Major E-commerce companies have stopped delivering goods in Kerala as the state government has levied tough rules regarding the sales tax. The state government does not permit these companies to sell products without paying the appropriate taxes. According to the recent reports, these companies save up to five percent and cater discount on their products because they do not pay the sales tax to the state governments. At present on typing the pin code and address of Kerala, it is being displayed that products will not be delivered in the state. Even the existing orders are stuck during the transit, due to the same issue.
Reduction in revenue
Owing to this regulation, there is confusion in the tracking of the products as the e-commerce sites as well the courier companies display different information. Similar rule has also been imposed by the state government of Punjab. Recently a survey was conducted by the Excise and Taxation department to assess the loss in revenue due to the online shopping. As per the initial reports the loss that is incurred is humongous and it amounts to quite a few crores. Thus, the state government has ordered the e-commerce sites to submit the details of the products that they have sold to people in the state.
Set warehouses in the state
It has also been decided by the state officials that they would ask these e-commerce sites to set up warehouses in the state so that they can levy local taxes on the same and earn from there. Presently these online sellers pay taxes to the state only to the state where they are based. After these regulations of both these state governments, other state governments now also feel the same way and justify that these sellers pay the necessary taxes to the states where they sell their products. Since the e-commerce sites are not physically located, it is really posing a problem for the state governments to levy taxes on them.
Inconvenience of CST
Presently, the e-commerce retailers have to pay Central Service Tax, VAT or the value added tax and also various other taxes based on the different items that they sell. These taxes are paid in different centers, in spite of the availability of the online facility and this has not turned out to be a convenient process of the retailers. This has posed to be a serious issue of concern for the companies as they operate on a large scale and because they sell these products on a daily basis.
Advantage of GST
So, now the online and the offline merchants have now opted for the Goods and Service Tax or the GST. This will comprise of all the taxes that the retailers have to pay separately and will be effective in reducing the various hassles that are faced by the retailers. With GST levied, there will be a further reduction in the prices of the products as the retailers need to pay the tax for value addition rather than the value of each of these products. GST will amount to fifteen to twenty percent of the price of the product, but still that will be less than the tax that retailers need to pay now.