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Late last week, the Delhi Government made it mandatory for all ecommerce companies and platforms to file transaction information by their sellers and traders via their platforms or website. This is a move that will help the Delhi Government’s Department of Trade and Taxes to identify sellers of goods and services, and ensure that adequate taxes are being paid by the sellers. The Delhi Government says that it had come to its notice that “some dealers/sellers engaged in the selling of goods through online portals were not depositing the due tax that they owe to the Department, even after collecting from consumers”. This addresses a long standing regulatory loophole, where neither ecommerce websites nor merchants were paying the requisite tax, for which tax departments have, in some states, taken action against the ecommerce platforms themselves, holding them accountable for the actions of merchants on their platform.

Delhi, Kerala and Rajasthan are three states which recognize that ecommerce platforms aren’t merchants, and hence this is a move to ensure that the government has enough information to identify sellers, and check if taxes are being paid by them or not.

As per this notification:
– e-commerce companies/firms/firms have to log on to website of the Department www.dvat.gov.in to enrol themselves by furnishing some basic information online in Form EC-I.
– Following this, a unique Id will be generated which will be utilized for online submission of forms EC-II & III.
– They have to file quarterly return in Form EC-II & III since 1st quarter 2015-16.
– The last date for filing of EC-II & III for the 1st quarter 2015-16 is 30.09.2015.
– The sellers/dealers etc. selling goods from e-commerce web-portal have to submit their particulars such as TIN Number, PAN No. to the concerned e-commerce web-portals.
– The sellers/dealers selling goods from e-commerce web-portal have also to submit details of their sale/purchase in Annexure 2A & 2B of DVAT- 16 or else penalty u/s 86(12) or u/s 89(2) of DVAT Act, 2004 will be imposed.
– Non-compliance of the notification shall be treated as violation of the various provisions, especially U/s 59(2) which attracts penalty of Rs. 50000/- under section 86(14) of Delhi Value Added Tax Act, 2004.

Why is this needed?

This is a good move because it establishes the fact that ecommerce platforms aren’t going to be held accountable for non-payment of tax by sellers on their platform. At a law and technology conference, Snapdeal’s general counsel Ashish Chandra had talked about instances of state governments, which don’t have the wherewithal to go after individual sellers avoiding tax, actually imposing it on ecommerce platforms instead: “We earn only 4-5%. If you ask us to pay 16% tax which should be paid by the seller, who will do an ecommerce business in India?”

“Thankfully,” Chandra had said, “with all the intervention from the ecommerce companies, there are three states (Delhi, Kerala and Rajasthan) which have a legislation which says that ecommerce companies are not sellers. They’re service providers. The only thing they have to do is provide the information about sales on the sites, and then the duty is of the government to do any reconciliation. That’s the right way to legislate.”

Must read:
Snapdeal’s Ashish Chandra on the regulatory challenges that ecommerce companies face in India
– Buy our report: The Structuring of Ecommerce businesses in India.

The press release from the Delhi Govt

TRADE AND TAX DEPARTMENT ISSUES DIRECTIONS, MAKES MANDATORY FOR ALL THE DEALERS/SELLERS ENGAGED IN THE SELLING OF GOODS THROUGH ONLINE PORTALS TO FILE THEIR INFORMATION ONLINE WITH REGARD TO TRANSACTIONS MADE BY SUCH SELLERS/TRADERS THROUGH THEIR PORTAL

· THE DETAILS OF NOTIFICATION AND ACT & RULES ARE AVAILABLE ON DEPARTMENT’S WEBSITE (WWW.DVAT.GOV.IN). PASSWORD FOR LOGGING IN WOULD BE COMMUNICATED THROUGH E-MAIL.

· NON-COMPLIANCE OF THE NOTIFICATION SHALL BE TREATED AS VIOLATION OF THE VARIOUS PROVISIONS, ESPECIALLY U/S 59(2) WHICH ATTRACTS PENALTY OF RS. 50000/- UNDER SECTION 86(14) OF DELHI VALUE ADDED TAX ACT, 2004

New Delhi: 04/09/2015

To regulate the dealers/sellers engaged in the selling of goods through online portals, the Trade and Tax Department has made it mandatory for them to Deposit the due tax that they owe to the Department to file information online with regard to transactions made by such sellers/traders through their portal. Taking into consideration the Notification issued by Department of Trade and Taxes, Delhi vide No. F.3 (515)/Policy/VAT/2015/330-41 dated 26/06/2015, the Department of Trade and Tax has made mandatory for all e-commerce companies/firms providing e-platform facility to file information online with regard to the transactions made by such sellers/traders through their portal.

In the financial year 2014-15, it had come to the notice that some dealers/sellers engaged in the selling of goods through online portals were not depositing the due tax that they owe to the Department, even after collecting from consumers. As e-commerce is an emerging and fast growing sector, department felt it imperative to regulate these dealers so as to bring them under the ambit of VAT. In this direction, through which it had with the Department.

Department recently convened a meeting with representatives of e-commerce web-portals on 27.08.2015 and has removed all the apprehensions in this regard. In line with the aforesaid notification, e-commerce companies/firms/firms have to log on to website of the Department www.dvat.gov.in to enrol themselves by furnishing some basic information online in Form EC-I. On successful furnishing of data, a unique Id will be generated which will be utilized for online submission of forms EC-II & III. Thereafter, they have to file quarterly return in Form EC-II & III since 1st quarter 2015-16. The last date for filing of EC-II & III for the 1st quarter 2015-16 is 30.09.2015.The sellers/dealers etc. selling goods from e-commerce web-portal have to submit their particulars such as TIN Number, PAN No. to the concerned e-commerce web-portals. The sellers/dealers selling goods from e-commerce web-portal have also to submit details of their sale/purchase in Annexure 2A & 2B of DVAT- 16 or else penalty u/s 86(12) or u/s 89(2) of DVAT Act, 2004 will be imposed. Further, non-compliance of the notification shall be treated as violation of the various provisions, especially U/s 59(2) which attracts penalty of Rs. 50000/- under section 86(14) of Delhi Value Added Tax Act, 2004.

The details of Notification and Act & Rules are available on Department’s website (www.dvat.gov.in). Password for logging in would be communicated through e-mail.