Tax Authorities Seize Amazon Warehouse in Bangalore
World’s biggest E-tail giant, Amazon got a jolt from the Karnataka tax authorities yesterday. Amazon’s Bangalore warehouse was taken over by the authorities. The warehouse was dedicated to the ‘Fulfilled by Amazon’(FBA) segment of products. Amazon stores these products in its warehouses and takes care of its delivery to the customers.
A few days back WSJ reported, “The Enforcement Directorate of the Finance Ministry is investigating whether Amazon.com’s fully owned Indian subsidiary has been circumventing restrictions on foreign investment in retail by selling directly to customers while making it look as if the sales are being made by other companies.”
The Karnataka government went ahead and served notices to over a hundred sellers who used ‘Fulfilled by Amazon’ service. It has ordered them to desist from storing their products in Amazon warehouses. The notice also said the sellers cannot register Amazon’s warehouses as an additional place of business.
There aren’t any set tax regulations for e-commerce businesses as of yet and that lead to this arbitrary action by the authorities. The authorities are known to have said that they cannot let such a practice continue. They should rather find out ways of amicably solving the issue as this could dissuade e-commerce companies from scaling up their functions. This may hamper the growth of the burgoening market.
An Amazon spokesperson said in an email statement to LiveMint, “We understand this to be a case where the laws have not kept pace with the new-age online business models that enable a faster, convenient and nationwide access to customers for sellers, especially small and medium businesses, at significantly low costs. We look forward to an early resolution in order to avoid closing our local warehousing operations in Karnataka and to stay on course for bringing more investments in the state.”
E-commerce is a fast growing segment in this country. India’s e-commerce market was worth about $2.5 billion in 2009; it went up to $6.3 billion in 2011 and to $14 billion in 2012. This year saw many companies going for exclusive tie-ups with several e-commerce websites. E-commerce is also beneficial to the customers as it decreases marketing costs for the company which is passed on the consumer, as was the case with Xiaomi Redmi 1S. The need now is for the government to come up with proper regulations so that issues like this don’t happen in the future. It causes a loss, not just for Amazon, but along with it, the sellers as well as the buyers are left in a limbo.