradesh tax department, on the other hand, has made mandatory for logistics of these ecommerce companies including the likes of their courier and warehouse services, to get a state specific service provider registration number and also submit monthly taxable items’ transaction records in the state. Besides, the state governments have already set up a specialized task force under the empowered state finance ministers’ panel to tackle the taxation on the ecommerce companies issue under the upcoming goods and services tax (GST) regime scheduled to be implemented from April 1, 2016.

Experts’ Say on the Move

While the other major ecommerce companies have decide stay mum on the issue, according to leading news daily Economics Times, an Amazon India spokesperson has commented to undertake the necessary steps to stay in compliance with the soon to be implemented local state tax laws. Although the experts like Pratik Jain, a partner of KPMG India, has justified the demand of the states to ask for greater disclosure vendor sales information on the respective ecommerce platform, has also deprecated the states’ stipulation of VAT on them and has insisted for a clearer upcoming GST framework to avoid unnecessary litigation.

While implemented steps will bring more transparency to the ecommerce business, again at the same time, the burden of extra scrutiny, complexity and increased cost is likely to put the leading ecommerce companies in little bit of discomfort which in turn, may also be reflected on the concessional price of different goods, from customers’ perspective, that is usually associated with these ecommerce marketplace platforms.