After Patna HC order, e-commerce firms hope for relief from other states

Entry tax inflates prices of goods purchased via e-commerce firms

E-commerce firms such as Flipkart and Snapdeal expect the Patna High Court’s quashing of the Bihar government’s move to levy an entry tax on e-commerce transactions to have a bearing on similar moves by several states.

At least eight states, including Rajasthan and West Bengal, have imposed entry taxes on e-commerce goods shipped to their jurisdictions, to mop up revenue in lieu of taxes they would have collected if the goods were bought locally.

Several other states, too, have been planning to implement a similar provision, but were watching the proceeding of the case in the Patna High Court.

The Patna High Court had called the move by the Bihar government to impose an entry tax as a violation of the Constitution, and quashed the order.

"We welcome this high court order as it will benefit lakhs of consumers in the state for whom e-commerce is the only way to get access to millions of quality and affordable products at their doorsteps,” said Flipkart, India’s largest e-commerce marketplace. “The additional entry tax was an anti-consumer move, leading to price inflation and depriving users of full benefits of online shopping.”

An entry tax made it more expensive for e-commerce firms such as Flipkart, Snapdeal and Amazon to ship products to customers outside their home states.

For instance, in Bihar, a product ordered within the state but being delivered from outside would attract a central sales tax and an entry tax.

Flipkart has argued that this move put dealers of a product from outside a state at a disadvantage against dealers within the state, as local dealers had to only pay value-added tax on a sale.

The Patna High Court’s ruling subscribed to this view, saying that such a tax discriminated against dealers from one state and another.

A Snapdeal spokesperson said: “E-commerce is an important lever for economic growth in the country, which benefits both sellers and buyers. India should be one market, with no inter-state restrictions which inhibit growth. The Hon'ble Patna High Court's judgment is an important step in the right direction.”