Taxing Troubles For Ecommerce Giants: Kerala Slaps Fine On Flipkart, Myntra, Jabong & Others

The Kerala sales tax department has slapped fines amounting to INR 54 Cr on online retailers for evading sales tax for two years i.e. in 2012-13 and 2013-14. Among the companies, the biggest penalty has been imposed on Flipkart—INR

47.15 Cr. Other retailers that have been fined are Jabong (INR 3.89 Cr), Vector Ecommerce, which has a stake in Myntra (INR 2.23 Cr), and Robemall Apparels, which operates Zovi.com (INR 36 lakh).

According to officials, etailers Jabong, Myntra, Flipkart and Snapdeal had stopped delivery in Kerala due to a ban imposed by the state’s commercial taxes department on the cash on delivery (COD) mode but the companies had recently resumed their COD services inspite of the ban. The tax officials are also scanning other ecommerce players who might as well face similar fines.

“Since the online retail firms do not have brick-and-mortar showrooms, their websites will be treated as showrooms that display products and prices. If the products are sold to local customers, regional taxes will be applicable. All transactions are taxable,” said a senior official with the Kerala Tax Department.

Offline traders in Kerala have also been complaining of sales tax evasion by online players. “Every day, at least INR 10 crore worth of products are sold by online retailers. Since they can evade the state’s tax net, they can pass on discounts to the tune of 16% to the customer in the state. They do business at the opportunity cost of offline traders.,” said E Binny, president of the Kerala Samsthana Vyapari Vyvasayai Samithi.

Flipkart spokesperson said, “We are compliant with the laws of the land in which we operate and will work together with the authorities to ensure that there are no information gaps between us.”

Earlier, Flipkart had been fined by the UP state tax department. Also, the tax department of Karnataka had barred Amazon’s local unit from selling electronics and a few other products from its warehouses situated in the state.