Amazon may exit Karnataka over VAT issues

If the set of amendments to its VAT Act of 2003 proposed by Karnataka\'s commercial taxes department get legislative approval, it might prove to be a full-stop to American e-commerce giant Amazon\'s business in the state. The department hassought to bring e-commerce firms under the definition of 'dealer' and proposed amendments to sections 8 and 22 of the VAT Act.

Sources say that the proposals are yet to reach chief minister Siddaramaiah, who also holds the finance portfolio, for a final view. Karnataka's additional chief secretary K Ratna Prabha, who heads the commerce and industries department, has written to chief secretary Kaushik Mukherjee, urging him to find a solution to the crisis and ensure Amazon does not quit the state.

Even Tamil Nadu's finance department is demanding amendments to its VAT laws to accommodate e-commerce business, but in ways different than that in Karnataka. The VAT authorities in the state are pushing for amendments that will require e-commerce firms to share details of transactions carried out through their portals and the dealers involved. The VAT authorities in Tamil Nadu are not bothered much about the nature of business model followed by an e-tailer as long as tax is paid on sale transactions.

The entire issue of VAT and problems surrounding it came to the fore with Amazon's warehouse launch in Hoskote. The dealers showed the Amazon warehouse as their additional place of business or branch to avoid paying certain taxes.