Amazon evading taxes?
- Thread starter avi
- Start date
This is the kind of greedy nonsense that drives away business in India. On one hand, the govt is against FDI and doesn't allow amazon to run a direct retail business. On the other hand, they want to collect taxes from Amazon treating it as if its a retail business in addition to the taxes they collect from the actual sellers.
Corrected that for you. That is what is slowly happening and the govt and people or either too dumb or too caught up in their delusions of India's grandeur to notice it. Investing in India is always a big risk.
Majority are misreading thé news. There Is no additional tax requested in the news. They have only said that Amazon will be responsible for tax payments. This is normal in case this was not an online transaction. Either there was a loop hole or an opérational difficulty (unlikely IMHO) due to which thé online transaction may not have been covered.
^^ I believe you are interpreting it wrongly. The govt is already getting the taxes from the sellers directly. If anything, Its the govt that is trying to create a loop hole through which they can exact additional taxes from Amazon in addition to those from the actual seller.
VAT is designed to be paid at every step of a sale based on the value change. Technically, the tax burden finally passes on to final customer since each seller in the chain recovers it from the next guy in the chain. But govt has the advantage and they will be able to start recovering taxes early in the chain. In a normal sales tax scenario, if the final product doesn't sell, the govt won't get any taxes at all. But VAT is designed to get some taxes whenever there is a change of hands even if the final product doesn't sell.
In case of Amazon, the seller chain ends at the amazon seller. Amazon (marketplace) themselves are not a seller in the chain, but only a mediator. The govt already gets taxes from amazon sellers which they recover from the buyers. Now they want Amazon marketplace to also pay taxes on the products listed on their site as if they are a seller. Since the marketplace itself cannot be treated as a retail seller in the chain because of FDI laws, there is no gradual transfer of tax burden between entities and both the Amazon seller and Amazon end up taxing the customer independently and govt would get extra revenue.
Usually this would be a contradiction of the FDI laws as well as double taxation for the consumer and why the govt is looking for loop holes through which it can be achieved. They don't want to allow Amazon to be a retail seller, but they want to get taxes from it as if it is one.
VAT is designed to be paid at every step of a sale based on the value change. Technically, the tax burden finally passes on to final customer since each seller in the chain recovers it from the next guy in the chain. But govt has the advantage and they will be able to start recovering taxes early in the chain. In a normal sales tax scenario, if the final product doesn't sell, the govt won't get any taxes at all. But VAT is designed to get some taxes whenever there is a change of hands even if the final product doesn't sell.
In case of Amazon, the seller chain ends at the amazon seller. Amazon (marketplace) themselves are not a seller in the chain, but only a mediator. The govt already gets taxes from amazon sellers which they recover from the buyers. Now they want Amazon marketplace to also pay taxes on the products listed on their site as if they are a seller. Since the marketplace itself cannot be treated as a retail seller in the chain because of FDI laws, there is no gradual transfer of tax burden between entities and both the Amazon seller and Amazon end up taxing the customer independently and govt would get extra revenue.
Usually this would be a contradiction of the FDI laws as well as double taxation for the consumer and why the govt is looking for loop holes through which it can be achieved. They don't want to allow Amazon to be a retail seller, but they want to get taxes from it as if it is one.
Nope. If there is a sale, there will be sales tax collected at each and every sale.
No. VAT is designed to avoid cascading effect of taxes/ see above
Read the article carefully. The article says, albeit hidden in all that jabber, this :- "The global retailer claimed that it is not doing business directly and asked the department to collect VAT from its sellers." and hence my comment.
And in case you think about how VAT works, you "cannot" do double taxation on the this transaction as VAT can be charged "effectively" only on the value added/ increased sale price.
On Amazon being Mediator imagine a non internet indian 'mediator' (/trader) who links a buyer and seller, does not store/transport but collects a small profit on enabling the sale of goods from seller to buyer. This mediator does pay VAT on every valid bill. Difference for Amazon is it being an e retailing and an FDI entity. Even tax experts will fumble when it comes to e retailing laws and hence interpretation of the law based on practical consideration has to be adopted. Hence there are going to be to and fro arguments.
On breach of FDI laws - Amazon made a public statement inserting the word FDI norms without adding anything further on FDI. Now this seems to be a deliberate attempt to utilize the Vodafone episode to create a public, media support in favor of Amazon.
Events which lead to this episode may not as black and white as seen in the news article. Amazon has always been the one to look for tax loops holes for evasion. you can check out wiki page http://en.wikipedia.org/wiki/Amazon_tax for the american episode and also google for Amazon tax issues in UK.