States can tax e-tailers to shore up revenues: RBI

Calls for a uniform tax model across states which is easy to implement

Mumbai, May 12: The Reserve Bank of India (RBI) on Tuesday made a case for more clarity on taxing the sunshine ecommerce sector, which has been seeing high valuations and frenetic activities, saying doing so will help bolster their finances.

“Taxing the burgeoning e-commerce space could bolster states’ own revenues, provided there is greater clarity around rules and procedures governing inter-state trade,” the Reserve Bank said in the ‘State finances: A study of budgets of 2014- 15’ report released late on Tuesday evening.

“Key to the states recommitting more strongly to fiscal consolidation is a reinvigoration of their own revenues,” the report said, making a case to focus on the e-commerce firms to shore up their revenue fronts.

The suggestion, which comes after multiple cases of litigation involving tax treatment to e-commerce portals like the one involving Karnataka and the world’s largest online marketplace Amazon India.

Kerala has also slapped a `54-crore tax notice on multiple e-commerce companies alleging tax evasion.

The Reserve Bank said this is a “complex problem” and the country needs to develop a uniform model across states which is easy to implement. “Leveraging technology and plugging the gaps in the state laws will lower the cost of compli- ance and monitoring of ecommerce taxation,” it said, giving examples of how other countries having federal structures deal with the issue.

With the goods and services tax (GST) coming up, the Reserve Bank of India report said that attention will need to be paid to the development of a uniform model for taxing e-commerce to reduce complexity and improve compliance.

The report expressed some optimism of the state budgets overall, saying the budgeted numbers of state finances showed some improvement during 2014-15. The report, however, added that information available for 17 states warrants a careful assessment of these initial expectations.

The RBI report, meanwhile, claimed that combined gross fiscal deficit of states has improved by 0.2 per cent to 2.3 per cent of GDP in FY 2014-15.

“Creating fiscal space for higher capital outlays, improving the quality of fiscal consolidation and containing the debt-GDP ratio of the states are crucial to improving their finances,” RBI said.

With the GST coming up, an RBI report said that attention will need to be paid to the development of a uniform model for taxing e-commerce to reduce complexity and improve compliance.