E-tailers expected to pay Rs 125 crore entry tax in Gujarat

E-commerce companies are facing the heat from tax authorities once again. Online retailers may end up paying as much as Rs 125 crore to the Gujarat government after a recent HC ruling asking them to cough up an entry tax on goods that are shipped from outside of the state. The two leading e-commerce players, Amazon and Flipkart, have had to pay a large chunk of the taxes recovered so far by the authorities, a source in the tax department told TOI. Aarati Kanwar, special commissioner, commercial tax department, told TOI, "So far our entry tax collection is Rs 102 crore but after recent dispute redressal, many other agencies will pay disputed amount.So actual collection will increase considerably . We expect by March 2017 total entry tax collection from online sales in the state may cross Rs 125 crore."

Earlier this month, a division bench of Justice M R Shah and Justice B N Karia rejected petitions moved by e-commerce firms and asked the state government to levy 6-12% entry tax on goods purchased through e-commerce sites in the state. The taxes recovered are from transactions made since April this year. A number of states have imposed an entry tax on goods sold on online marketplaces, which come from outside the state in order to protect the interest of local traders.

When contacted by TOI, a Flipkart spokesperson confirmed the development but did not specify the amount the Bengaluru-based company has paid so far to the Gujarat government. "Entry tax is largely absorbed by the company when we have to pay the state governments. That, as a consequence, has some impact on our share of earnings from selling a product," a senior executive at Flipkart said on the condition of anonymity . An Amazon India spokesperson did not reply to an email sent by TOI till the time of going to press.

Amazon is likely to have paid more than Rs 40-50 crore as taxes, a person privy to the developments said. Both Flipkart and Amazon are not passing on these taxes to end customers currently . This comes at a time when e-tailers are incurring huge losses on the back of heavy discounting, building supply chain and marketing costs.Amazon Seller Services saw its losses more than double to Rs 3,572 crore in the financial year ended March 2016 while Flipkart Internet, which runs the online retailer's marketplace business, clocked Rs 2,306 crore in losses for the same period.

Earlier, Flipkart Internet,which runs the online marketplace Flipkart.com , had filed a petition in the Gujarat High Court challenging the state government's notification to charge up to 21%entry tax on goods being bought through these e-commerce firms which are shipped from outside of the state. Amazon, too, had filed a similar petition. Since the matter was sub judice till early this month, these companies did not pay the entry tax or pass it on to shoppers.