The entry tax is imposed by states on goods purchased online, coming in from another state.
Almost half-a-dozen other states, including Gujarat, Madhya Pradesh and Rajasthan, are considering a similar levy.
Calling the levy “discriminatory”, Flipkart on Monday has sued Uttarakhand and has filed a writ through its in-house logistics arm E-Kart Logistics in the Nainital High Court.
According to a report in The Economic Times, Flipkart has argued in its petition – filed in February – that while the standard rate of entry tax is 5 per cent, goods purchased through e-commerce companies have been subjected to entry tax at the rate of 10 per cent.
The petition stated: “This new scheme is ex facie discriminatory wherein an additional tax burden is imposed on ‘goods’ procured through a different stream of commerce or commercial mobility. This is an aberration from the scheme of the UT Entry Tax Act, which sought to levy entry tax on specified goods irrespective of the entity from where they were procured.”
An industry official on the condition of anonymity, was quoted by The Economic Times as saying that the entry tax was erroneously being applied on e-commerce firms and that states were looking for easy ways of garnering revenues even as the goods and services tax (GST) is being delayed.
Goldman Sachs has projected that India’s online retailing market, which is already one of the largest in the world, will expand to $69 billion in 2020 from $23 billion in 2016. Over the past month or so, entry tax on ecommerce purchases found mention in the Budget speeches of Gujarat, Madhya Pradesh and Rajasthan. Madhya Pradesh Finance Minister Jayant Malaiya in his Budget speech said the government wishes to impose an entry tax of 6 per cent on goods purchased online to compensate for the loss due to ecommerce. It is estimated that 20-30 per cent of the state’s commerce has shifted online.
Similarly, Gujarat Finance Minister Saurabh Patel proposed a levy on ecommerce transactions where goods are sourced from outside the state.
“Trade of dealers of the state is affected adversely as also the state suffers loss of tax revenue due to sale of goods through supplies in the state from outside the state under ecommerce transactions. By capturing such transactions under the entry tax, the dealers of the state would get level playing field,” he said in his Budget speech.