E-Commerce: The VAT Conundrum

The e-commerce boom and build-up of online sales, has opened up a massive opportunity for the online service providers/aggregators. Popularity of the online market places has however, also brought with it certain legal and regulatory challenges especially in relation to taxability of the online aggregators.

One such issue that the online aggregators seem to be grappling with is applicability of value added tax ("VAT"). In one of its recent judgements, the Kerala High Court dealt with this issue, in the matter of Flipkart Internet Private Limited and Ors. v.State of Kerala and Ors. (2015 (5) KHC 522). The state revenue authorities had imposed a penalty on the petitioner (Flipkart Internet Private Limited and others) under the Kerala Value Added Tax Act ("Act"), on the ground that the petitioner had not registered itself as a 'dealer' under the Act and not filled returns and maintained true and correct accounts as mandated under the said Act.