Gujarat, Assam, Odisha, Uttarakhand, Rajasthan and Mizoram have such a tax and Punjab, Himachal, UP and MP are considering having it
Software lobby group National Association of Software and Services Companies (NASSCOM) today cautioned that states are creating barriers for market access within India after Gujarat joined Assam, Odisha, Uttarakhand, Rajasthan and Mizoram to levy an entry tax on goods purchased through e-commerce marketplaces.
The trend, which has sparked off a massive outcry amongst industry players such as Amazon, Flipkart, Snapdeal, Shopclues, etc, will make goods purchased from outside the state by residents of Gujarat more expensive. NASSCOM says this is akin to introducing trade barriers to free interstate trade.
“Providing un-restricted cross border access to sellers as well as buyers is the prerogative of the government and is an important driver towards creating an ease of doing business. Such tax structures will lead to additional burden on SME traders,” said R Chandrashekhar, president of NASSCOM.
India’s largest e-commerce player Flipkart, which filed a petition in the Uttarakhand High Court (HC) against the 10 per cent entry tax on goods bought via e-commerce firms in the state, recently won an interim stay on the case. The company also won a similar stay from the Kolkata High Court earlier this month.
Apart from the above mentioned states, Punjab, Himachal Pradesh, Uttar Pradesh and Madhya Pradesh are also mulling over the idea of increasing the amount of tax levied on goods purchased online. NASSCOM argues that states imposing higher taxes on e-commerce purchases will hurt SMEs the most and not just consumers who will have to cough up higher prices.
Moreover, with the upcoming Goods and Services Tax (GST) reform, differential levies on goods bought from e-commerce marketplaces will be short lived. The software body argues that firms will have to significantly upgrade their IT systems to differentially account taxes for goods entering such states, making the entire process highly commercially unviable since it is for such as short period of time.
States want to benefit from the boom in e-commerce which facilitated the sale of goods worth $12 billion in India during 2015. Earlier, Karnataka had gotten into a tussle with Amazon over payment of value added taxes, where the government wanted the firm to cover defaults made by merchants.