Gujarat Governent has recently levied an entry tax in Gujarat for the products purchased online. Meanwhile, e-commerce giant Flipkart sued the Uttarakhand government for the levying entry tax. Selling goods to various states is increasingly getting difficult for Indian e-commerce companies as more states are thinking of levying the 10% entry tax, said an ET report.
Currently, Uttarakhand, Bihar and Assam charge a 10% entry tax on goods bought online and coming into the state from outside. This tax is billed to the courier company, the cost of which will eventually be passed on to the customer.
The State Government intends to provide a level playing field for traders and retailers in the state, as the online discounted good was affecting the local trade.
Clarifying the need for the bill, State Finance Minister Saurabh Patel, said, “The recent development in the field of online purchase, web-based software applications or through tele-shopping platforms, does not attract any tax under the present Act, local businesses were adversely affected.”
The Gujarat Tax on Entry of Specified Goods into Local Areas (Amendment) Bill, 2016, was passed in the state assembly in the absence of Congress MLAs, who were Tuesday suspended for two days by the Speaker.
The bill amended the present Act of 2001 that did not cover e-commerce transactions, which according to the government, was adversely affecting the local traders as the goods coming in the state through such means was sold at a much cheaper rate due to non-payment of any tax.
“Due to the recent development in the field of online purchase, web-based software applications or through tele-shopping platforms, which does not attract any tax under the present Act, local businesses were adversely affected,” state Finance Minister Saurabh Patel said while presenting the bill.
As per the bill, the word “importer”, as specified in the present Act, now also covers those who “bring or facilitate to bring any specified goods for consumption, use or sale in Gujarat from any part of the country using online platforms.”
The state government would announce the rate of tax as well as other procedures to be followed by the importers through a separate notification,” Patel added.
The initiative from the various governments has created ripples among various stakeholders. The national association of software companies NASSCOM has expressed dissatisfaction over the move from the government.
NASSCOM believes that such a move will pose significant commercial challenges for e-commerce and logistics companies and to retailers from outside of Gujarat, selling goods to customers in the state.
A similar levy is being enforced in Assam, Odisha, Uttarakhand, Rajasthan and Mizoram and is proposed to be levied in Punjab, Himachal Pradesh, Uttar Pradesh and Madhya Pradesh.
Viren Bavishi, Director, Sapphire Micro Systems, Mumbai said, Online sales has affected all SMEs in big way. Though no government is concerned about them most of the billing is done from some particular low tax zones. With the state governments losing on revenue, as a local retailer, I am welcoming the move. Take the case of Mumbai, we can’t find an online seller is paying Octroi and delivering.”
Champakraj Gurjar, President of Federation of IT Associations, the consortium of state IT associations across the country has welcomed the move.
Congratulating the state associations, he said that this should come across the country urging all the state associations to adopt the same.