UP tax diktat makes e-tailers lose crores of potential business

Many e-commerce retailers are not able to ship goods over Rs 5,000 to Uttar Pradesh (UP). This is because of a tax diktat that has been in place in UP for the last six months. As a result leading e-tailers such as Flipkart, Amazon and Snapdeal are losing crores of potential business every month.

The new law requires online buyers purchasing products over Rs 5,000 to file a VAT declaration along with the registration number of the vehicle that brings the products. This has put a stop to major high-end purchases in the country’s most populous state. Most online retailers concede that 60 per cent of their sales come from UP. As an industry expert says, it is a huge and underserved market. Now Flipkart, Amazon and Snapdeal have had to stop sales of goods over Rs 5,000 to customers in UP after the state tax authorities clamped down on products delivered by online retailers from outside the state and even seized the goods. Not just e-tailers, even consumers are unhappy.

To overcome this hurdle, many e-commerce marketplaces are increasing their seller base and warehouses in UP. Paytm, for instance, has enrolled about 3,500 sellers in the state and also added 1,000 sellers in Noida and 650 in Ghaziabad. Even Snapdeal is increasing sellers and warehouses in UP.

E-commerce businesses are facing probe by tax authorities in many states. In Karnataka, a 1 per cent value added tax deducted at source on all payments to dealers has been proposed while in Delhi recently the government had issued an ad asking ecommerce companies to start filing mandatory quarterly returns.