E-commerce firms to get entry tax breather from states

Firms such as Flipkart & Snapdeal expects a ruling by Patna HC that quashed the Bihar govt move to levy entry tax

E-commerce firms such as Flipkart and Snapdeal expects a ruling by Patna High Court that quashed the Bihar government's move to levy entry tax on e-commerce transactions would have bearing on similar moves by several states such as Gujarat and Uttar Pradesh.

At least eight states, which include Rajasthan and West Bengal, have imposed entry tax on e-commerce goods shipped to their respective states, as they look at mopping up revenue in lieu of taxes they could collected if the goods are bought locally.Several other states too have been planning to implement a similar provision, but were watching the proceeds of the case in the Patna High Court to move on the decision.

 

"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 customer from outside their home state. For instance in Bihar, a product ordered within the state but being delivered from outside would attract both 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 disadvantageous position, when compared to dealers within the state, since local dealers only had to 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.

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

The Patna High Court called the move to impose entry tax by the Bihar government as violating the constitution. The Economic Times reported the development first on Friday.