India e-commerce VAT doubts put Amazon on alert

Sun 19th Apr 2015

Amazon has put e-commerce warehouse investment in the India state of Karnataka on hold over concern for the Indian VAT treatment of distance selling.

For over a year, it has not been clear if Amazon would be treated as a legal partner in a transaction between customers and its online merchants. This would mean Amazon becoming responsible for levying VAT on transactions, collecting it and paying on to the tax authorities.

Amazon does not consider itself as an agent in the chain when they are providing fulfilment services, so has disputed the interpretation taken from the tax authorities.  As a result of the continuing doubts over the correct Value Added Tax treatment, Amazon has stopped new investments in the state in warehousing facilities.

India is reforming its antiquated VAT rules with the launch of Indian GST potentially in April 2016.  This will replace VAT, Service Tax and many other overlapping taxes.