Online retailers under Delhi govt scanner, VAT evasion suspected

Global e-tailers minting millions of rupees by selling goods to customers in Delhi are under the scanner of Delhi government’s revenue department which is suspecting VAT evasion by some players.

Officials said they are in touch with tax departments in Karnataka and other south Indian states, where these companies are based, to see if alleged tax evasion is taking place.
The godowns of these companies in Delhi are also being checked to detect illegal stocking.

An official said: “We have written to the tax departments in other states. Their reply will shed light on the whole affair.”

The e-tailers, based in other states, are selling goods like mobile phones, computers, dresses and footwear, among a range of products, but it is suspected some companies are not paying VAT on all the products that are reaching Delhi homes.
This has meant a loss of revenue for the Delhi government.

According to complaints of some Delhi retailers received by the department, the e-tailers are allegedly selling products on bills issued in states which have a lower VAT rate.
“The warehouses of some businessmen in Delhi are being used by e-tailers to stock their goods for sale at a later stage,” said an official, referring to a complaint.

The rules demand that a product cannot be stocked in a godown before an order is placed online, said the official.

“If goods are found in the godown of an e-tailer before the online order, it violates the provisions of foreign direct investment and the prescribed model for e-tailers,” he said.
Officials are also checking if some e-tailers are also fudging documents and declaring themselves as service provider in documents but still selling goods to customers ordering online.

“A verification exercise has been launched to weed out bogus or dummy companies,” said a trade and taxes department official.

“There is an urgent need to stop VAT evasion,” said the official, adding that department was coordinating with the revenue wing to focus on evaders.

The probe against the e-tailers comes at a time when consumer rights activists are trying to push for a case of bringing in stronger provisions for the use of Consumer Protection Act against them, in cases of refusal of not taking back goods delivered in a defective state.