Gujarat govt wins tax battle, leading marketplaces to pay up

Editor | Sep 15, 2020

After a lot of back and forth, the verdict is out on the entry tax conundrum – companies will have to pay. After the Gujarat High Court dismissed a petition (filed by Amazon, Flipkart and Instakart), it has directed the companies to pay the state government the pending tax amount. If sources are to be believed, this will amount to a cool Rs. 125 crores.

This is a combination of the amount that various companies will end up paying, says Aarati Kanwar, special commissioner in the commercial tax department,

“So far our entry tax collection is Rs 102 crore but after recent dispute redressal, many other agencies will pay disputed amount. So the actual collection will increase considerably. We expect by March 2017 total entry tax collection from online sales in the state may cross Rs 125 crore.”

The long journey home

Etailers and different state governments have been battling over this issue for a long time. The Gujarat government has been on it since April this year, when it passed a bill to give a fair chance to the local retailers. However, ecommerce players said that it was just a means for the states to get their hands on the rapidly booming online retail (God knows how everyone is struggling to keep afloat in the midst of their losses).

An inspired Rajasthan government planned a similar move. However, etailers noted that they were subjected to Central Sales Tax (CST) and the double taxation was unwarranted. Likewise, Uttar Pradhesh was planning a 5% entry tax on goods that come into the state, but this caused Flipkart to take a step back from the state.

The company also filed litigation against the Uttarkhand government for its 10% entry tax, and got a stay order. Next, Flipkart won a stay order on the state of West BengalJammu and Kashmir was next.

Thankfully the Patna high court deemed entry tax on products purchased online illegal

GST to be the harbinger of peace?

The long overdue Goods and Services tax will centralise all taxes, which will give relief to retailers. As of now Flipkart will bear the weight of the tax payable to the Gujarat government on its own. A senior executive from Flipkart said under anonymity,

“Entry tax is largely absorbed by the company when we have to pay the state governments. That, as a consequence, has some impact on our share of earnings from selling a product.”

Will 2017 bring with it the GST and a breather to online sellers?

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