Compliance under DVAT for E-Commerce Portals and sellers selling on E-Commerce Portals (Part-2)

Discussion on Compliance under DVAT for E-Commerce Portals and sellers who are selling on E-Commerce Portals 

PART-2

In our blog "Compliance under DVAT for E-Commerce Portals and sellers selling on E-Commerce Portals (Part-1)", we have have discussed about compliance for E-Commerce Portals and Dealers under DVAT. We have discussed in details about Forms applicable for E-Commerce Portals. Now in this blog we'll discuss regarding compliance and Forms applicable to dealers for E-Commerce transaction.

Complete details of compliances

1. For E-Commerce dealers- 

DVAT deptt. issued  Notifications No.F.3(20)/Fin(Rev-I)/2015-16/dsvi/906 dated 12.11.2015. In this Notification an Annexure - 1E has been inserted in DVAT-16 ( Form for Quarterly return) in which dealer has to give details about sales made on E-Commerce Portals. Extract of Annexure - 1E here below:

In this Annexure, rate wise sales separately for Local and Inter-State to be mentioned. Name and  EC-I Enrollment ID of the E-Commerce Company/Firm also to be mentioned. Separate formats require to fill in case sales made by more than one E-Commerce Portal.

CONSOLIDATED EFFECT OF COMPLIANCE OF E-COMMERCE PORTAL AND DEALER

After getting details from E-Commerce Portals in EC-II and from dealers in Annexure -1E, DVAT deptt. can easily compare them and find difference in tax rate and sales ( if any). By this Deptt. will easily find the dealers who are showing incorrect tax rate or incorrect sales figures and trying to reduce tax liability. So all the dealers conducting sales through E-Commerce portals need to be very cautious while filing returns and give correct details. 

Dealers should take following precautions before filing returns:

1. Rate of Tax on all items should be same as mentioned by dealer and as mentioned by E-Commerce Portals on their web site. If there is any difference then dealer should take it seriously with E-Commerce Portals and get these matched.

2. Sales figures should be matched with sales figures shown on site by E-Commerce portals. It there are differences then these should be eliminates and if not possible then there should be some reconciliation statement.

3. Local and Interstate sales should be correctly bifurcated.

4. Even if Notification for E-Commerce Portals came on 26.06.15 but E-Commerce portals are required to submit quarterly returns starting from quarter 01.04.15 to 30.06.15. So if any dealer found any error in returns for QTR-1 and/or QTR-2 of 2015-16 then he should file revised return and pay tax correctly.

Hope above details will assist regarding compliance of Notification No.F.3(515)/Policy/VAT/2015/330-41 dated 26.06.2015 and Notifications No.F.3(20)/Fin(Rev-I)/2015-16/dsvi/906 dated 12.11.2015.

CASE LAW - FLIPKART INTERNET PRIVATE LIMITED (KERALA HIGH COURT)

On 20.10.2015 Kerala High Court gave a decision in favor of Flipkart Internet Private Limited and quashed penalty imposed by Kerala VAT deptt. for non-filing of Returns and discharge of tax liability for "sales made by dealers from outside Kerala to consumers in Kerala through Flipkart E-Commerce Portal". 

In newspapers and in online media it is taken as a decision in which Vat/CST can't be levied on E-Commerce portals for the sales made by registered sellers on these portals and these E-portals are just facilitators and not the sellers. But when we go through the 19 pages decision of the Kerala High Court it not seems exactly like that.

In this case Kerala Vat deptt. issued notices to Flipkart imposing taxes and penalties on sales made on Flipkart portal by sellers outside Kerala to Consumers in Kerala. Kerala VAT deptt. considered that when the consumer of Kerala placing online order from Kerala thorugh Flipkart portal then contract of sale made in Kerala hence situs of sale is in Kerala hence VAT should be payable under Kerala VAT Act. Here Kerala VAT deptt. taken a wrong view. VAT/CST is levied on the basis of delivery of goods and not on the basis of situs of contract of sale. If a contract of sale is made in UP but goods are delivered from Delhi to Haryana then VAT/CST is applicable as per Delhi Vat laws and Central Sales Tax Laws. In Flipkart case goods are delivered from outside Kerala and dealers are registered in that state and discharging their tax liability accordingly.

Important to note here that

1. In this case sales in consideration are not the sales made through E-Portals from Kerala to Kerala Consumers or outside Kerala Consumers, but are sales made from outside Kerala to Kerala Consumers. So the matter "whether VAT/CST can be levied by Kerala VAT authorities on Flipkart on sales made from Kerala to Kerala or outside Kerala" is not taken at all.

2. The matter "whether E-Commerce companies are dealer or just facilitator" is also not considered at all. As of now maximum E-Commerce portals are providing ware housing facility also, where the sellers registered on these portals send goods in advance to ware house of these portals and on getting orders  these portals doing all logistic work ( like packaging, delivery etc.) and delivering goods to the ultimate buyer. This model is on the target of taxing authorities to consider portals as dealer and levy taxes. This type of transaction is not considered in Flipkart decision at all.

So the Kerala High Court just ordered that sales made from outside Kerala to Kerala consumers are outside the preview of Kerala VAT laws. It should be taken that Flipkart or we can say E-Commerce portals are kept outside of VAT/CST laws.

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