With date with GST regime getting extended for another year, worried Reserve Bank of India (RBI) has called for a clarity with regard to taxation of burgeoning e-commerce which could bolster revenue of state Governments, a media report, quoting the apex banker, said.
"Attention will need to be paid to the development of a uniform model for taxing e-commerce to reduce complexity and improve compliance," the RBI said in a study on state finances.
It said the states' revenue could be stepped up, provided there is greater clarity around rules and procedures governing inter-state trade. Rapid progress in e-commerce in recent years has confronted governments having federal structures with issues relating to taxing e-commerce trades, especially inter-state trades, a UNI report quoting RBI, said.
These issues are gaining importance in the Indian context, with e-commerce and online business in the country booming in recent years and it is expected to grow exponentially. ;The key issues are what should be treated as point of sale and whether e-business is to be treated as market place or inventory model of online business, it said. The point of sale in online trade where the sale is deemed to have occurred, fixes the liability and incidence of tax.
For intra-state sale, where the seller and buyer are in the same state, the Value Added Tax (VAT) rate of that state is applicable and collected from the seller, the RBI study noted. For inter-state trade where the sellers and buyers are located in different states, the Central Sales Tax (CST) is applicable and is collected by the state in which the sale originates and not by the destination state, it said. In the case of online trading/ selling in the business to customer model, the seller is liable to pay both CST and VAT, depending on location of the seller, it said.
In respect of transactions through e-retailers, there is considerable ambiguity regarding where the sale is deemed to have occurred and hence, in the incidence of tax. This leads to dual tax demand, both at the point of origin as well as at the point of destination.