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Big Relief For Flipkart, Snapdeal As Kerala High Court Thrashes Government’s Order For Imposing Fine On E-Tailers

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Revoking the fine that Kerala government imposed on e-commerce giants including Flipkart and Snapdeal in January, Kerala’s High Court today said that the giants doesn’t have to pay even a single dime for non-payment of value added tax (VAT) for goods sold online and delivered in the state.

Kerala state department had slapped a fine of around Rs 54 crore in January this year on a slew of e-retail players including Flipkart and Snapdeal for evasion of sales tax in 2012-13 and 2013-14.

The highest fine was imposed on Flipkart – Rs 47.15 crore. Meanwhile, Jabong was fined Rs 3.89 lakh, Vector E-commerce Rs 2.23 crore and Robemall Apparells Rs 36 lakh.

Justifying the move, tax officials earlier said that though these online retail companies do not have physical showrooms, their websites, where they display the products and prices, serve the purpose. Since these companies sell the products to the local customers, regional taxes are applicable, said authorities.

The Kerala high court on Tuesday revoked the state government’s orders and brought some relief to all those giants who have been target for this controversy.

Flipkart and Snapdeal both defended themselves saying that they only offer an online marketplace and that taxes are paid by the respective sellers in their home states.

Justice AK Jayasankaran Nambiar said the government should bear in mind the fundamental constitutional precept under Article 265 that no tax shall be levied or collected except by authority of law.

Tax issue for the e-commerce giants in the country has been prevailing since years. Earlier in 2014, online retailers such as Jabong, Myntra, Flipkart and Snapdeal had stopped delivery to Kerala cities as the state tax department had banned cash on delivery services. The department said that it considers such transactions as a sale that happened in the state and hence are liable to pay sales tax.

Earlier, the Karnataka tax department had banned Amazon’s Indian arm from selling electronics and few other select products from its warehouses situated in the state. The state department had cancelled licences of about 100 vendors who sold products through the company’s website.

It’s unfortunate to see that a country like India, which has lately been witnessing an incomparable boom in the e-commerce sector, lacking coordination on tax grounds. Hoping that this verdict helps.

Senior Writer

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