Ignoring or abetting GST evasion? Amazon India might be answering the question soon

Even as Amazon India has been on the government and sellers association’s radar for floundering foreign direct investment (FDI) rules, the company’s internal checks and balances system for sellers on the platform might be causing losses to the exchequer. Looking at the GST rates being charged by many sellers, Entrackr has reason to believe that many sellers are evading payment of the right amount of GST.

According to Entrackr’s investigation, several sellers have been selling the same product with different GST rates on the platform. For instance, Campus Men’s Syrus running shoes being sold by Cocoblu Retail has a GST rate of 12% while the same shoes carry 18% GST rate by the brand itself via Campusactive wear. It’s worth noting that sports shoes below Rs 1,000 attract a GST of 12%.

Another example is Fastrack Men’s Square sunglasses on which Stonehenge Retail, e-Stores & Visions India charge 18% GST whereas Cocoblu Retail charges only 5%. Sports shoes and branded sunglasses have an 18% GST rate, as per the GST Council of India.

This isn’t all. There are several products being sold by sellers on Amazon India with different GST rates. Parachute coconut hair oil listed by RK World Infocom, Tielo Industries and Jayshree Kirana merchant has 5% GST. The same product from G-Mart Store carries 18% GST. According to the GST Council, packaged coconut hair oil has a flat GST of 18%.

HP Ink Tank colour printer and scanner charges 18% GST by Appario Retail (a JV between the Patni Group and Amazon) while the same model has a GST of 12% by The-Estore. On similar lines, G-Mart Store is selling Fortune Kacchi Ghani mustard oil with a GST of 18% but it’s being sold by NatureFoods and Neelam Food Industries with 5% GST.

Entrackr has also tried to track GST disparity on Flipkart but the company doesn’t allow checking GST details without actual purchase.

According to GST and other compliance experts, such kinds of sellers are present across marketplaces. "There has always been a cohort of sellers on marketplaces who stay ahead of competition through wrongful practices such as tax arbitrage and evasion. Due to the robust system of GSTN and the data sharing in form of GSTR-9, tax authorities can always catch hold of such evasion,” said Kush Agarwal, a well-known pro-seller activist and angel investor.

Queries sent to Amazon did not elicit any response. We'll update the post in case they do.

Experts also point out that e-commerce marketplaces can not really do much about the wrong information provided by merchants unless it is a rampant practice.

Sellers, if caught, are likely to blame the ‘mistake’ on the wrong HSN (Harmonised system of nomenclature) code, a six digit code (later turned to 8 digits by central excise) that classifies various products. The last two digits usually denote the GST rate applicable. With 21 sections, 99 Chapters, about 1,244 headings, and 5,224 subheadings, the potential to plead confusion in interpreting the code is not uncommon, as one can imagine. Very small organisations also get GST exemptions, but that probably wouldn’t apply to the sellers highlighted above.

While Amazon’s agreement with its sellers will definitely indemnify it from any liabilities, there does seem to be a case for the giant to help screen out such blatant discrepancies better. It cannot be unaware that enforcement remains a crude weapon in India, and collateral damage is very likely as and when the tax inspectors get around to cleaning up the issues here.