Amazon may have to wait for tax relief in Karnataka

Karnataka is expected to go slow in amending the Karnataka Value Added Tax Act, 2003 provisions to facilitate e-commerce major Amazon to do business.

The State government feels there is no need to rush in for amendments.

“The amendment only helps or facilitates one sector. That too, only a handful of companies,” said a senior government official.

At present, Amazon does not pay VAT for online transactions as it claims it does not do business directly and instead wants its dealers (sellers) to make the payment.

The Chief Minister has to take a final call on this, he said. “The finance and commercial tax department is waiting for direction from the Chief Minister’s office. He (CM) at the moment is pre-occupied with the legislative session and is yet to give his opinion,” said the official.

In this scenario, the government is planning to bring in the amendments to Karnataka Value Added Tax only during the Budget session next year (sometime in February 2015). At present, the State government has classified Amazon’s business under the Section 8 and also as per the definition of a dealer under Section 2 (12) of the Karnataka Value Added Tax Act, 2003 and expects Amazon to fall in line and pay the tax accordingly.

As per Section 8, every person who, for an agreed commission or brokerage, buys or sells on behalf of any principal who is a resident of the State shall be liable to tax. As per Section 2 (12), a dealer means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise for cash or for deferred payment or commission.

To settle this issue, the state government needs to bring in general amendment to Karnataka Value Added Tax. It is mainly to incorporate a proviso for e-commerce business with reference to place of business and transaction.