State governments have been picking on online marketplaces through the use of entry taxes. Some may say they want a share of the ecommerce boom, some may say entry taxes are just a guise to exploit etailers. Online marketplaces don’t like being pushed around and certainly will fight back when someone tries to take away their earnings.
Just ask Flipkart! The online marketplace refuses to pay the unjust taxes imposed by the state governments of Uttarakhand, West Bengal and Gujarat. Flipkart has even filed legal motions against these state governments imposing entry tax on ecommerce goods being brought into the state. The etailer feels the state governments are being discriminatory.
Amazon Challenges the Bases of Entry Tax in Gujarat!
Recently Amazon India took the Gujarat state government to court for levying 6 – 12% entry tax on all ecommerce goods delivered from sellers in other states, (6% on normal commodities and 21% on specified products.) The state imposed its entry tax law, in March to level the playing field for sellers within the state.
The etailer challenged the definition and very concept of entry tax at the Gujarat High Court, according to a person familiar with the case.
The source told ET retailer, “The tax should be applicable to anyone who is importing items.”
“Now, in this case, Amazon is only a facilitator and only arranging the buyers and the sellers on the portal, and is neither the importer nor the consumer, and the company as such has nothing to do with the goods. It is not a case where Amazon is purchasing and selling,” said the person.
A senior executive at one of the largest ecommerce firms claimed that:
- Ecommerce companies are mere intermediaries in the value chain, so they should not be the ones taxed.
- Ecommerce firms are organized entities, so it is easier to chase after them instead of multiple sellers.
Entry Tax is Bad?
The secretary general of the Federation of Indian Chambers of Commerce and Industry, Dr. A Didar Singh said, “Any special tax that is ecommerce specific will result in negating the benefits to Indian MSMEs and also to end-consumers at large, as the increase in taxes will ultimately make the goods more costly.”
He also reasoned that entry taxes couldn’t possibly uplift state revenues. However, they could become a barrier to trade between states!