Karnataka govt asks Amazon to resolve VAT issues in a month

Karnataka has mandated the American e-commerce giant Amazon to

explore options and comply with state’s VAT laws in a month's time. Till such time, the Commercial Taxes department has agreed not to act against individual dealers who have business a partnership with Amazon.

After Amazon opened its modern warehouse in Hoskote, Bangalore in January it could tie-up with just 50 dealers because its ‘fulfillment model’ ran into trouble with Karnataka tax authorities. Under this model, the dealers register the Amazon warehouse as their additional place of business (APOB), also called branch, with VAT authorities. The Commercial Taxes department accepted this initially, but later questioned the business model. The local VAT offices (LVOs) soon issued notices asking dealers why their branch certificates be not cancelled.

The e-commerce giant had expressed its inability to the finance department that it was unable to issue VAT invoice to buyers or remit taxes on dealers’ behalf as any such activity would be construed as engaging in retail trade, and violate FDI regulations in India.

Amazon recently announced that it plans to invest another two billion dollars (over 12,000 crores) in India to aggressively take on the competition. The company, since the launch of its official Indian website in June last year is giving tough competition with several initiatives like low prices, same-day delivery, wide choice of product categories and investing in advertising and marketing activities.