oppn parties Should Service Tax be Levied on Online Retail Platforms?

News Snippets

  • The government says Covid-19 is still in local transmission stage in India
  • Government scotches rumours of extending the lockdown beyond April14. Says no such plan
  • Centre asks states to give shelter and food to migrant workers to stop them from taking to the streets
  • RBI cuts repo rate by 75 bps, the steepest in 10 years
  • Centre writes to states regarding laxity in monitoring people who had arrived from abroad between January and March
  • Kerala reports a spurt in new cases
  • With 124 fresh cases on Friday, the number of reported cases in India stand at 854
  • Five of a family, including a 9-month-old-baby test positive for Covid-19 in Nadia district in West Bengal on Friday
  • The Pakistani army is reportedly forcibly moving all Covid-19 patients to PoK and Gilgit
  • Untimely azaans in J&K mosques spark panic gathering
  • Stocks rise - Sensex up by 1400 points and Nifty goes above the 8600 mark
  • Rahul Gandhi says the economic package is "the first step in the right direction"
  • The government announces wide-ranging measures to help the poor overcome the economic hardship caused by Covid-19
  • G20 leaders to hold a virtual meeting today to explore ways of fighting Covid-19 in a coordinated manner
  • The Delhi government orders testing of all medical staff after the positive test on a Delhi mohalla clinic doctor
Death toll reaches 27 as Covid-19 cases across India reach 974 on Saturday
oppn parties
Should Service Tax be Levied on Online Retail Platforms?

By Sunil Garodia
First publised on 2015-09-23 17:55:45

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.
Ecommerce sites like Flipkart, Amazon, Snapdeal et al are going to get into a taxation web of their own making.

These players never tire to remind one and all that they are not sellers, but platforms for seller. In other words, they are just facilitators. In yet other ominous words, they are nothing but service providers. Snapdeal’s Kunal Bahl has pointedly said that “We are not an ecommerce company. We are an enabler.” The said companies are saying so because they want to escape paying income tax on revenues as they correctly pass it as sales of merchants who have enlisted for selling their products on their platform.

But there is something called service tax in India which is levied on transactions where service is provided. Enabling merchants through any means to sell their products is a service. Finance Minister Arun Jaitley had called them "aggregators" while bringing them under the service tax net in this years' Union Budget. Hence, all ecommerce sites, whether facilitating merchants or providing any other third party based services, are now aggregators and hence liable to pay service tax.

Now, the leading business daily The Economic Times has already raised this question in a hard hitting editorial. Specifically, the ET asks “in the meantime, there is something the government can and should do to level the playing field a bit. In the marketplace model followed by online retail, which draws tones of FDI and uses this money to offer huge discounts to consumers, the role of the retail agent is to provide service of mediation between sellers and buyers via its online platform. This activity â€" Amazon calls it fulfillment â€" should attract a service tax, even as the goods sold bear value added tax. To the extent that offline retail is a direct seller, it would bear only VAT. Is there any reason for tax authorities to skip this service tax?”

Normally, the answer to this question should have been a resounding no. The Union Budget had already provided for this and if the government is not collecting the tax yet, it is its own fault. But, with the country moving towards GST, in the end it is just a question of a few months before the new tax regime takes over. Then, there will be no separate service tax or VAT. A single GST will be applicable. So why rock the boat now? It is no one’s case that this service tax be levied with retrospective effect. Hence the benefits of bringing these companies under the service tax net at this juncture will not be many. The government can, however, do so to make a point and perhaps mollify the offline retailers.