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Amazon urges government to allow 49% FDI in B2C e-tailing & amend VAT

E-commerce giant Amazon, which has been under government lens for possible violation of FDI norms, has asked the government to clarify and remove FDI restrictions in ecommerce and allow 49 per cent foreign direct investment (FDI) in e-tailers selling directly to consumers, according to The Economic Times report.

However, previously authorities had said that the government is more comfortable with ‘marketplace’ model instead of FDI in e-com.

The company has also asked the Centre to amend the law on value-added tax to overcome clashes with local tax authorities that have dogged its operations in Karnataka. Presently, tax authorities have asked sellers not to store products in Amazon's warehouse near Bangalore as it was not paying VAT on the products sold from there.

According to Amazon, the current VAT laws make it an agent, bringing its activities in direct conflict with restrictions on FDI in B2C ecommerce.

Amazon runs a marketplace just like other foreign VC funded ventures such as Flipkart and Snapdeal or for that matter Ebay, one of the oldest online marketplaces active in India.

Amazon had launched its India marketplace last year and had been steadily gaining traction. Amazon founder and chief Jeff Bezos had recently said Indian operations might become the fastest in the company’s history to clock $1 billion in gross merchandise value. It had also announced plans to invest $2 billion in India to take on home-grown competitors like Flipkart and Snapdeal.

Amazon had also formed a separate JV with Catamaran Ventures, the private investment arm of Infy co-founder N R Narayana Murthy to sell products on Amazon.in. This is also allowed as per current norms, provided Amazon.in does not derive over 25 per cent of its total sales from the in-house or related vendor.

(Edited by Joby Puthuparampil Johnson)

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