Karnataka will lose out on all future investments that Amazon India will make in ramping up its warehousing infrastructure.
However, all the other investments that the e-commerce giant is making in transportation, logistics, manpower etc in Karnataka will continue according to plans, and the company will continue to be headquartered in Bengaluru, an Amazon India spokesperson told BusinessLine .
This development comes close on the heels of the e-commerce giant’s single largest investment in India — the opening of a 2,80,000 sq ft Fulfilment Centre (FC) or a warehouse in Telangana, near Kottur on the outskirts of Hyderabad, which will be operational from May.
FCs or warehouses are where the products/merchandise that have been ordered by customers are stored, packed and dispatched by Amazon.
The reason for Amazon putting its FC investments on hold is due to its ongoing tax dispute with the Karnataka Government. The problem arose with the State Government demanding that Amazon pay up VAT for all the seller merchandise that is stored in its Bengaluru FC, as it amounts to the company selling directly to the buyers.
Amazon, on its part, told the Government to collect VAT from the sellers saying that it is just providing a service for third party sellers to sell their merchandise conveniently and quickly and is not liable to pay VAT as it does not own the merchandise that it helps sell on its marketplace platform. The State Government also sent out cancellation notices to some 100 sellers or third party merchants who were selling on Amazon.in.
Making it clear that Amazon has no intention of exiting Karnataka, an Amazon India spokesperson said “We understand the situation to be a case where the laws have not kept pace with the new-age online business models that enable a faster, convenient and nationwide access to customers for sellers, especially small and medium businesses, at significantly low costs. Needless to say, currently all future investments in warehousing infrastructure for the e-commerce business in Karnataka are on hold. We do look forward to a resolution at the earliest.”
Founder and CEO of Amazon, Jeff Bezos had announced an investment of $2 billion in India when he had visited the country last year. A significant part of the investment was to be in Karnataka.