Ecommerce companies have reason to worry on the Telangana front. Reports have confirmed that the state government is working on imposing taxes on ecommerce companies. The Telangana government is proposing an amendment to Value Added Tax (VAT) to counter loopholes in the current tax system.
Major ecommerce companies like Amazon and Flipkart are a disappointed lot. Perhaps the word ‘disappointed’ would be a mild understatement, as both companies have invested heavily in setting up their warehouses in the state. Both the companies are Bangalore-based, and shifted to the newly formed state over tax ambiguity. Amazon chose to move to Telangana because the company was facing problems in Karnataka due to the latter’s tax laws.
It seems the Telangana government is dead set on moving ahead with its taxing plans.
State commerce minister Talasani Srinivas Yadav says, “We are working on a policy framework to monitor all kinds of online transactions, including those of the e-commerce companies. The proposal is to set up a common server and to see to it that no one is out of the tax purview.”
Yadav goes on to say that the government wants to encourage IT companies. “However, there must be a proper monitoring system for regulation while ensuring revenues to the exchequer,” he says.
Leading online marketplaces had moved out of Karnataka because of the proposed one percent VAT. Unfortunately it seems to be a move too soon because Telangana is planning to have a similar pattern of VAT.
The government is unrepentant on its plans.
Jayesh Ranjan, IT principal secretary defends the proposal with, “The e-commerce firms had agreed that they would cooperate with the state policy before they came here with their business proposals. They had committed to pay tax.”
Ecommerce companies, however, are not amused.
Citing the move as ‘regressive’, Sandeep Kumar Makthala, who is the global president of Telangana Information Technology Association states, “When e-commerce companies are looking at Telangana as an investment destination, the state must be competitive in terms of industry-friendly policies as compared to the other states.”
However, it seems that no amount of complaining or whining will work, as the Telangana government is fast-tracking the policy formation. Ecommerce companies will have to resign themselves to paying VAT. With most other states like Karnataka, UP, Uttarkhand, and Tamil Nadu standing by their VAT rules, online sellers are finding themselves at the short end of the stick. Will there be any respite? Only time will tell.
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