MP To Levy 6% Entry Tax On OLS, Channel Welcomes Move

In a major relief to offline channel and a big jolt to online marketplaces, the Madhya Pradesh government has proposed 6 per cent entry tax on E Commerce companies. The government has decided to amend the law in order to bring E Commerce transactions under the ambit of taxation. With the move, Madhya Pradesh has joined the list of states who have already levied entry tax on OLS. While offline channel partners have welcomed the move, the E Commerce players seems furious over the decision.

Brick and Mortar has demanded entry tax on online trade. According to the offline line channel, the OLS allegedly take undue advantage of disparities in taxation rules of states and indulge in predatory pricing. The move to impose entry tax on OLS is said to be an attempt to provide a level playing field to both offline and online channel. The government, which is aiming to receive INR 300 crore from the tax, will introduce a Bill in the upcoming monsoon session to amend the laws.

“We would bring the e-commerce firm under tax regime and impose 6 per cent levy by bringing a Bill to amend in the monsoon session, which is going to start from tomorrow,” PTI report published in Hindu Business Line quoted Madhya Pradesh Finance Minister Jayant Malaiya as saying.

“The business of e-commerce companies is increasing day-by-day and it is affecting the traditional shopkeepers, who pay us an entry tax along with other levies. So, we have decided to bring e-commerce under the gambit of tax regime, so that there should be equal collection from both channels — traditional brick & mortar shops and e-commerce trade”, he said.

Also Read: eTailers Increases Offline Presence To Expand Business

Offline channel partners have welcomed the move of the government and said that it will bring parity in the business. “It is a very important decision and it will create a level playing field for offline retailers. All the state governments should adopt this policy. This will benefit them in terms of revenue as well as boost our business”, said Sanjeev Pathare, Owner of Computer Shoppe.

“We have been agitating for entry level tax and it seems that our fight has fetched fruits. OLS talks advantages of tax disparities and enjoy tax free business. This saved money is then transferred to fill the losses due to heavy discounting. The tax is expected to curb these unethical practices”, said Naveen Jain, Owner of Techno India.

Also Read: Retailers Approach Government To Oppose Cashback Policy

The rising anguish against alleged unethical practices of some of the E Commerce players has forced the governments across the states to bring uniformity in online and offline channel business. Madhya Pradesh Chief Minister Shivraj Singh Chauhan recently gave a green signal for amendments in the legislation for imposing 6 per cent entry tax on e-commerce. As per reports, the state will impose this special tax on every shipment which arrives in the state, be it from India or outside India.

Similarly, Uttar Pradesh Government in June this year imposed 5 per cent entry tax on stuff purchased from e-retailers. Uttarakhand have also imposed a special 10 per cent tax on all E Commerce purchases, whereas Bihar has levied 12 per cent tax on OLS. The Gujarat Government has passed a bill to introduce entry tax on OLS. Other states such as Mizoram, Assam, Odisha, West Bengal etc. are contemplating to bring the E Commerce under the ambit of taxation.

While state governments are mulling flexes to curb alleged tax evasion practices by E Commerce companies, OLS giants have raised strong reservations about the move of the state governments. OLS companies are openly criticizing the government’s move to levy entry tax on them terming it “an attempt to kill” E commerce industry in the country. Amazon India has knocked the doors of Gujarat High Court against an entry tax the state has levied on goods purchased through E Commerce portals and delivered from outside the state. Besides, Flipkart has challenged such taxes in Uttarakhand and West Bengal as well. In fact, Flipkart has reportedly started forming an E Commerce lobby to fight such ‘anti-digital’ moves by state governments.

Also Read: Nasscom Opposes E-Commerce Entry Tax By Gujarat Govt

Apex industry body NASSCOM has also expressed its disappointment over the decision of the state governments to levy taxes on interstate E Commerce transactions, calling the move flawed, detrimental to the growth of small and medium enterprises. However, there is another group in the industry who has strongly recommended such tax ambit for online companies to bring parity in the retail business. Industry bodies such as the Retailers Association of India and Confederation of All India Traders (CAIT) have stressed on imposing special taxes on online transactions. Industry experts say that with the GST bill, which is being presented in the Parliament this Monsoon session, coming in force, all such disparities in taxation will be eliminated, bringing higher stability in the industry.

Leave a Response