E-retailers stop delivering high-end goods in UP, Uttarakhand

If you live in Uttar Pradesh, India's most populous state, and order a new smartphone from Flipkart, Snapdeal or Amazon, it most likely won't be delivered to your home.

The three online marketplaces have virtually stopped delivering products worth over Rs5,000 to customers in UP and Uttarakhand, citing harassment by tax authorities over a form that buyers are required to furnish when purchasing goods from other states.

Buyers have to file a VAT declaration, along with the registration number of the vehicle bringing the product which has to be furnished by the deliverer. The tax authorities have tightened enforcement of these norms and have even seized goods.

''Owing to these statutory restrictions imposed by the UP government, we do customer deliveries for shipments only up to Rs5,000 for interstate shipments," a Flipkart spokesperson The Economic Times in an e-mail.

This is another instance of ecommerce companies facing the heat from states over tax issues. Karnataka proposes to impose a 1 per cent value added tax deducted at source on all payments to dealers in the state by ecommerce firms, a move vehemently opposed by the industry.

A spokesperson for Snapdeal said online marketplaces provide technological platforms to connect independent sellers and consumers and should be treated as facilitators, as done by the states of Kerala, Delhi, Rajasthan, West Bengal and Tamil Nadu.

Last year, ecommerce companies stopped shipping high-value products to UP localities including Noida and Ghaziabad after delivery boys got mugged and consumers refused to pay for products ordered through cash on delivery.

After the situation improved, they resumed deliveries earlier this year.

The UP law states that any person who intends to bring or receive goods from outside, other than those specifically exempted, is required to furnish a declaration that must accompany the goods during their movement in the state.

This is mandatory for foods of any value being transported by truck, specified goods used in construction such as sand worth more than Rs1,000 and other goods with a value exceeding Rs5,000.

"The requirement of the UP government to ask for way bill forms (Form 39) from end-users, even though the consignments that are brought in are for self-consumption, is leading to recurrent incidences of seizure for both prepaid and postpaid cash-on-delivery consignments," said a senior executive of an ecommerce company asking not to be identified.

"Since the tax liability on these is already being discharged by the seller in the state from where the shipment has originated, such tax demands are unfounded and restricting marketplace deliveries in this market."

The Flipkart spokesperson said Uttarakhand also has similar VAT regulations in place and such restrictions were earlier in place in Bihar as well. "However, the same (in Bihar) is now subject to payment of entry tax," the Flipkart spokesperson said.

Amazon did not respond to an e-mail seeking comment on the issue.

Tax experts said states don't get any tax on goods supplied from outside and are using this system as a deterrent.

The only solution to the impasse is the early introduction of the long-awaited goods and services tax.