Tamil Nadu raised Flag against VAT Evasion by E‑Commerce Players

In a fall­out of the out­cry over dis­count sales by e‑commerce play­ers, the Tamil Nadu gov­ern­ment has raised a flag. The state com­mer­cial tax­es depart­ment has issued a com­mu­ni­ca­tion cau­tion­ing busi­ness­es about the reper­cus­sions of indulging in unfair trade practices.

“Recent inves­ti­ga­tions under­tak­en by the com­mer­cial tax­es depart­ment of the Tamil Nadu gov­ern­ment reveal that cer­tain deal­ers involved in online trad­ing have indulged in tax eva­sion by not declar­ing the turnover on online sales. Such deal­ers have not paid val­ue-added tax (VAT) due there­on to the gov­ern­ment on sales effect­ed through e‑commerce por­tals,” said the note signed by prin­ci­pal sec­re­tary of com­mer­cial tax­es. “In one such instance, a deal­er made online sales worth sev­er­al crores of rupees but report­ed a small por­tion of the turnover to the gov­ern­ment, for which legal action is being pur­sued to col­lect tax due includ­ing inter­est and penalty.”

The depart­ment is ver­i­fy­ing bank trans­ac­tions made on e‑commerce por­tals to detect sup­pres­sion of sales and ascer­tain legit­i­mate tax due to the gov­ern­ment and the tax recov­ered as per pro­vi­sions of the state VAT Act. “Fur­ther, such deal­ers evad­ing tax are warned of pros­e­cu­tion under Sec­tion 71 of the Tamil Nadu Val­ue Added Tax Act, 2006,” the noti­fi­ca­tion said.

VAT is payable on online pur­chase of any goods, includ­ing down­loaded soft­ware, e‑books and songs, among oth­ers, by a con­sumer in Tamil Nadu from an online retail­er deliv­er­ing goods from Tamil Nadu. In case an e‑tailer deliv­ers goods from Tamil Nadu to a con­sumer in anoth­er state, cen­tral sales tax is payable. In the case of sale of motor vehi­cles from with­in Tamil Nadu or out­side the state to a con­sumer in Tamil Nadu, entry tax should be paid by the online sell­er or importer of such vehicle.

“Hence the deal­ers involv­ing in e‑commerce are here­by cau­tioned to dis­close and pay VAT and cen­tral sales tax due on all trans­ac­tions through e‑commerce por­tals prompt­ly, fail­ing which puni­tive action will be tak­en as per penal pro­vi­sions of TNVAT Act 2006,” the note said.

This is not the first time e‑tailers are fac­ing a tax tan­gle. Ama­zon India has found itself on a sticky wick­et with tax author­i­ties in Kar­nata­ka over the Ful­fill­ment by Ama­zon ser­vice, where­in the glob­al giant encour­ages third-par­ty sell­ers on its plat­form to store goods in its ware­hous­es even before an order is placed. The tax author­i­ties con­tend that Ama­zon is essen­tial­ly func­tion­ing as a com­mis­sion agent, which, they say, makes it liable to pay VAT on behalf of the sell­ers. At present, the sell­ers pay the VAT.

The Kar­nata­ka com­mer­cial tax­es depart­ment has issued notices to 40–50 deal­ers who it says had reg­is­tered Amazon’s ful­fil­ment cen­tre as an “addi­tion­al place of busi­ness” with­out prop­er­ly dis­clos­ing that the premis­es was being shared by sev­er­al busi­ness­es. Typ­i­cal­ly, a dealer’s addi­tion­al place of busi­ness should be under his exclu­sive con­trol, accord­ing to the department.

The com­mer­cial tax depart­ment urged con­sumers to insist on tax invoic­es con­tain­ing the name, full address of the sell­er and TIN while effect­ing online pur­chas­es, which would enhance their con­sumer rights by hav­ing legal title of goods pur­chased in case of any fault on the part of the sup­pli­er. If con­sumers come across online sales with­out prop­er spec­i­fi­ca­tions, they can inform the com­mer­cial tax­es depart­ment of the irregularities.

Source: Finan­cial Express