Madhya Pradesh Government To Impose 6% Entry Tax on Ecommerce Firms

Madhya Pradesh has joined the list of other states at imposing tax on goods bought via ecommerce marketplaces.

The MP government plans to impose 6% entry tax on the ecommerce firms by amending the legislation to increase revenue. It has planned to introduce a Bill in the upcoming monsoon session to amendment laws, so as to bring ecommerce firms under the tax regime.

According to finance minister of MP, Jayant Malaiya, “The business of ecommerce companies is increasing day-by-day and it is affecting the traditional shopkeepers, who pay us entry tax along with other levies. So, we have decided to bring ecommerce under the gambit of tax regime, so that there should be equal collection from both channels — traditional brick & mortar shops and ecommerce trade.”

The government  is aiming to receive at least INR 300 Cr from the move.

Madhya Pradesh is another state that has now joined seven other states including Uttar Pradesh, Assam, Odisha, Uttarakhand, Rajasthan, West Bengal, and Mizoram, which imposed the tax on ecommerce firms citing loss of revenues.

The ecommerce marketplaces have confronted that it is a facilitator and an intermediary. The tax, if applicable, should be imposed on the merchant directly, and not on the marketplace. However, looking at innumerable transactions happening via ecommerce marketplaces, states find it easier to impose the tax at the marketplace or delivery entity instead of the seller.

Earlier last month, Amazon filed a case against Gujarat state government for imposing ‘Entry Tax’. Flipkart too sued the state of Uttarakhand for imposing a 10% entry tax on ecommerce goods. Also, last year, Flipkart, Snapdeal & Amazon had collectively decided to stop delivering products, exceeding INR 5000 in value, to customers in UP and Uttarakhand owing to the harassment by tax authorities.

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