KOCHI: E-commerce companies Flipkart, Amazon and Myntra have set up captive logistics operations to deal with markets such as Kerala, where cash on delivery (COD) is considered as a sale, attracting local taxes.
Flipkart and Amazon, which received multi-billion dollar investments in recent days, have resumed cash-on-delivery partially in Kerala, thanks to local logistics operations, according to industry officials.
Typically, e-commerce companies use the services of a third-party logistics firm or use courier firms to deliver their merchandise to customers. With their own captive logistics operations like E-kart in case of Flipkart and Amazon Logistics by Amazon, e-commerce companies are trying to address the growing business in-house, they said.
By having their own warehouse in the state, the e-commerce companies can avoid inter-state sales tax but local VAT (value added tax) will still be applicable, said Sachin Menon, partner and national leader, indirect tax practice, at KPMG.
“There are regions where regulations prevent delivery of goods above a particular value and areas like Kerala where cash on delivery is considered as a sale, subject to state levies, thus preventing this mode of payment. These are all lost sales for e-commerce companies, which has prompted players such as Flipkart (E-kart) and Amazon (Amazon Logistics) to set up expensive captive logistics operations,” a recent note by Nomura, a stockbroker, said.
Industry sources said other e-commerce companies such as Snapdeal, Jabong and Myntra, which had also stopped services within Kerala, have resumed their COD services.
‘’We keep various factors in mind while arriving at our service matrix. This could be our shipping partners in the state, our delivery capabilities or order volumes. These are purely business decisions and change from time to time depending on circumstances,” a Flipkart spokesman said.
He, however, did not respond to specific queries on E-kart and other issues such as the tax structure in Kerala.