Telangana tax authorities scan transactions at Amazon and Flipkart for compliance

The department, however, not looking at destination bound transactions involving dealers in other states

Telangana government's commercial taxes department has asked for product sale transaction details from e-commerce companies Amazon and Flipkart to verify if the orders placed with the dealers in the state by these firms were accounted for.

“Under the Value Added Tax (VAT) law, the transactions involving the dealers of Telangana irrespective of whether the product was delivered to a customer within the state or to someone outside, are taxable here. We want to see if such transactions, handled by the e-commerce companies, are being complied with our tax provisions,” V Anil Kumar, commissioner of the state commercial taxes department, told Business Standard.

The department, however, is not looking at the destination bound transactions involving dealers in other states for compliance issue, according to him. It was not yet known as to what proportion of these transactions involves local dealers and what proportion involves dealers from outside the state, he said.

The departmental teams had launched inspections and raids at courier service points and other facilities used by the e-commerce firms for product delivered about 20 days ago before the senior officials called the representatives of the two companies to furnish relevant transaction data.

B Revathi Rohini, additional commissioner (Enforcement) of the commercial taxes department, said they had verified over 150-odd large-size transactions of Flipkart involving 39 local dealers. About 30 dealers were found to have fully complied with the tax laws, according to her. The department has started the verification process with Flipkart as it mostly uses dealers for placing and delivering the orders of respective products.

This exercise coincided with a drop in tax collections in November leading to speculations that the e-commerce business had started denting the tax-base of the state. However, the authorities deny this claim. “It is another matter that we have started losing Rs 60 crore a month on account of a drop in petrol and diesel prices as these products contribute substantially to VAT collections,” V Nagi Reddy, principal finance secretary, said.

Explaining the ongoing verification of e-commerce transactions, Reddy said the revenue department was actually trying to grapple with the situation before the e-commerce turns into a major issue to deal with.

The perceived revenue loss on account of e-commerce business, according to revenue principal secretary B R Meena, would be at the level of a few crores of rupees as of now. He said they would know the full picture about tax compliance and the impact of e-commerce business once the ongoing verification was over.

According to the Nagi Reddy, the impact of e-commerce business needs to be understood in totality as many product parcels delivered on e-commerce platforms usually carry the TIN number of states like Karnataka, which means the tax was paid elsewhere instead of at the actual point of sale. “The revenue department is seized of the matter,” he said when asked if there was any proposal to enforce the tax laws on every e-commerce transaction.

“The purpose of the ongoing drive has been to seen if the transactions that are permitted to be taxed under the existing law are accounted for by the dealers and the e-commerce companies. We are not looking at the transactions involving the products delivered by the dealers from outside the state,” the commercial taxes commissioner said.

Revathi Rohini said the department was about to begin the verification of the data provided by Amazon and they would also be checking the transactions of e-commerce portal Snapdeal regarding tax compliance issues.