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The Karnataka Government has said the e-commerce giant Amazon’s online business in the State is similar to that of a commission agent.
Hence, it has asked the company to come up with a viable alternative that conforms to the Karnataka Value Added Tax Act, 2003. A top official of the Commercial Tax Department also said that the Centre has a taken a stand to protect the interests of the old economy, brick & mortar, companies. It has assured them that it will make rules under GST that will not affect their business interest.
He said the State Government too will protect the interests of the old economy companies and at the same time, amend certain rules to accommodate the interests of online retailers. The department, which had earlier sent tax notices to Amazon, has at the moment withheld them by granting the company a month’s time to come up with an alternative proposal.
The official told BusinessLine that the company has to now work out a proposal based on Section 8 and also as per the definition of a dealer under Section 2 (12) of the Karnataka Value Added Tax Act, 2003. As per Section 8, every person who, for an agreed commission or brokerage, buys or sells on behalf of any principal who is a resident of the State shall be liable to tax. As per Section 2 (12), a dealer means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise for cash or for deferred payment or commission. An Amazon spokesperson refused to comment on the developments.
Last month, the State Government had sent cancellation notices to around 100 sellers, or third party merchants, who sell their merchandise on Amazon.in, ordering them to stop storing their merchandise in the Amazon warehouse or fulfilment centre located on the outskirts of Bangalore. The issue arose as the State wanted Amazon to pay up VAT for all the seller merchandise that is stored in its warehouse and is sold through its Fulfilment by Amazon (FBA) service.
Amazon claimed that it was merely providing a service for third party sellers to sell their merchandise conveniently and quickly and is not liable to pay VAT as it does not own the merchandise.
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