Telangana govt looks to plug e-tailers' tax gap loopholes

Hyderabad: Concerned over the state losing nearly Rs 1,000 crore per year  by way of tax evasion by e-commerce firms, the state government plans to plug the loopholes soon. Chief Minister K. Chandrasekhar Rao, who took over the commercial taxes portfolio recently, has told officials to examine how other states are dealing with the issue. During a review meeting recently, Mr Rao was informed by the officials that the state was losing huge revenue in the form of sales tax since many online shopping firms do not have their warehouses in TS but deliver goods from their godowns located in other cities like Delhi, Mumbai, Kolkata etc. This leaves no scope for the state to levy taxes on these transactions.

Officials told Mr Rao that the Karnataka government has been collecting taxes from online firms in Bengaluru and the same model can be replicated here. They also told him that Maharashtra and Delhi governments were also implementing effective measures to check evasion of tax by online shopping firms. Mr Rao asked officials to draft norms making it mandatory for all online firms to set up their warehouses in the state and deliver stocks from these points so that they can be brought under the sales tax ambit. He said that when e-commerce giants like Amazon, Filpkart etc. could set up their warehouses in Hyderabad, it should not be a problem for others to do so.

It was also proposed to make it mandatory for online firms to file their transaction details on the website of the commercial taxes department to track their business volume and collect taxes accordingly. These transactions attract sales tax ranging from 12.5 per cent to 14 per cent. Since 70 per cent of the total tax receipts are by way of sales tax alone, the tax evasion by e-commerce firms has been affecting TS state exchequer in two ways. Firstly, sales in brick and mortar shops are coming down, resulting in lower taxes; and second, it is losing sales tax on online sales by these firms.