Tax Demand On E-Commerce Companies Quashed – Authorities Directed To Re-Examine Transactions

• Kerala High Court quashed demand notices under Kerala VAT law to Flipkart and Myntra on the ground that tax authorities did not satisfactorily deal with objections of Petitioners.
• High Court holds that notices were issued arbitrarily without concluding on whether transaction was an inter-state sale or intra-state or that one of petitioners was not engaged in sale of goods and that sellers on its portal were responsible for the same.
• High Court also cautioned tax department from making aggressive claims in show cause notice

Background

The Kerala High Court ("Court") in Flipkart Internet Private Limited vs State of Kerala¹ quashed demand notices issued against Flipkart and Myntra ("Petitioners") under Kerala Value Added Tax Act, 2003 ("Kerala VAT Act"). The Court ruled that the tax authorities did not consider the objections of Petitioners that the transactions were made in the course of inter-state commerce and hence, were not liable to tax under Kerala