EComm En­try Tax Will Build Trade Walls Here

Nasscom says the move is detri­men­tal to growth of small and medium en­ter­prises

The Economic Times - - Disruption: - Our Bureau

New Delhi: Nasscom came out strongly against the de­ci­sion of the state govern­ments to levy taxes on in­ter-state ecom­merce trans­ac­tions, call­ing the move flawed, detri­men­tal to growth of small and medium en­ter­prises and would re­sult in ad­di­tional costs for them.

Nasscom, the in­dus­try body rep­re­sent­ing In­dian soft­ware in­dus­try, re­leased the state­ment af­ter the Govern­ment of Gu­jarat passed a Bill on March 30, propos­ing an en­try tax on con­sumers for e-com­merce trans­ac­tions.

“Such tax struc­tures will lead to an ad­di­tional bur­den on SME traders, in­crease lit­i­ga­tion and also re­duce busi­ness ef­fi­cien­cies. It will also re­strict choice of the cus­tomer,” said R Chan­drashekhar, pres­i­dent, Nasscom.

“The e-com­merce sec­tor as­pires to unify the country dig­i­tally into a sin­gle en­tity. Pro­vid­ing un­re­stricted cross bor­der ac­cess to sellers as well as buy­ers is the pre­rog­a­tive of the govern­ment and is an im­por­tant driver to­wards cre­at­ing an ease of do­ing busi­ness,” Chan­drashekhar said. The e-com­merce in­dus­try has been up in arms about the levy of “en­try taxes” be­ing ap­plied by dif­fer­ent states, say­ing that such tax- es in­crease cost of the goods brought into the states. En­try taxes are payable by the con­sumers and will be col­lected and de­posited by en­ti­ties that bring spec­i­fied goods to a state from any other part of the country.

The move to levy in­ter­state taxes is “flawed”, said Nasscom, be­cause it was “akin to in­tro­duc­ing tra- de bar­ri­ers to free in­ter-state trade thereby restrict­ing mar­ket ac­cess within the country”.

It fur­ther added that e-com­merce had helped small and medium busi­nesses grow, ir­re­spec­tive of their lo­ca­tion, and that such taxes would dis­cour­age lo­cal man­u­fac­tur­ing by SMEs.

ET has ear­lier re­ported that Flip­kart re­cently dragged the states of Ut­tarak­hand and West Ben­gal to court over the is­sue of en­try tax. It got a stay from both the govern­ments, which is ex­pected to act as a de­ter­rent for other states that are in the process of im­pos­ing en­try taxes on goods bought on­line.

“The pro­posed levy will have a short life in light of the im­pend­ing GST re­form,” Nasscom added.

“For col­lect­ing and de­posit­ing the tax, the deemed tax payer would be re­quired to sig­nif­i­cantly revamp the IT sys­tems to track the tax charged on in­ter-state sale of goods to Gu­jarat and de­ter­mine the dif­fer­en­tial tax which has to be paid in the form of en­try tax,” it added. In­ter-state tax levies will af­fect lo­gis­tics com­pa­nies and the out­side-state sellers sell­ing goods to cus­tomers in the state, Nasscom said. The states of As­sam, Odisha, Ut­tarak­hand, Ra­jasthan and Mi­zo­ram have en­forced such levies, and Pun­jab, Hi­machal Pradesh, UP and Mad­hya Pradesh have pro­posed sim­i­lar taxes.

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