CA Vinod Kaushik
Before I begin this article it is crucial to discuss the reasons behind writing this article with such a scary title and too when the concept of ease of doing business is on its peak. In fact all of us use the e-commerce in daily life to buy goods without moving anywhere and also the payment is given once we check the goods ordered. Do you know the goods ordered on abc.com (specific name not taken) are fulfilled by third parties which pays commission to abc.com for its services of facilitation of customers and timely delivery? Yes, they are in fact not selling or buying goods but giving services of providing customers, timely delivery of goods and collection of payment from customers and after deducting their commission and other charges amount is being paid to the original seller who has fulfilled the order. Now I will discuss in detail the newly notified notification No.F.3 (515)/Policy/VAT/2015/330-41 by Delhi VAT department on 26-06-2015 for e-commerce business model.
What was the need for this notification?
Our VAT laws are drafted to cover only simple sale and purchase transaction but there is no provision to cover e-commerce transaction. Under e-commerce model as discussed above the goods are collected from original sellers and supplied by e-commerce companies i.e. abc.com to customers after packing or labeling. For department it became very tedious to track all the suppliers who are fulfilling the orders on e-commerce portal and some of the them are registered under Delhi VAT and while other are working as unregistered dealers. In order to cross check the volume of sales reported by these suppliers and payment of VAT the department has sought direct information of sales by these suppliers from e-commerce Companies. The notification has prescribed form EC-I, EC-II and EC-III and except EC-I other two forms are required to be filed on quarterly basis.
Are E-Commerce Companies Dealer under DVAT Act, 2004?
If we interpret the current DVAT law and specially the definition of Dealer which says that “Dealer means any person who, for the purposes of or consequential to his engagement in or in connection with or incidental to or in the course of his business, buys or sells goods in Delhi directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration and includes-
A factor, commission agent, broker, del credere agent or any other mercantile agent by whatever name called, who for the purposes of or consequential to his engagement in or in connection with or incidental to or in the course of the business, buys or sells or supplies or distributes any goods on behalf of any principal or principals whether disclosed or not;
Strict interpretation leads to conclusion that e-commerce companies are Dealers under Section 2(j) (i) of the DVAT Act, 2004 ignoring the facts that VAT is already paid by the original sellers on full value of consideration. As of now DVAT department is not treating the e-commerce companies as dealers under existing law instead prescribed form EC-I, EC-II and EC-III to unearth under reporting of sales by the suppliers who fulfill the online orders. Any how the department has to achieve the collection of VAT without hampering the atmosphere of trade in the city.
Enrollment of E-Commerce Companies under DVAT Act, 2004:
All such persons engaged in the business of e-commerce (like Snapdeal, ebay, Amazone etc.) Shall have to enroll themselves by filing online Form EC-I. A unique ID would be generated after successful submission. This ID should be used for filing the said return. Password for logging on to the site would be communicated on email provided by the person.
Filing of quarterly return by E-Commerce Companies in form EC-II and EC-III:
The department has prescribed these forms to capture the information of turnover reported by sellers under e-commerce model and to make a comparison between the turnover reported in the return and turnover furnished by e-commerce companies. The another objective of prescribing form EC-II and EC-III is to get the information of Dealers who are making turnover more than 20 lacs and are still not registered under VAT laws. The return shall be filed on before 20 day of next month on which quarter ends i.e. on 20th day of July 2015 in case of quarter ending on 30th June 2015. The notification is applicable from the Ist quarter of 2015-16 but online forms are still not available on web portal of department. On 21-07-2015 a circular has been issued and the date of filing return in form EC-II and EC-III has been extended till 30-09-2015 (Mail me if the circular is required)
Concept of return of goods:
Net sale turnover of a dealer, reducing there from the turnover of the sold goods returned which have been sold during the same quarter shall be reported in the return. The return of a quarter can be revised by the end of next quarter for making corrections for the goods sold in that quarter but returned in subsequent quarter.
Looking at the interest of small and medium enterprises which are growing due to this e-commerce model this is a welcome step by VAT department. This step in my personal opinion will bring desired results and also unearth the tax evasion. As per verbal response from department forms EC-I, EC-II and EC-III are under process of drafting and will be available soon anyway the date has been extended to 30-09-2015 vide circular no. 15 dated 21-07-2015.
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