Gujarat e-commerce entry tax will pose challenges: Nasscom

The bill by Gujarat government to levy entry tax on interstate e-commerce transactions will pose significant commercial challenges to all stakeholders, industry body Nasscom said on Thursday

"This levy of entry tax poses significant challenges both commercially and operationally for the e-commerce companies, logistics companies and the outside state sellers selling goods to customers in the state (Gujarat)," the National Association of Software and Services Companies (Nasscom) in a statement.

According to the new rule, the entry tax will be paid by the consumers which will be collected and deposited by entities which bring the goods to Gujarat from any other part of India for sale and consumption.

"Providing unrestricted cross border access to sellers as well as buyers is the prerogative of the government and is an important driver towards creating an ease of doing business. Such tax structures will lead to additional burden on SME traders, enhanced litigation, and also reduce business efficiencies. It will also restrict choice of the customer," said Nasscom president R. Chandrasekhar in the statement.

The industry body noted a similar tax is being collected in Assam, Odisha, Uttarakhand, Rajasthan and Mizoram and is being proposed to be introduced in Punjab, Himachal Pradesh, Uttar Pradesh and Madhya Pradesh.

Nasscom said that the entry tax is flawed as it is akin to introducing trade barriers to free interstate trade, discourages SMEs to manufacture and will have a short life in view of the impending GST reform.

"For collecting and depositing the tax, the deemed tax payer would be required to significantly revamp the IT systems to track the tax charged on inter-state sale of goods to Gujarat and determine the differential tax which has to be paid in the form of entry tax," it said.

Other hiccups Nasscom raised include disputes on classification as a huge number of sellers operate through the marketplaces and also resulting in burdening the service industry with administrative costs and unwanted disputes.

"Cost of complying with this entry tax for thousands of sellers outside the state will be much higher than the expected outcome. Such moves will fragment the India market, severely jeopardising business case for many entrepreneurs both manufacturers and service providers," it said in the statement, adding the entry levy is not aligned with reform and growth programmes like Digital India, Make in India and Start-up India and Standup India.