Online dealers scrutinised by VAT department

For quite some time now, we have been positive that the ecommerce industry has caught the attention of government officials. With some disputes about tax and stocking of products in particular warehouses, the government has been forced to spell out its opinion about online marketplaces in India.

Time for action

Add to this the fraudulent incidents that customers have experienced with shopping online. With the various delivery gaffes that have occurred, some kind of legal intervention and framework has been overdue for a while now.  Thus, in light of these occurrences in the online retail industry, the Government has start scrutinising the veracity of sellers selling their goods through online marketplaces. This is done in order to ensure that vendors don’t use the effective ecommerce route to promote illegal sales or earnings.

According to recent reports, Delhi’s value added tax (VAT) department has planned to ask all registered dealers operating on online portals to check their tax declarations for the last and current fiscals. The department wishes to warn against any undervaluation or incorrect declaration and shall take strict action by way of heavy penalties against violators. The department has been scrutinising the transaction details of Flipkart.com and Snapdeal.com, but a response is awaited from Amazon.in as the portal has requested for some time to present relevant information.

What the officials say

VAT commissioner Sanjeev Khirwar told the Times of India, “We wrote to these three e-commerce players seeking their transaction details and those of the dealers operating through their portals. While Flipkart came forward with information, Snapdeal said it did not come under the purview of the sales tax laws as it was a mere facilitator and no dealer. That is when we moved to carry out an inspection in keeping with the legal provisions at the Snapdeal offices here and they have provided us data of 8,000 dealers operating on their platform.”  This inspection revealed that about 10% of Snapdeal’s dealers scrutinized so far were either not registered with the state as per norms or were bogus.

A Snapdeal spokesperson explained their stand on this issue. “In case any seller is found to be non-compliant, we are willing to assist the authorities in providing all the information that they need. We want a million small and medium sellers to succeed on our platform in a fully compliant manner,” the spokesperson said.

In a way, we think this is an excellent provision to regulate the authenticity of sellers and to verify their credentials. This could possibly protect online marketplaces from fraudulent or illegal vendors. Additionally, it could improve the customer’s shopping experience and trust.