Amazon accused of “backdoor” entry; faces tax evasion in India
Amazon has been accused of violating Foreign Direct Investment (FDI) laws in India by setting up business in the country.
Seattle based Amazon.com, operating its business from Bangalore, is in confrontation with the Karnataka government’s commercial taxes department. While, the department argued that Amazon.com has violated FDI, regulations by making a “backdoor entry” into the country’s retail business. The company, however disagreed pointing out that it is a go-between the sellers and buyers in the country.
Amazon, claims that it has not breached any rules since it is only collecting commissions from dealers to deliver goods to customers.
As per the country’s FDI rules, a foreign company cannot operate multi-brand retail business in India. If a company desires to do so it can do so through an Indian subsidiary or in a minority partnership with a local company.
During last year, Amazon, has opened three large warehouses in Bangalore.
According to reports the dealers pay Value Added Tax (VAT) of nearly Rs 100 crore to the state department, while Amazon is paying service tax on the commission it earns to the Centre.
Karnataka’s commercial tax department has demanded that the company register itself as a dealer and pay VAT. According to the department’s officials, if Amazon persists that they should be exempted from paying VAT than Section (8) of the VAT Act has to be amended.
