UP’s tax system hurting ecommerce firms Flipkart, Amazon, Snapdeal

Editor | Sep 10, 2020

An online buyer posted on Flipkart’s Facebook page,

“Flipkart – Moto G3 not deliverable at 226012. Should buyer move to other pincode as it is sold through FK only.”

Flipkart representative replied,

“Sorry, serviceability at UP has some constraints. Please provide us with an alternate address outside of UP, we’ll ship your order.”

The buyer didn’t seem satisfied with the series of explanations offered by Flipkart’s CE as his last comment was about boycotting the ecommerce portal.

Lost opportunity for the buyer, seller and Flipkart. All because of Uttar Pradesh state’s tax regulations. Sigh!

Losing out on a huge market

Uttar Pradesh is India’s most populous states. This makes it a very profitable market and can contribute to ecommerce’s growth in a big way, but it largely remains unexplored due to tax restrictions.

IOS had earlier reported how tax issues in UP and Uttarakhand are driving away ecommerce companies Flipkart, Amazon, and Snapdeal. The mandatory VAT declaration rule for every purchase above Rs. 5,000 from other states has compelled online marketplaces to not fulfil orders from states like UP.

Etailers are trying to set up warehouses, fulfilment centres and increase local seller base in UP, but it still means limiting the buyer’s choice.

UP trade officials reveal 5% entry tax on goods sold online

UP Trade Tax Commissioner Mukesh Meshram declared that the state government is looking to enforce 5% entry tax on goods sold by e-commerce firms in the state.

“In fact, it is the suggestion of the courier companies for the imposition of 5% entry tax on goods sold by e-commerce companies. Several states have either imposed tax on sale of goods over e-commerce or have proposed or actively considering imposing VAT,” he said.

The Rs. 5,000 cap coupled with 5% entry tax is only going to add to online marketplaces’ woes. If these issues continue to be the way it is now, ecommerce companies, sellers and the state will continue to lose money. We hope that UP state tax authorities and ecommerce players find a middle ground soon.

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