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Amazon’s Karnataka tax issues likely to escalate

The standoff between online retailer Amazon India and the commercial tax department in Karnataka may escalate further as officials contemplate attaching assets of dealers who have not responded to its notice.

Many dealers on Amazon’s e-commerce platform, who were served cancellation notice by the department, are yet to respond. 

The commercial tax authorities, who have already extended the deadline for responding to the notices, are now mulling the next course of action. 

According to senior officials, the options available before the commercial taxes department, could be attachment of their assets or bank accounts. However, the department has not set any time frame for the next action, officials told Business Standard.

Meanwhile, the department has stopped issuing fresh registrations to new dealers on Amazon’s e-commerce platform.

Amazon attracted the attention of tax authorities when it was found that the company was not paying value added tax (VAT) for transactions on its online platform, saying it was not doing business directly. It asked the department to collect VAT from the sellers.

“The status quo continues as of now as we are waiting for the chief minister to take a stand on the issue,” said I S N Prasad, principal secretary, finance department, government of Karnatka.

“However, we have stopped issuing fresh licences to new dealers until it is resolved. We had given additional time to dealers and are waiting for their response,” he added.

According to officials in the department, the point of contention is not about tax evasion, but who should be assessed for tax – Amazon or its dealers? 

In this case, Amazon is clearly acting as more than a facilitator or a logistics provider for the goods booked and sold on its platform. It is also raising the invoice on behalf of the dealers, packing the goods and delivering them at the customers’ doorstep, officials pointed out.

“We will stand by our interpretation of the law. If Amazon or its dealers do not agree with our notice, they are free to file their complaints or even take legal recourse. However, none of them have moved in this direction. It only means that they are on weak ground. So, we will wait for some more time before initiating penal action on them,” the officials said.

The department had served cancellation notice to around 75 dealers operating through Amazon’s fulfilment centre. While, some of them responded, many are yet to file their replies. The department also wanted to know, how the place of business for so many dealers was common. They had all stocked their goods at Amazon’s fulfilment centre at Hoskote on the outskirts of Bengaluru.

The officials declined to give details if other e-commerce players had been served similar notices as well. 

“We are hoping that by end of December, a solution would emerge and we hope that not just Amazon but other e-commerce players operating in Karnataka also fall in line and comply with state tax laws,” they added.

The officials also clarified that Amazon India is still operating its fulfilment centre on the outskirts of Bengaluru and the department had not prevented it from doing its regular business. 

The commercial tax department also said that there was no provision in the state’s VAT rules for retailers to share space at Amazon’s fulfilment centres. “They do not have exclusive access to the space they have taken. They are only sharing it with others and there is no scope for the tax authorities to inspect this place and that amounts to violation of law,” officials added.

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