E-commerce giant Amazon and 50 of its sellers are facing investigations for allegedly falsely claiming Central Value Added Tax (Cenvat) credit and evading tax of about Rs 118 crore.
Officers of the Directorate General of Central Excise Intelligence (DGCEI) have conducted search operations at Amazon's business premises across the country and at its headquarters in Bengaluru, in January.
"So far, the total tax evasion we have been able to establish is to the tune of Rs 118 crore, which could increase. We will soon issue show cause notices to respective sellers," a senior officer told the Business Standard.
"We have recorded the statement of Amazon executives and are assessing the details provided by them," he added.
In an e-mail response, an Amazon India spokesperson said, "We confirm that the DGCEI had raised some questions around our promotion programme. We have cooperated with the authorities to the fullest extent and provided them with all the information that they needed."
Traders are alleged to have misused the Cenvat scheme, which allows a manufacturer or service provider a relief from the taxes paid on inputs to manufacturing of final products or services.
Sources in the said they had detected bogus invoices of declared goods were issued to merchants through dummy firms. Verifications revealed that the firms said to be providing the goods were non-existent.
DGCEI has raised questions on the accountability of the products sold on Amazon.
Sources privy to the development said aggregators such as Amazon pay service tax to the seller. Some sellers had not deposited the service tax with the government even after claiming it from the e-commerce giant. The DGCEI is investigating the matter.
Aggregators like Amazon connect merchants with prospective customers on its platform - to provide service under the latter's brand name.
In such a business model, the e-commerce website is usually paid in the form of commission.
The DGCEI is also probing if Amazon had any involvement in the merchants claiming Cenvat credit.
At present, a manufacturer can claim Cenvat credit (at 12.5 per cent) on amount spent on purchase of raw material, which can later be utilised for payment of central excise duty.
After the Delhi high court ordered an investigation on 21 e-commerce companies for allegedly flouting foreign direct investment norms in November 2015, government agencies have become alert in probing said companies.
Over the past two years, brick-and-mortar retailers have raised their voices against the e-retailers saying they are luring customers with heavy discounts funded by foreign investments.