Flipkart, after getting slapped with numerous Government restrictions, is now on the offensive. The e-commerce behemoth has dragged Uttarakhand Government to court, over its decision of levying a 10% entry tax on goods purchased through online shopping.
The company based its arguments on the fact that, while the standard levy tax is 5 percent, goods obtained via online shopping are being subjected to an additional 5 percent tax — which as it says is in contradiction to the state’s own taxation laws.
As per the petition,
This new scheme is ex facie discriminatory wherein an additional tax burden is imposed on ‘goods’ procured through a different stream of commerce or commercial mobility. This is an aberration from the scheme of the UT Entry Tax Act, which sought to levy entry tax on specified goods irrespective of the entity from where they were procured.
What makes Flipkart’s petition even more important is the fact that the result of the case will have far flung consequence — not just in Uttarakhand, but for the rest of the country as well. While Maharashtra, Bihar and Karnataka already have an entry tax on e-commerce purchases, inspired by UK perhaps, almost half a dozen states are in the middle of imposing similar taxes upon e-retailers.
So, if the High Court in Nanital, where Flipkart has filed its petition, rules in its favour — the decision will be welcomed by the e-commerce community across the nation, while also setting a precedent for other states to follow. If it rules against, however — well, Flipkart is almost certain to take the matter to the Supreme Court.
Speaking on the topic with ET, a Flipkart spokesperson said,
This additional tax is on top of the tax already paid on such goods by the sellers in the state from where the goods have been dispatched. This will make all the products 10% more expensive for the customers in Uttarakhand for whom ecommerce is the only way to get access to millions of affordable products in one place at the convenience of delivery at their doorsteps.
Not to mention that it will also increase the cost of things, thus adversely affecting both sales and revenue.
Well, the other e-commerce portal are waiting to ‘gain pointers’ from the Flipkart Vs UK government case, which will be heard next week. However, considering that the decision is bad for retailers all around — Who likes paying extra taxes? — we may just witness them come together to support Flipkart.
Meanwhile, given that it will lose significant revenue by going back on its decision, various state Governments probably won’t give up without a fight. The first round is set to begin next week in what is yet another example of the clash of corporate Vs government interests, with the Judiciary acting as referee.