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

News Snippets

  • Maratha quota bill likely to be tabled in Maharashtra assembly today
  • Arvind Kejriwal skips ED summons for the 6th time, says the case is in court and will follow court's decision
  • PM Modi says UP has gone from 'red tape' to 'red carpet' in 7 years of 'double engine' government
  • Farm unions reject government offers, to resume Delhi march from today
  • Centre says some Aadhar cards in Bengal 'deactivated' due to technical glitz, will be activated back soon
  • Supreme Court stays LS privilege panel summons to Bengal officials over BJP MP Sukanta Majumdar injury case
  • Supreme Court junks Sandeshkhali petition, says it cannot be compared to Manipur, asks petitioner to approach Calcutta HC
  • Supreme Court gets tough on Chandigarh mayoral elections, asks for ballot papers and video footage, does not order re-election
  • Government starts withdrawing old small tax demands, up to Rs 25000 per entry till FY 2009-10 and up to Rs 10000 per entry from FY 2010-11 to FY 2014-15 with an overall ceiling of Rs 1 lakh per tax payer
  • Stocks remained positive on Monday: Sensex gained 281 points to 72708 and Nifty 81 points to 22122
  • Jasprit Bumrah likely to be rested for 4th Test while K L Rahul may be back
  • FIH Pro League hockey: India beat Spain 8-7 in shootout
  • SP leader Salim Sherwani, miffed at no Muslim candidate given RS ticket, quits party
  • Army going for big (Rs 57000cr) upgrade in combat vehicles to replace T-72 tanks
  • Mamata Banerjee says the BJP is doing nothing to resolve the Sandeshkhali dispute but instead fanning the fires to escalate it
History created in Supreme Court as Chandigarh mayoral poll ballots counted in court, judges declare AAP candidate Kuldeep Kumar winner after taking into account the votes defaced by returning officer Anil Masih
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.
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.