Worried by the fast growth of online retailing that is chipping away the business volumes of brick-and-mortar retail shops, the Kerala State Vyapari Vyavasayi Ekopana Samiti (KVVES), the country’s largest union of retailers and small businesses, is asking the government to rein in e-tailers.

The association has threatened that its members will en masse refuse to pay value-added tax (VAT) and Central Sales Tax (CST) from January 1 if the online sellers are not taxed the same way as ordinary retailers.

“The online business is eating into our business and also robbing the government of hundreds of crores of rupees in taxes,” KVVES President T Naziruddeen told BusinessLine .

“Why should we pay the taxes when the online retailers pay nothing at all?”

The union has urged the Chief Minister to ban online retailing in Kerala.

“If the government cannot create a level-playing field for both the ordinary retailers and online retailers in terms of taxes and other dues, it should ban online retailing in the State,” Naziruddeen said.

Loss of revenue

He guesstimates that this year alone, consumers in Kerala had placed online orders worth ₹10,000 crore.

“This means that the government lost around ₹1,450 crore in VAT,” he claimed.

“The quantum of online retailing is going to be ₹30,000 next year and the government would stand to lose ₹4,500 crore.”

(The VAT, in case of most consumer products priced above ₹500 is 14.5 per cent).

Naziruddeen pointed out that youngsters were now placing online orders for even footwear and handbags, not just laptops and mobile phones, thus denting the revenues of small traders.

Naziruddeen, who is currently on a State-wide road campaign to highlight the grievances of small traders’, said e-tailing created havoc for ordinary retail businesses in many ways.

“It has drastically reduced our sales, squeezed the government’s tax revenues and led to the imposition of additional taxes on us.”

For instance, he claimed, the Kerala Government had recently imposed a 2 per cent turnover tax on textile retailers.

This, according to him, was to offset the fall in commercial taxes, one reason for which was the growth of online retailing.

But, online retailing helps the consumer to save on the price, doesn’t it?

“The online retailers don’t have to pay VAT or CST; they don’t need to pay rent for shop space and high wages to workers as we do; they don’t pay municipal taxes, and their cost of electricity and other services are very low,” he claims.

“So, they are able to sell products at a lower price and as a result our businesses stand to suffer.”

Extreme measures

The only way to fight off the competition was to impose all the taxes as paid by the brick-and-mortal shops.

“Or else, the government should ban online shopping in Kerala,” Naziruddeen demands.

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