Delhi Govt. Declares VAT As Mandatory For All Local Online Retailers; Violation Attracts Fine Of Rs 50,000
September, 07th 2015
All Delhi based online retailers are henceforth mandated to pay Value Added Tax (VAT) to the Delhi Government; failure of which can result a fine of Rs 50,000.
Although ecommerce marketplaces, such as Flipkart, Snapdeal, Amazon have been exempted from paying VAT, but they will be required to submit details of all transactions done by Delhi based retailers, and calculate the exact VAT which is applicable.
In a notification issued by Trade and Tax Department under Delhi Government, it was shared: “Taking into consideration the Notification issued by Department of Trade and Taxes, Delhi vide No. F.3 (515)/Policy/VAT/2015/330-41 dated 26/06/2015, the Department of Trade and Tax has made mandatory for all e-commerce companies/firms providing e-platform facility to file information online with regard to the transactions made by such sellers/traders through their portal.”
Delhi Govt. had conducted a meeting with all stake-holders (ecommerce companies, retailers and distributers) on August 27th, and the notice about tax collection was explained to them in detail.
It seems that the Govt. has observed that some portals are charging tax from the customers, but are not paying it forward to the treasury. The notification further said, “In the financial year 2014-15, it had come to the notice that some dealers/sellers engaged in the selling of goods through online portals were not depositing the due tax that they owe to the Department, even after collecting from consumers.”
To avoid this, both the online market place and the online retailers need to furnish all details of the transactions; and the retailers need to pay the total VAT applicable on the sold products.
Hence, the retailers will now add the VAT to the actual cost of the product, and this means that Delhi customers will need to shell out more in order to buy a product online. This may actually set a dangerous precedent, as other states such as Karnataka and Kerala are anxiously waiting to slap such taxes on ecommerce portals, and include them under the tax-net. Earlier this year, Flipkart, Jabong and other ecommerce portals were fined Rs 54 crore by Kerala Govt. for evading taxes and last year, Karnataka tax officials had sent notices to Amazon for issues related with tax.
In the absence of a concrete framework, such confusion regarding taxes is bound to happen.
But with Delhi Govt’s clear notification, it seems that online shopping is all set to become expensive with the inclusion of VAT and other taxes. Offline retailers will be happy with this news, as it creates a level playing field for them, as they had accused the online retailers of having unfair advantage with no provision of taxes.
Like it happened in the US with Amazon, another scenario is possible: Ecommerce portals may stop recruiting Delhi based retailers so that their Delhi customers are exempted from paying any tax. In case a seller from Punjab decided to sell a product to Delhi based customer, then there is no tax on this transaction.