Amazon and Flipkart join hands to fight against taxes

The e-commerce industry is coming together to fight against governments, that are imposing entry tax on goods purchased online. Flipkart has several cases filed against Uttarakhand, West Bengal, and Gujarat state governments and now Amazon too has joined the fight.

Amazon has registered a lawsuit against Gujarat government - which passed a bill to levy entry tax on goods purchased through e-commerce portals on March 31, 2016 - “challenging the definition and the very concept” of this tax.

In addition to Gujarat, several other states - West Bengal, Uttar Pradesh, Mizoram, Assam, Bihar, Orissa, Rajasthan, and Uttarakhand - have also levied entry taxes on e-commerce.

A person involved with Amazon said, "Amazon is only a facilitator and only arranging the buyers and the sellers on the portal, and is neither the importer nor the consumer, and the company as such has nothing to do with the goods. It is not a case where Amazon is purchasing and selling. The tax should be applicable to anyone who is importing items."

The state governments are defending the tax in the name of providing equal opportunity to offline traders. The traders who have been urging against online shopping entities for some time now have accused e-commerce companies for affecting their business by offering heavy discounts.

The potential of generating heavy revenues is another reason behind such government's taxes. Recognizing the huge growth in online shopping which will only increase in future, state governments are trying to earn considerable revenues by levying taxes on online goods. For example, UP government, which proposed an entry tax of 5 percent on e-commerce goods, is expecting to earn almost 600 crores in tax revenues during 2016-17.

However, e-commerce companies, as well as online trade regulation bodies and NASSCOM, are not ready to provide big revenues to the government because these entities serve only as marketplaces and do not directly sell goods to consumers.

According to Dr. A Didar Singh, Secretary General of Federation of Indian Chambers of Commerce and Industry (FICCI), "Any special tax that is e-commerce specific will result in negating the benefits to Indian MSMEs and also to end-consumers at large, as the increase in taxes will ultimately make the goods more costly."

Flipkart had challenged Uttarakhand and West Bengal state governments before Gujarat. Calcutta High Court gave its decision in support of Flipkart by placing a stay on state government’s order. Nevertheless, the West Bengal government is preparing to go to Supreme Court against the decision.

This approach could also be followed by other governments in future.