The state government has asked top e-tailers to charge the difference in value added tax (VAT) rates between Gujarat and the state from where a product is supplied as entry tax. Similar mechanism would apply to locally made goods, which are sold in other states.

The new levy was introduced in this year's state budget to provide level playing field to local dealers who claim to be at the receiving end of the competition.
"Suppose Maharashtra charges 5% VAT on mobile phones and Gujarat has 15% VAT, the difference works out to be 10%.

If a consumer in Gujarat buys a mobile phone sold by a dealer in Maharashtra, he or she will be charged differential 10% as entry tax," explained a senior government official.
As a result, now buyers will not get low cost goods online. However state's retailers will now have less competition with e-tailers.

On Thursday, the state government had a meeting with all major online retailers including Amazon, Flipkart and Snapdeal. These companies have also been asked to charge the difference in VAT rates as entry tax in their bills and deposit the tax to the state exchequer within two days of the transaction.

"Though the state assembly is yet to pass the bill but we have been instructed by the government to keep VAT collection mechanism from the e-tailers ready. We had two rounds of meeting with top e-commerce companies and their views were also taken into consideration. Unlike others states where flat rates are charged, we have decided to charge only difference arising out of difference in VAT rates of various states," a top official in the state commercial tax department told TOI.