Home/ Industry / Retail/  Indian online retailers face increased government scrutiny

In the first signs of growing disaffection with Indian online retailers such as Flipkart and Snapdeal, Tamil Nadu joined Karnataka in imposing stringent tax rules on online transactions and commerce and industry minister Nirmala Sitharaman said that the government will look into complaints against Flipkart for selling goods at below-cost prices.

The Tamil Nadu government on Wednesday warned e-commerce companies to make sure they pay taxes on all transactions or face prosecution.

In New Delhi, Sitharaman said that the central government would look into complaints made by traders against online retailer Flipkart, which logged record sales by offering deep discounts in what it billed as the ‘Big Billion Day’ event on Monday. “We have received many inputs. Lot of concerns have been expressed. We will look into it," Sitharaman said. “Whether there is a need for a separate policy or some kind of clarification is needed, we will make it clear soon." Sitharaman is also the minister of state for finance and corporate affairs.

Flipkart on Monday took just 10 hours to hit its target of $100 million in gross merchandize value—or the value of goods sold—but faced numerous complaints from consumers that it had marked up prices of some products to make discounts look more attractive than they were.

The growing popularity of online marketplaces such as Flipkart and Snapdeal have raised concerns among traditional merchants, who can’t match the online discounts, that their business would suffer. Earlier this week, the lobby group Confederation of All India Traders (CAIT) had demanded the commerce and industry ministry take steps to monitor and regulate online businesses. CAIT has also sought a probe into the business model and trade practices of e-commerce companies to find out how they are offering such huge discounts during the ongoing festive season.

In Chennai, Tamil Nadu’s commercial taxes department said in a statement that recent investigations showed e-commerce companies had evaded taxes. The department is verifying bank transactions made on e-commerce portals, it said.

“Further such dealers evading tax are warned of prosecution under Section 71 of Tamil Nadu Value Added Tax (VAT) Act 2006," said the statement.

State VAT is payable on online purchase of any goods, including software, e-books and songs downloaded by a consumer in Tamil Nadu from an online retailer delivering goods from the state. In case the online retailer delivers goods from Tamil Nadu to a consumer in another state, central sales tax is payable.

The commercial taxes department asked dealers in e-commerce marketplaces to disclose and pay VAT and central sales tax due on all transactions promptly, failing which punitive action will be taken.

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Updated: 09 Oct 2014, 12:30 AM IST
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