Incremental tax, cumbersome forms make online shopping a frustrating experience in the state
By Prabhu Mallikarjunan
With most e-commerce players offering deep discounts during the Diwali sales, Appu (32) from Kozhikode, a tier II city in Kerala, tried ordering a wooden cube wall shelf for his new home. While ordering on Flipkart, a message popped up, saying, “Not available with any seller at this pincode”. He switched to another e-commerce player, Paytm. The website said, “Not available for delivery at your location.”
Not giving up, he tried with yet another, Pepperfry.com. He was lucky, but the procedure for the order turned cumbersome. It said, “Customers in Kerala are required to submit additional documents — Form 16 (VAT related certificate of ownership form).” Along with the form, the company asked him to submit a valid photo identity proof (PAN card/driver’s licence/passport) within 24 hours of placing the order. Since it involved too many details, he quit shopping for the product online.
His experience is not a one-off case. In fact, it is common occurrence in the state. As per the Kerala government rules, for any purchase above Rs 5,000 where the seller is based outside the state, customers have to submit Form-16, which seeks information like details of the shipment, value of the goods ordered and even the registration number of the vehicle transporting the goods. And for the seller, there is incremental tax of up to 2% depending on the product.
While some e-commerce players are trying to work within the preset rules, some are waiting for the regulations to change, while others totally ignore shipping products to this southern state. Some like Paytm, for instance, will soon launch an exclusive Kerala store on its portal to help customers with hassle-free shopping.
Speaking to FE, Saurabh Vashishtha, vice-president for business at Paytm, said, “People still have to figure out from the catalogue as to which item is available in Kerala, and many times have to face disappointment when they realise that it can’t be delivered. To get away from all this, we will be launching an exclusive Kerala store in the next fortnight.”
It is difficult to quantify the e-commerce market size in Kerala, as nobody has actually explored the business yet. The sales growth can be dramatically high if consumers have access to goods from outside. “The literacy rates are high and lot of car brands decide to launch first in Kerala because the adoption is much higher. There is no reason for us to believe that it is smaller than any other southern state,” Vashishtha adds.
ShopClues, which has pegged its sales target for October and November at Rs 1,000 crore, says Kerala has the potential to reach 4% of the gross sales. “For us, southern states contribute close to 38-40% of the sales. While Tamil Nadu and Karnataka contribute 7% each, AP is around 5-6% and Telangana 2-3%. Kerala is nil, but can easily account for 4% of the overall sales if regulations are simplified,” feels Nitin Kochhar, vice-president at ShopClues.
To play by the rules, many companies nbso online casino reviews are just adding more sellers within the state. Rahul Taneja, VP, category management, Snapdeal, said, “If the sellers are sitting outside Kerala, there is an incremental tax to be paid and that basically takes away the price competency. If the regulations change, sales will sufficiently go up. They could go up five or ten times. But we are adding more sellers within the state to cater to the customers there.”
The Kerala government has also been critical about e-commerce transactions over the years. It slapped a Rs 47.15-crore penalty on Flipkart; Jabong was asked to cough up Rs 3.89 crore, Vector E-commerce was imposed a fine of Rs 2.23 crore and Robemall Apparels Rs 36 lakh, for allegedly evading tax. The case went to the high court, which then quashed the case, ordering in favour of the e-commerce companies.
Just last month, Kerala High Court judge Justice AK Jayasankaran Nambiar pronounced that in cases where there is uncertainty with regard to the real nature of the transaction, the intelligence officers have to refer the matter to the assessing officers before imposing the penalty.
VJ Gopa Kumar, deputy commissioner (general), commercial tax department, said they might appeal against the order, as the case was very much on the lines of what the Karnataka government did.
The Karnataka Value Added Tax Act, 2003, considers direct sellers and those who sell on behalf of others and charge a commission, both liable to pay tax. In a recent order, the Karnataka government proposed that e-commerce companies will have to deduct 1% of payments made to vendors before passing the money on.
