Following pressure from retail traders’ associations,
Kerala Finance Minister KM Mani has agreed to look into taxation issues
thrown up by the growing online retailing, which the associations say is
robbing the government of hundreds of crores of rupees in government
revenue.
At the pre-budget consultations held at K.M.
Mani Centre for Budget Studies at Cochin University, the minister said
the government was studying the issue and steps would soon be taken.
The
Kerala Vyapari Vyavasayi Ekopana Samiti, worried by the fast growth of
e-tailing, had urged the government to bring online retailing under the
VAT (value added tax) regime. It has threatened that if the government
did not charge VAT from online companies, retail shops and businesses
would not pay the taxes from January. The retailers complain that since
the e-tailers sell their wares at a much reduced price, the business
volumes of the brick-and-mortar shops had shrunk. As retailers had to
pay 14.5 per cent VAT, municipal and other taxes as well as the huge
expenses of direct selling which required paying rent and wages, their
prices were higher. However, Jose Sebastian of the Gulati Institute of
Finance and Taxation, told BusinessLine that it was impossible to impose VAT on e-tailing.
‘Principle of origin’
Since
the country followed the ‘principle of origin’ for taxing commodities,
only the State where the product originated could tax and not the State
where the commodity was sent. However, once the Goods and Services Tax
regime comes into effect in 2016, this would be possible as GST follows
the ‘principle of destination’.
KVVES claims that in
this financial year ₹10,000 crore worth of e-tainling would take place
in Kerala. This would mean taking that much business away from the
brick-and-mortar shops and a loss of close to ₹1,500 crores in taxes for
the government.
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