No tax evasion issue with Amazon: Tax department
BENGALURU: Commissioner of commercial taxes Ritvik Pandey said there is no request for VAT exemption from Amazon, nor is there a tax evasion issue that concerns the e-commerce major. He said Amazon pays VAT on packaging and labelling. The merchant pays VAT on the product. Pandey said the problem was that Karnataka’s VAT rules do not have any provision for a fulfillment centre model of the kind that Amazon follows. “The tax department does not deal with policy,” he said.
Under Amazon’s model, sellers on its platform register the fulfilment centre (the warehouse from which Amazon fulfils orders) as an ‘additional place of business’ while filing their taxes. The government says this makes the fulfilment centre a co-shared property, and that the state’s laws demand that the ‘additional place of business’ belong to one owner, not multiple owners.
Amazon wants this fulfilment centre model because it clearly communicates that it is the merchant who is selling the product, and Amazon is merely the facilitator. If Amazon turns into the single owner of the facility and runs the entire operation, then it will have to invoice in its own name, and it would be treated as a retailer.
“Since Amazon gets its capital from outside the country, such invoicing will go against the Centre’s law that bans FDI in retail. The company does not want to flout any rules. Flipkart, on the contrary, is on the right side of the Karnataka government, but they are facing problems with the Enforcement Directorate as they have received FDI,” an industry expert said.
Given its issues with the state government, Amazon’s fulfilment centre in the state now stocks only a few products such as books that do not come under the VAT rules.
