The Uttar Pradesh government has imposed a 5 per cent entry tax on all e-commerce purchases by consumers in the state. The decision, which will also include courier services in its ambit, was taken in a Cabinet meeting chaired by chief minister Akhilesh Yadav on May 31st, 2016.
The proposed tax will be put before both houses of the state legislature, following which it will be sent to the governor for his approval, before it comes into force.
UP is not the first state to impose the entry tax on goods sold over e-commerce platforms. Uttarakhand, Bihar, West Bengal and Himachal Pradesh have already imposed varying taxes earlier.
The decision is taken considering the huge sales volumes generated by e-commerce companies and the huge Value Added Tax (VAT) tax potential. Currently, the annual trade by e-commerce and e-tailers in the state is estimated at Rs 10,000 crore and is projected to touch Rs 40,000 crore by 2020.
Traders and retailers in the state had been demanding a level playing field vis-à-vis e-commerce companies. They were agitating that while brick-and-mortar retailers are required to pay several taxes and duties, the goods sold by e-tailers were comparatively cheaper due to lower or no tax liability, thereby cutting into their sales and hurting their profits.