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Kerala govt slaps Rs 54 crore fine on Flipkart, Jabong, Zovi and Myntra

The Kerala commercial taxes department has put a fine of up to Rs 54 crore on e-commerce players for evasion of sales tax in 2012-13 and 2013-14. The companies which have been fined include Flipkart, Jabong, Vector e-commerce which has a stake in Myntra.com and Robemall apparels which operates Zovi.com


The Financial Express reports that Flipkart was fined Rs 47.15 crore, Jabong was fined Rs 3.89 crore, Vector e-commerce was fined Rs 2.23 crore and Robemall was fined Rs 36 lakh. The report added that other e-commerce players will come under its scanner.  It is worth noting that earlier in June last year, e-commerce players had stopped deliveries to Kerala due to issues with the state’s sales tax department as they had banned cash on delivery services .

E-commerce players also ran into trouble with the Karnataka government last year, most notably Amazon. The Karnataka government is now planning to amend the Value Added Tax Act to bring transactions on e-commerce sites under its ambit. Through this amendment, the government is expected to classify online marketplaces as “commission agents” since they charge a commission from third-party sellers for using their platform and their delivery & warehousing services.

The Punjab government too is taking stock of the loss of revenue to the state from online shopping. The Punjab government has asked the 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.

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In October last year, the service tax authorities also pulled up Uber for non-payment of service tax.  Uber had passed on the onus of paying service tax to cab drivers and has agreed to provide details about their cab drivers to the tax authorities.

Call for GST

Last year during the Union Budget, finance minister Arun Jaitley had said that the debate for Goods and Services Tax (GST) must come to an end and that the central government was in talks with individual states and collectively.

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.

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Also read:

Trends in the E-commerce segment in 2014

#Outlook15: What Indian Niche E-Commerce Companies Plan To Do in 2015

#Outlook15: What Indian E-Commerce Marketplaces Plan To Do in 2015

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