Rajasthan govt to levy entry tax on ecommerce traders; GST to the rescue

In a move that could cause worry to online sellers, the Rajasthan government is mulling over imposing entry tax on goods transacted through ecommerce companies. The government is proposing an additional tax of 5.5% on goods that enter the state.

According to the Rajasthan government’s Entry Tax Act, the government is allowed to levy a tax on dealers (a dealer is defined as anyone who carries out business over Rs. 1 lakh in any locality in the state) who bring goods into the state. In other words, any product that comes into the state to be sold can be subjected to a tax.

Double taxation unconstitutional, say online traders

However, online sellers point out that they already pay Central Sales Tax (CST) on the goods that they deal with. Adding entry tax would further burden the traders, which they will invariably be forced to pass on to their buyers.

According to an individual from the ecommerce sector on condition of anonymity, “CST is already paid on the goods brought into the state as per the orders of the customers. Asking to pay entry tax on it amounts to double taxation. The amendments in the entry tax cannot stand any court of law and it is unconstitutional.”

The person pointed out that the goods are being brought in not for further sale by a dealer, but for individual consumption.

Shilpa Gupta, head of retail at Federation of Indian Chambers of Commerce and Industry (FICCI), said that ecommerce offers a chance to those entrepreneurs who are limited by their finances.

She said, “Ecommerce has emerged as a new frontier that promises opportunities for growth to a large section of the entrepreneurs who could not grow beyond their localities due to lack of financial resources. Instead of welcoming it and supporting it, we are killing the industry.”

Industry players challenging the proposal

Other states like Bihar, Assam, and Uttarakhand already have provision for entry tax. Flipkart is taking steps to veto the tax at Uttarakhand (which is 10%). However, experts are of the opinion that sellers need not worry, as the advent of the Goods and Services Tax (GST) will ensure a uniform policy, and nullify other taxes. Online sellers should be rooting for GST, which is unfortunately getting delayed.