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After Flipkart, Amazon Too Challenges Gujarat E-commerce Entry Tax

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The Gujarat government had passed a bill to allow an extra levy on any product purchased online through various e-commerce websites like Flipkart, Amazon, Snapdeal and Jabong from outside the state. First Flipkart went to court and challenged the tax, claiming it to be anti-Digital India, but then the case did not pick up pace until now.

Now, Amazon India too has also moved to the High Court against the entry tax on e-commerce shopping in Gujarat. Two biggies involved in a battle on the same side is bound to make Gujarat Government take cognizance of the fact that this tax is going to adversely affect both the marketplace as well as the buyers.

Amazon’s case in point is that it is simply an online marketplace bringing buyers and sellers together and is not involved in selling its own products in the state. It is a pure B2C model where Amazon is just a medium or a platform.

“Now, in this case, Amazon is only a facilitator and only arranging the buyers and the sellers on the portal, and is neither the importer nor the consumer, and the company as such has nothing to do with the goods. It is not a case where Amazon is purchasing and selling,” said a spokesperson from Amazon India.

In the past we have seen Uttarakhand, Madhya Pradesh and Rajasthan, West Bengal and Mizoram facilitating the entry tax to protect local craftsmen and offline sellers. While their concern is genuine, their actions do not reflect so.

Critics feel that this will hamper interstate trade and we feel that this is going to make online marketplaces shift their burden to consumers.

Amazon India is investing $300 Million in India for its operations, and such taxes will end up shooing away further potential investments. Their 2014-2015 financial report did not look very good and we could see further dip coming from states levying taxes on online marketplaces.

With Amazon India stepping in, the Government should feel the heat, resulting in possible cancellation of the entry tax in future. But for now, customers in Gujarat and other states with the tax have to make-do with the higher prices online.

Even if the Courts decide to go either way, the era of such arbitrary taxes by various states will soon be over once GST (Goods & Service Tax) is passed by the Government, which is expected to happen during this monsoon session!

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