Telangana mulls entry tax on goods sold by e-tailers

Govt plans to levy tax on products coming from other states to protect revenues

The Telangana government is planning to levy entry tax on products sold to customers from outside the state by e-commerce firms and other online platforms.

A top official of the state revenue department told Business Standard that the government might take the ordinance route without having to wait till the next Budget session to amend the existing provisions of the Value Added Tax (VAT) Act for facilitating the same.

The existing provisions of the Act permit the authorities to impose tax on the product only at the point of sale and the Act needs to be amended even to introduce entry tax to bring these online purchases into the tax ambit of Telangana, according to the official.

The talk about a possible ordinance reflects a sense of urgency in government over this matter as the Budget session of the state Assembly usually starts in the middle of February and lasts till March 31. However, the timing of the Budget session is likely to alter as both AP and Telangana share the same Assembly premises.

This would be the next logical step for the government after it had verified if the goods, which have been sourced from a local dealer and sold online to customers outside the state were being properly accounted for for the tax purposes. The Commercial Taxes department had verified such transactions of popular e-commerce firms like Amazon and Flipkart and found that they were in compliance with the law.

“The state of Maharashtra has been levying entry tax on products moving into the state through online marketing and other channels. We also want to follow the same method,” B R Meena, principal secretary - revenue, said. According to him, the entry tax rates are expected to be similar to the VAT rates applicable depending on the product category.

Meena said the state was going to lose revenues as Telangana did not have any warehouse being operated by e-commerce firms like Amazon unlike in Karnataka. Warehouses are the points of sale benefiting the states where they operate.

The restoration of entry tax may also cover certain bulk purchases like cement, which is being procured by the organised builders from companies located on the Telangana-Karnataka borders.