M C Sampath, minister for commercial taxes and registration, Government of Tamil Nadu, at the stakeholder consultation meeting on Formulation of Suitable Guidelines on e-Commerce Transactions held at New Delhi on July 15, 2015, suggested that there should be clear definition of terms such as 'e-commerce', 'inventory base' and 'market place' and regulations to avoid tax evasions by the e-commerce players.
Regulatory oversight to prevent concentration of market power in a few hands should be ensured and to protect the interest of consumers e-commerce platforms should have mandate to declare the name, address and contact details of every online seller on such platforms.
A monitoring mechanism has to be put in place to ensure that FDI regulations are not violated or bypassed by e-commerce platforms or sellers, harming the interests of brick-and-mortar retailers.
He reiterated that the interest of small retail trade which provides livelihood to lakhs of small traders and shop owners should be protected and said Centre should keep it in mind while framing guidelines and policies.
Tamil Nadu is against FDI in retail trade thinking that it would have an adverse impact on the unorganised retail business. The state has opposed the decision of the previous UPA Government at the Centre to permit FDI upto 51 per cent in multi brand retailing and 100 per cent in single brand retailing.
The state also said definition of e-commerce needs to be consonance with other laws including the Sale of Goods Act and commodity taxation laws. Some e-commerce platforms perform agency functions, as defined under the Sale of Goods Act, 1930 and Indian Contract Act 1872 such as storing and despatching goods on behalf of consumers, collecting payments from customers on behalf of principals, etc., and therefore would fall under the definition of a agent or dealer under VAT laws.
This would place those e-commerce platforms with FDI in conflict with the FDI regulations relating to e-commerce and on multi-brand retail trade. Hence, due care needs to be exercised in finalising the definition, said the Minister.
"The market place model is a clear ploy to circumvent the FDI norms in B2C. While there are no official definitions of such models, there appears to be an effort to convey that e-commerce players are only intermediaries facilitating the sale of goods owned by a seller to a purchaser without getting into the element of ownership of such goods, and hence do not amount to retail trader. This does not appear acceptable". The definition of e-Commerce has to be changed to include only the "inventory based" model and not the "market place" model.
Commodity taxation is the main source of revenue for States. Hence, ensuring that the revenue base is not eroded through sharp e-commerce practices is a serious concern for us, said the Minister.
"All regulatory and tax laws governing brick-and-mortar retail business should be made equally applicable to e-commerce business also without any exception to maintain the level playing field," he said. E-commerce transactions should be subjected to levy of appropriate tax, either State VAT (Value Added Tax) or CST (Central Sales Tax), depending upon the nature of the transactions.
Although transactions relating to B2B e-commerce are at present governed by the existing VAT and CST laws, from the point of view of taxation, this is an emerging area. However, he alleged that many of them do not file returns as required under the VAT laws and restrict themselves to data sharing, he alleged. The existing VAT laws do not have provisions for carrying out VAT audit of such e-commerce platforms situated outside the State jurisdiction thereby posing serious risks to State revenues.
In respect of B2C transactions in particular, the existing VAT and CST laws need to be strengthened to avoid tax evasion. Many e-commerce platforms hold their data and servers in data centers abroad and this would make enforcing compliance with taxation laws and other statutory regulations difficult. Efforts to strengthen rules to overcome this has to be ensured.
Government of Tamil Nadu is clearly of the view that the FDI Policy for cash and carry wholesale trading should be applicable to B2B e-Commerce also. Unambiguous guidelines should be framed for B2B e-Commerce.
It is also not clear whether the entities engaged in e-commerce are complying with the relevant labour, consumer protection and other regulatory laws. There are already many complaints that enforceable warranties are not available to consumers for products that are purchased through e-commerce platforms and such entities cannot be allowed to bypass or escape the essential regulatory frameworks, said the Minister.
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