Ecommerce companies seem to have caught the eye of the governments down south and that too, not in a good way. The Kerala state government recently fined a slew of ecommerce retailers to the tune of Rs. 54 Crore for evasion of sales tax in the financial years 2012-13 and 2013-14. This step taken by the Kerala government comes close on the heels of the news of the Karnataka government banning Amazon India from selling electronics and a few other products from its warehouse in the state.
The companies that were fined by the Kerala government include Jabong; Robemall Apparels, company behind garment retailer Zovi.com; Flipkart; and Vector E-commerce, which has a stake in Mynta.com. Flipkart faced the maximum brunt with a fine of Rs. 47.15 crore. Meanwhile, Jabong.com was fined Rs. 3.89 crore, Vector E-commerce Rs. 2.23 crore and Robemall Apparels Rs. 36 lakh.
Ecommerce retailers like Snapdeal, Jabong, Flipkart and Myntra had stopped their delivers to some cities of Kerala last year as their cash on delivery (COD) mode was banned by the state’s commercial taxes department. The companies resumed their services and COD mode after sometime but according to the officials at the commercial tax department, the ban hasn’t been lifted and is very much in place.
The Kerala commercial tax department has plans of making the swoopdown on other ecommerce retailers in the future. According to a senior official of the department, “Since the online retail firms do not have brick-and-mortar showrooms, their websites will be treated as showrooms that display products and prices. If the products are sold to local customers, regional taxes will be applicable. All transactions are taxable.”
According to the state’s commercial tax department, the online retail falls under the purview of the definition of business, trade, goods, and sales as per the Kerala Value Added Tax Act 2003, General Clauses Act 1897, Transfer of Property Act 1882 and Sales of Good Act 1930. The Kerala government is quite confident of its win even if the companies fined decide to knock the doors of the court. Offline traders in the state have also complained about the sales tax evasion by the online players.
“Every day, at least Rs.10 crore worth of products are sold by online retailers. Since they can evade the state’s tax net, they can pass on discounts to the tune of 16% to the customer in the state. They do business at the opportunity cost of offline traders, who also have to cough up on overhead costs like showroom and staff wages,” said, E Binny, president of the Kerala Samsthana Vyapari Vyvasayai Samithi in a statement to The Financial Express.
On the other hand, a statement from a Flipkart spokesperson said: “It is our endeavor to be transparent in all our dealings with authorities. We are compliant with the laws of the land in which we operate and will work together with the authorities to ensure that there are no information gaps between us.”
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