NEW DELHI: Ecommerce players are crying foul as several states start imposing entry tax on goods purchased online, which the industry alleges is ‘discriminatory’ and even ‘unconstitutional’.
Uttarakhand, Bihar and Assam have already imposed an entry tax — a tax states impose on goods coming in from another state — on goods purchased online. Almost half-a-dozen other states, including Gujarat, Madhya Pradesh and Rajasthan, are considering a similar levy.
Ecommerce companies have alleged that this levy, which is imposed on the courier agent delivering the goods, leads to substantial increase in prices of goods sold online since it amounts to double taxation, and said they are mulling judicial remedy individually as well as collectively.
An industry official said entry tax is erroneously being applied on ecommerce firms and that states were looking for easy ways of garnering revenues even as the goods & services tax (GST) is being delayed. “The decision to impose such a levy without any ostensible justification seems not to be driven by clean hands. The governments seem to be catering to various retail lobbies, which failed to stop ecommerce otherwise,” the official said, seeking anonymity.
Sudhanshu Gupta, vice-president (business) at Paytm, said, “What’s the point of the entire ‘Make in India’ if you can’t sell without barriers to all the people in India?”
He said these kind of levies act as a major deterrent for sellers from different parts of the country who have been traditionally supplying to showrooms in the state and are now selling directly to consumers.
Subho Ray, president of the Internet & Mobile Association of India, said, “The practice smacks of some kind of predatory tax regime which is being promoted by some states.” ET had reported on Monday that Flipkart has sued Uttarakhand for its decision to impose a 10% entry tax on goods purchased through ecommerce.
The country’s top etailer, which called the levy “discriminatory”, has filed the writ through its in-house logistics arm Ekart Logistics in the high court of Uttarakhand in Nainital. The matter is likely to be heard later this week.
Goldman Sachs has projected that India’s online retailing market, which is already one of the largest in the world, will expand to $69 billion in 2020 from $23 billion in 2016. Over the past month or so, entry tax on ecommerce purchases found mention in the Budget speeches of Gujarat, Madhya Pradesh and Rajasthan. Madhya Pradesh Finance Minister Jayant Malaiya in his Budget speech said the government wishes to impose an entry tax of 6% on goods purchased online to compensate for the loss due to ecommerce. It is estimated that 20-30% of the state’s commerce has shifted online.
Similarly, Gujarat Finance Minister Saurabh Patel proposed a levy on ecommerce transactions where goods are sourced from outside the state.
“Trade of dealers of the state is affected adversely as also the state suffers loss of tax revenue due to sale of goods through supplies in the state from outside the state under ecommerce transactions. By capturing such transactions under the entry tax, the dealers of the state would get level playing field,” he said in his Budget speech.