Nasscom slams entry tax on e-commerce goods

18 Apr '16
3 min read

The National Association of Software and Services Companies (Nasscom) has slammed state governments for creating barriers for market access within India for e-commerce companies. Nasscom's reaction came after Gujarat became the sixth state after Assam, Odisha, Uttarakhand, Rajasthan and Mizoram to levy an entry tax on goods purchased through e-commerce marketplaces. According to Nasscom, the move is flawed and is similar to introducing trade barriers on interstate trade.

Nasscom says this will hurt SMEs the most, part from consumers having to pay higher prices.

“Providing unrestricted cross-border access to sellers and buyers is an important driver towards creating ease of doing business. Such tax structures will lead to additional burden on SME (small and medium enterprises) traders,” said R Chandrashekhar, President of Nasscom.

Punjab, Himachal Pradesh, Uttar Pradesh and Madhya Pradesh are toying with the idea of increasing the tax levied on goods purchased online.

But with the GST on the anvil, differential levies on goods bought from e-commerce marketplaces will be shortlived. Nasscom says e-commerce entities will have to significantly upgrade their information technology systems to address the new levies, making the entire process highly commercially unviable, as it is for such a short period of time.

The decision of state governments to impose entry tax seems to stem from a desire for a slice of the massive revenue that e-commerce generates. The boom in e-commerce facilitated the sale of goods worth $12 billion in India during 2015.

The e-commerce industry has been staunchly opposing the levy of entry taxes, saying that such taxes increase cost of the goods brought into the states. Entry taxes are payable by the consumers and will be collected and deposited by entities that bring specified goods to a state from any other part of the country.

The country's largest e-commerce company, Flipkart, filed a petition at the Uttarakhand High Court against the 10 per cent entry tax on goods bought via e-commerce firms in the state. It recently won an interim stay and, earlier this month, another from the High Court in Kolkata.

Earlier, the Karnataka government had imposed sales tax on the goods sold by Amazon, saying the company was keeping the goods in the warehouses in the state and this amounted owning the items being sold. However, the company maintained that it was following a market place business model, in which it just plays the role of a facilitator or platform to conduct business and argued that the tax should be levied on the seller. (SH)

Fibre2Fashion News Desk – India

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