After some states in the country introduced the E-commerce entry tax, it was rumoured that Gujarat would implement the tax soon as well. It comes as a shocker that it was indeed true.
The Gujarat Government has passed a bill that imposes an E-commerce Entry tax which basically taxes goods purchased through any online marketplace. According to the Government, passing the bill is a measure to protect the local traders and businesses from online cheaper prices.
Talking about the bill, Gujarat Finance Minister Saurabh Patel said, “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.”
A 15% tax has been fixed for online purchases in Gujarat, which includes sellers from other regions selling goods in Gujarat through an online website.
Flipkart moves the bill to court
Earlier Flipkart and Amazon had decided that they will not deliver products to states like UP and Bihar with an invoice of more than Rs. 5000. This makes sense as well because such a tax is going to harm these e-commerce websites and the sellers indirectly.
With the bill passed in Prime Minister Narendra Modi’s home state, Flipkart has filed a petition in the Gujarat High Court against the Gujarat Government for introducing the entry tax on e-commerce purchases.
The tax is unfair and might also demotivate local manufacturers from selling online in the state. This was the whole point of e-commerce, to provide goods and services at lower costs than brick and mortar, since all you need in an account of one of these online marketplaces and inventory to sell your stock.
A 15% tax over and above the usual VAT and other state taxes will technically bridge the gap between online and offline modes of sale and harm Flipkart specifically since it does not sell any products of its own.
Amazon India has not yet reacted to the law passed, but we could soon hear about them siding with Flipkart. At a time when the country is looking to pass the GST bill, state governments are taking a step back and imposing more duties on online sellers.