Amazon, Karnataka tax issue: Nasscom expresses concerns

Trade body, local business chamber protest as state cancels registrations of 12 e-dealers, serve notices on 52 more

Tax policies should foster the growth of new technologies, such as e-commerce. Not create impediments for doing so, regrets the National Association of Software and Services Companies (Nasscom), trade body for the information technology sector.

It has said so in connection with the heat that online retail giant Amazon is facing from tax authorities in Karnataka.

Nasscom president R Chandrashekhar says it is the job of governments to catalyse growth and they shouldn't forget this.

"In some areas, we are seeing some sudden decisions, perhaps taken without adequate consideration of the implications," he said in response to queries from journalists on the Amazon issue, while making it clear that he was not talking on the merits of the particular case. "The key is to see how we can enable the economy to be efficient and how we can focus on the multiplier effect of such disruptive technologies, rather than on the direct revenue that might accrue. (Doing the latter) will become self-defeating.

"We have to be a little more far-sighted in enabling this (e-commerce) to grow, not stifling it by an undue focus or additional regulations that create additional burden," he added.

The issue

The commercial taxes department in Karnataka is learnt to have cancelled branch registration certificates issued to some dealers of Amazon which had allowed them to store goods in the latter's warehouses before selling to customers using the marketplace platform. According to sources, of 133 dealers, the certificates of 12 have been cancelled and 52 more have got notices asking why these shouldn't be.

The tax officials say Amazon works as a commission agent, by enabling sale through its fulfillment centres. So, those in question have to comply with norms of the state regarding value added tax.

The local chamber of commerce doesn't think so. "It is unfair to do this. There is no value addition here. In this case, the income tax Amazon derives is service income and on this, they are discharging services taxes. There is no 'sell' that is involved in this transaction. For a transaction to be so treated, there must be a transfer of property or goods from one person to the other," said S Venkataramani, chairman of the sales taxes expert committee at the Bangalore Chamber of Industry and Commerce.

Adding: "What they are doing is that of a job of a transporter, a handling agent. If you want to tax Amazon, then you have to tax all transporters."

Rethink?

Media reports quoting the state government's principal secretary for finance on Tuesday had said the effort was to resolve the issue amicably. And, that the officer had asked the commercial taxes department to review the matter. The principal secretary, I S N Prasad, could not be reached for his comments on this report, despite repeated attempts.

"Each state has its own tax regime and e-commerce is an absolutely new phenomenon. The current tax regime is perhaps not equipped to handle the complexities in the e-commerce structure. But, I am sure things will move from here and the government will work on a solution soon," said Saloni Nangia, president, Technopak, a retail consultancy.

Amazon says

Amazon India, to a query from Business Standard, said it had been working with the relevant authorities in Karnataka to address their concerns. "We understand this to be a case where the laws have not kept pace with the new-age online business models, that enable a faster, convenient and nationwide access to customers for sellers, especially small and medium businesses, at significantly low costs. We look forward to an early resolution in order to avoid closing our local warehousing operations in Karnataka and to stay on course for bringing more investments in the state," the company said.