New Delhi: You want to buy a phone online, it is best if your delivery address is anywhere in India other than in UP or Uttarakhand. Tax woes are cited as the reason. Flipkart, Snapdeal and Amazon, are, reports say, refusing to deliver the phones in these states, and in fact have stopped delivering items if their value is beyond Rs. 5000
They cite harassment by tax authorities over a form that buyers are required to furnish when purchasing goods from other states. Buyers have to file a VAT declaration, along with the registration number of the vehicle bringing the products, which has to be furnished by the deliverer. The tax authorities have upped the ante to ensure it is strictly followed and have even seized goods.
This is another instance of e-commerce companies facing the heat from states over tax issues. Karnataka proposes to impose a 1% value added tax deducted at source on all payments to dealers in the state by e-commerce firms, a move vehemently opposed by the industry.
“Owing to these statutory restrictions imposed by the UP government, we do customer deliveries for shipments only up to Rs 5,000, which is for interstate shipments,” a Flipkart spokesperson said. A spokesperson for Snapdeal said online marketplaces provide technological platforms to connect independent sellers and consumers and should be treated as facilitators, as done by the states of Kerala, Delhi, Rajasthan, West Bengal and Tamil Nadu.
Last year, e-commerce companies stopped shipping high-value products to UP localities including Noida and Ghaziabad after delivery boys got mugged and consumers refused to pay for products ordered through cash on delivery. After the situation improved, they resumed deliveries earlier this year.
The UP law states that any person who intends to bring or receive goods from outside, other than those specifically exempted, is required to furnish a declaration that must accompany the goods during their movement in the state. This is mandatory for goods of any value being transported by truck, specified goods used in construction such as sand worth more than Rs 1,000 and other goods with a value exceeding Rs 5,000.
Although the rule is applicable to all, e-commerce companies that do not have fulfillment centres or use vendors from outside the states have begun to face the heat. “The requirement of the UP government to ask for way bill forms (Form 39) from end-users, even though the consignments that are brought in are for self-consumption, is leading to recurrent incidences of seizure for both prepaid and postpaid cash-on-delivery consignments,” said a senior executive of an e-commerce company, asking not to be identified.
“Since the tax liability on these is already being discharged by the seller in the state from where the shipment has originated, such tax demands are unfounded and restricting marketplace deliveries in this market.”
The Flipkart spokesperson said Uttarakhand also has similar VAT regulations in place and such restrictions were earlier in place in Bihar as well. “However, the same (in Bihar) is now subject to payment of entry tax,” the Flipkart spokesperson said. Amazon did not respond to an e-mail seeking comment on the issue.
Tax experts said states don’t get any tax on goods supplied from outside and are using this system as a deterrent. “This effectively means that without having a local warehouse in these states (and paying local VAT), catering to the customers has become virtually impossible,” said Pratik Jain, partner for consulting firm KPMG in India.
He said this problem may finally get resolved under the proposed goods and service tax regime as the benefit of the levy would accrue to the consumption state. Jain said careful drafting of rules under the GST regime is needed to avoid such disputes.
