Amazon Files Lawsuit Against Gujarat Government Over ‘Entry Tax’

The legal atmosphere of the country is burning high with its flames reaching to the corridors of Gujarat High Court again. Amazon has recently filed a case against Gujarat state government for imposing ‘Entry Tax’.

This tax is levied on goods purchased through ecommerce portals and delivered from outside the state. Amazon is challenging the basic definition and the concept of this tax

According to a new report by ET , Amazon is only a facilitator and only arranging the buyers and the sellers on the portal, and is neither the importer nor the consumer, and the company as such has nothing to do with the goods. “It is not a case where Amazon is purchasing and selling. The tax should be applicable to anyone who is importing items,” said one of the sources to ET.

However, Gujarat government has a different take on this. It believes that this tax will protect offline retailers from competitive discounts that online sellers offer, thereby taking edge over them.

Earlier this year, Flipkart had also filed the similar case against West Bengal, Uttarakhand and Gujarat Government. Flipkart has been able to get favourable judgement from Uttarakhand and West Bengal High Court, both imposing a stay on the collection of entry tax on the goods entering these states.

Currently, entry tax is levied by governments of UP (5%), Rajasthan (5.5%), Bihar, and Uttarakhand (10%). Other states such as Assam, Jharkhand, Odisha and Bihar have restrained themselves from taxing goods purchased through ecommerce platforms.

“This entry tax is unlikely to expand states’ revenues, but will prove to be a major barrier to the inter-state trade,” said Dr A Didar Singh, secretary general at Federation of Indian Chambers of Commerce and Industry (FICCI).

Ecommerce in India is projected to reach $119 Bn in next 4 years. As per Nasscom, creating such barriers will not only impact the financials of the ecommerce companies but also restrain new and foreign players from entering into the market. The market is already trying to cope with burgeoning losses, low investor sentiments and rising consumer expectations in terms of delivery and quality.