Is the Amazon expansion story ending in Karnataka?
news Wednesday, April 15, 2015 - 05:30
The News Minute | April 14, 2015 | 3.57 pm IST Even as the industry fears a bad investment climate in Karnataka, the government has said that it has not yet taken a final call on the tax issue with Amazon. The government of Karnataka is yet to finalise its stand on e-commerce giant Amazonâ€™s possible relocation to neighbouring Telangana over its standoff with the government on VAT. Relations between Amazon India and the government of Karnataka have soured since September, when the commercial taxes department issued notices to sellers effectively preventing them from using Amazon to sell their wares. Principle Secretary of the Finance Department ISN Prasad told The News Minute that Chief Minister Siddaramaiah, who also holds the finance portfolio, was yet to meet with Amazon officials, who have threatened to stop future investments in warehousing infrastructure in Karnataka. A final decision would be taken only after that, he said, adding: â€śWe donâ€™t know what problem Amazon has with Karnatakaâ€™s laws, no other e-commerce company has any issue.â€ť Trouble started when the government issued notices to sellers who use Amazon to reach customers, preventing them from doing so. The government has maintained that Amazon is liable to pay VAT to the government for the products that are stored in its warehouses. But the company, has maintained that it merely stores third party products in its warehouses or Fulfillment Centres and dispatches them to the customer, and does not engage in direct selling. Therefore, the company argues, the sellers and not Amazon (which is an online marketplace) must be liable to pay VAT to the government. Snapdeal, another online retailer, is not affected by this as it does not own a warehouse in the state. According to a Mint report, the government of Karnataka wants Amazon, Flipkart and other online marketplaces to pay VAT in accordance with current rules. For a detailed explanation of the entire issue, see the Mint report. Mint also reported that the government was contemplating changes in the law to resolve the current issue,Â which aroseÂ as the result of the law pre-dating the online shopping phenomenon. Business Line, has reported that the e-commerce company will not pull out completely from the state, but has put future investments in warehousing infrastructure on hold, until the tax issues with the government are resolved. The move comes close on the heels of Amazonâ€™s upcoming opening of aÂ Fulfillment CentreÂ on the outskirts of Hyderabad, which is also the companyâ€™s single-largest investment in the country.