E-retailers move HC against Gujarat entry tax

Along with two ecommerce majors Amazon and Flipkart, internet-based grocery delivery service Instacart too has challenged the Gujarat government's decision to levy an 'entry tax' on goods sold to customers in Gujarat through online shopping.

The court has issued notice to the state government on Instakart Service Pvt Ltd's petition and the hearing is now scheduled on Monday. Petitions by all three companies will be heard together.

Instakart has contended that the decision to differentiate between online service providers and local players is against the Constitutional provisions and hence the newly introduced entry tax must go.

These litigations took place after the state government made amendments in Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001 on 31 March. The government came up with a notification for implementation of changed rules the next day.

The government claimed that entry tax has been levied in the state budged in 2016-17 on e-retailers to prove a level playing field to local dealers, who were taking a beating in the competition.

E-retailers are paying as entry tax the difference in Value Added Tax (VAT) rates between Gujarat and the state from where the product is supplied.

These firms have claimed that they are not engaged in any sale of goods to customers, but they are mere service providers - an online platform for the sellers and buyers.