Gujarat, MP, Rajasthan May Also Impose Tax On eCommerce Shopping; Startups Ask: “What is the use of Make in India?”

On one hand Indian ecommerce industry is excited with the launch of their first ever IPO inside India; there are some states which have become so greedy and insecure of the Internet industry, that their actions may actually kill the golden goose.

After UP, Bihar and Uttrakhand started charging additional tax for ecommerce purchases, reports are emerging that atleast 6 other states may soon start this trend. Although Flipkart has dragged Uttrakhand Govt. to court on this same tax issue, it has made little difference to the mindset and policy decisions of other states.

As per unverified reports, Gujarat, Madhya Pradesh, Rajasthan are among those states, which are attempting to milk the ecommerce industry, and protect their local traders from the onslaught of technology and digital.

Ironical it may seem, but Gujarat, the state where Infibeam was founded and from where they are now launching eCommerce’s first ever IPO without taking any external funding to expand, is among those states which wants to strangle and destroy the ecommerce industry.

Is This Make in India?

Frustration level is rising among digital startups and technology evangelists, as this additional tax on ecommerce companies is being seen as a method to protect local traders, who still dont want to compete against Internet.

If this is the state of affairs for digital economy, then how will Make in India work?

Sudhanshu Gupta, vice-president (business) at Paytm, correctly asked, “What’s the point of the entire ‘Make in India’ if you can’t sell without barriers to all the people in India?”

IAMAI has reacted strongly to this new development, as their President, Subho Ray said, “The practice smacks of some kind of predatory tax regime which is being promoted by some states.”

Going from the comments shared by Finance Ministers of Gujarat, Madhya Pradesh, Rajasthan; it is clear that the tax is being imposed to protect the local traders.

For instance, Gujarat Finance Minister Saurabh Patel said, “Trade of dealers of the state is affected adversely as also the state suffers loss of tax revenue due to sale of goods through supplies in the state from outside the state under ecommerce transactions. By capturing such transactions under the entry tax, the dealers of the state would get level playing field..”

Similarly, Madhya Pradesh Finance Minister said that their Govt. will impose a fine of 6% to “compensate for the loss due to ecommerce..”

Is GST The Final Solution?

As per financial analysts, the implementation of GST (Goods and Service Tax) would be the eventual answer for avoiding this ‘double taxation’ which ecommerce companies are facing in some states.

An industry official, on condition of anonymity, shared that since GST is being delayed, some states are intentionally levying tax on ecommerce transactions for making quick bucks, and to protect local traders.

He said, “The decision to impose such a levy without any ostensible justification seems not to be driven by clean hands. The governments seem to be catering to various retail lobbies, which failed to stop ecommerce otherwise,”

IAMAI has already warned that failure to implement GST would be disastrous for the Indian eCommerce industry; and ASSOCHAM has hailed GST as the ‘Brahmastra’ for Indian economy.

Even if GST is not passed, for the sake of development, and for the sake of progress, no state should charge any tax on eCommerce transactions.