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Court says no VAT for e-marketplaces

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In a ruling that will give relief to digital marketplaces such as Flipkart and Amazon, Kerala High Court late last week held that they are only facilitators to a transaction, and not sellers themselves, and are hence not liable to pay value added tax (VAT).
The court said that as the actual sellers have discharged their tax dues in full, the place of delivery holds no relevance, and as per Article 286 and Section 3 of the CST Act, tax is payable in the state where sales have occasioned.
The ruling is a significant shot in the arm for companies such as Flipkart, Amazon and Snapdeal, which have been contending that most norms applicable to offline retail should not apply to them, including those on foreign direct investment (FDI).
Large retail companies have argued that the foreign money invested in e-commerce firms gives them the financial cushion to offer steep discounts, eating into the market share of brickand-mortar retailers.
E-commerce companies did not respond to queries mailed by HT.
A week earlier, on October 20, the Kerala High Court had held as illegal, the commercial tax department’s order imposing more than ` 49 crore as penalty on Flipkart and Myntra for alleged violation of the state’s tax laws.
“The Centre has to come up with a clear definition for retail, and have one rule for everyone,” said Kumar Rajagopalan, CEO of the Retailers’ Association of India. “Otheriwse, these ambiguities will keep happening.”
Hindustan Times, New Delhi, 3rd Nov. 2015

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