The Punjab excise and taxation department has started a survey to calculate the revenue loss to the state exchequer from online shopping, reports Hindustan Times. According to a preliminary estimate, the loss is to tune of crores of rupees annually.

It has asked e-commerce websites to furnish details of items they have sold to people living in Punjab. They also plan to ask these companies to set up warehouses in the state so that it can ensure payment of local taxes.

As of now when products are sold online sales tax is being paid in the state where the seller is based. Many state governments however feel that these sellers should pay taxes in the states where the buyer is based in as well.

Earlier this month leading e-commerce players had stopped shipping products to Kerala because of similar issues there.

What about GST: As of now retailers need to pay Central Service Tax (CST), Value added tax and also separate tax in the state the item is sold in, for each product. Each of these taxes need to be paid at different centres and though it can be done online, it is not always a convenient process, or one that can be automated according to retailers. This is a big problem for e-commerce companies that operate at a bigger scale and need to sell products across states in India on a daily basis.

Merchants, both online and offline have been demanding the introduction of Goods and Services Tax (GST) that would combine all the above mentioned indirect taxes and reduce the hassle for retailers. Once a merchant pays GST, the adequate tax amount is paid to each state by the centre and that should help avoid such scenarios like in Punjab and Kerala.

It is also worth noting that GST will reduce the prices of products as the tax is charged only on the value addition at each stage rather than on the value of the product sold. Though GST could be in the range of 15-20%, the final price of the product will supposedly be lower than the current tax regime.

This tax incidentally was proposed back when the last NDA government was in power and has been slowly moving through the bureaucratic channels towards becoming a law. It is worth noting that BJP (which heads the NDA) had mentioned the implementation of GST as one of their objectives in its 2014 election manifesto. The party had claimed that it would build a “robust IT framework” to implement this without mentioning the timeframe.