Flipkart enters Legal battle with Uttarakhand, UP State over Unfair actions

IOS had earlier reported how Uttar Pradesh and Uttarakhand State’s complex tax system is affecting ecommerce leaders’ business.

The tables have turned now as the ecommerce biggie Flipkart, along with the help of the High Court is ready to take action against the two state departments for biased treatment and harassment.

Flipkart sues Uttarakhand government

The online marketplace has filed a petition against the Uttarakhand State government for levying 10% entry tax on goods purchased through ecommerce medium.

The standard entry tax rate is 5%. While Rajasthan is planning to impose 5.5% entry tax, Uttarakhand straightaway demands 10% on goods purchased from e-commerce companies. This is why Flipkart has decided to sue the state government.

Calling the entry tax move ‘discriminatory’ and ‘anti-consumer’, Flipkart’s petition states, “This new scheme is ex facie discriminatory wherein an additional tax burden is imposed on ‘goods’ procured through a different stream of commerce or commercial mobility. This is an aberration from the scheme of the UT Entry Tax Act, which sought to levy entry tax on specified goods irrespective of the entity from where they were procured.”

Other etailers are most likely to follow suit, but only after Flipkart’s case hearing.

UP tax dept criticized for withdrawing Rs. 49 crore from Flipkart’s account

Now let’s discuss the latest development in the Flipkart VS Uttar Pradesh tax battle.

Recently, the Allahabad High Court came down hard on commercial tax department of Uttar Pradesh. Its offence? Withdrawing Rs. 49.82 crore from Flipkart’s bank account in the name of VAT dues!

How it all transpired?

• Flipkart requested for change in place of business in its VAT registration form to Ghaziabad from Noida

• The tax authorities didn’t inform the etailer that its application for change of address has been rejected

• Tax department issued notice to Flipkart on January 27 for VAT dues and mailed it to the old Noida address instead of the new Ghaziabad one

• Shortly after that they attached Flipkart’s bank accounts and withdrew Rs 49.82 crore

The court slammed the state tax body’s disdainful behaviour of attaching the etailer’s bank accounts and removing money without issuing notice to the company. A bench of justices, Vinod Kumar Misra and Tarun Agarwala has also asked the tax officer who carried out this act to pay Rs. 2 lakh to Flipkart.

The above two positive developments indicate that the burden of unfair state tax policies & penalties on ecommerce businesses may reduce soon.