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

News Snippets

  • In a first, the Supreme Court recognizes marital rape, although for the limited purpose of allowing married women the right of abortion up to 24 weeks if they conceived as a result of forced sex by their husbands
  • Air India cuts discounts on base fare to students and senior citizens from 50% to 25%
  • Mallikarjun Kharge and Digvijay Singh are being touted as frontrunners to take on Shashi Tharoor in the elections for the post of Congress president
  • Sonia Gandhi will decide who will be Rajasthan CM if she feels there is a need to change guard after the near-rebellion by MLAs in the state
  • Ashok Gehlot bowed out of the race for being Congress president after meeting Sonia Gandhi
  • India has moved to the 40th spot in the innovation index, up 6 spots from last year
  • DGGI has alleged that top insurance companies, banks and NBFCs has committed a fraud of Rs 800cr by claiming input tax credit without underlying supplies
  • The Centre will borrow Rs 10000cr less than planned earlier due to good revenue collections
  • At $23.9bn, India's current account deficit widened to 2.8% in Q1, the worst in four years
  • Stocks continue to flounder on Thursday: Sensex sheds 188 points to 56409 and Nifty 40 points to 16818
  • The 36th National Games were declared open on Thusrday by PM Modi in front of a record crowd in Motera near Ahmedabad
  • Jasprit Bumrah most likely to miss T20 World Cup due to recurrence of back injury
  • PFI's political wing, the SDPI is on EC radar and action will follow soon if discrepancies are detected
  • Ashok Gehlot to meet Sonia Gandhi today, says all issues will be sorted out soon
  • Referring to the PFI ban, most Muslim organizations ask the government to take similar action against right wings organizations like the RSS, Bajrang Dal, VHP and the like
In a landmark order, Supreme Court rules that all women, married or unmarried, are entitled to safe and legal abortion up to 24 weeks of pregnancy as per the MTP Act
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.