NRN Murthy's Cloudtail gets tax notice of Rs 54.5 crore, says report

Cloudtail — a joint venture between ecommerce giant Amazon and Infosys co-founder NRN Murthy’s Catamaran Ventures — has been slapped with a service tax demand of Rs 54.5 crore.
 
According to a report in The Guardian, the company has received a showcause notice from the Directorate General of Goods and Service Tax Intelligence amounting to Rs 54.5 crore, along with interest and penalties, for service tax-related matters.
 
The report does not mention the exact detail of the tax dispute. “Cloudtail has disputed the service tax claim by the authorities and the matter is before the adjudicating authorities. Cloudtail has been disclosing this as a contingent liability in its Annual Report since 2019 as per Indian Accounting Standards. Since this matter is subjudice we are unable to comment any further. Cloudtail reiterates that it is in full compliance with the laws of India,” Cloudtail said in a statement.
 
According to several media reports, Cloudtail reported revenue of Rs 11,413 crore for FY20, an increase of 27.76 per cent compared to Rs 8,945 crore reported the previous year. The company posted a profit of Rs 67.5 crore for FY20.
 
Cloudtail, one of the largest sellers on Amazon India, is owned by Prione Business Services.
 
Catamaran Ventures increased its stake in Prione in 2019 to 76 per cent from the earlier 51 per cent. Subsequently, Amazon’s stake went down to about 24 per cent in the company.

 
Amazon’s stake in Cloudtail has come under fire from several traders’ associations in the country. Both CAIT and DVM alleged that Amazon had a direct relationship with Cloudtail and was giving it preferential treatment, along with another seller, Appario. Appario Retail is a subsidiary of Frontizo, which is a joint venture between Amazon and the Patni Group.
 
“There seem to be numerous inconsistencies in Amazon’s selling tactics with Cloudtail, and the true picture will emerge if the probe continues. If Amazon is found to be in violation, it will face a significant financial penalty,” said Sonam Chandwani, managing partner at KS Legal & Associates.
 
Legal experts said Amazon, like other retail operators and online retail players in India, has exploited policy loopholes. Amazon signed both Cloudtail and Appario deals between 2014 and 2017.
 
However, the revised e-commerce laws restricted marketplace platforms’ shareholdings in direct retail suppliers.
 
Meanwhile, on June 11, the Karnataka High Court dismissed the pleas of e-commerce giants Amazon and Flipkart against a probe by the Competition Commission of India (CCI) for alleged violation of competition laws.
 
In 2020, the CCI announced a probe into Amazon and Flipkart following a complaint filed by Delhi Vyapar Mahasangh (DVM), representing the small and medium business owners in Delhi, accusing the two ecommerce giants that they were favouring some preferred sellers which in turn is hurting small businesses.
 
Both the companies had managed to get a stay on the CCI probe by saying they had done nothing wrong, up until now.