India lands Amazon's merchant model with VAT bill

Tax authorities in the Indian region of Karnataka have assessed a large VAT bill on Amazon's merchant trader service.  It views Amazon as taking on a commissionaire role rather than a simple provider of goods delivery services.

The Fulfillment by Amazon (FOA) service is a global service Amazon offers to sellers (merchants) of goods on its online website.  It provides delivery of goods to anywhere in the world for e-retailers, enabling them to expand their potential markets exponentially.  In addition to delivery, Amazon also rents space in its global warehouses to merchants to enable them to store goods in each major region so that they can then deliver goods within a day to two once an online sale has been made.  Throughout the process, the legal title of the goods remains with the merchant - Amazon is only providing a goods delivery service.

However, tax authorities in India have taken the view that Amazon is a reseller of goods, and therefore liable to account for Indian VAT.  The tax office is also assessing the merchants for having a local place of business or permanent establishment by renting warehouse space from Amazon.

The tax office is taking the view that Amazon is a 'commissionaire', acting on behalf of the merchant and therefore liable to charge VAT.