Flipkart's Instakart platform not an agent, dealer or importer; cannot be subject to Local Body Tax: Bombay High Court

The Bombay High Court recently held that Instakart, which delivers products ordered on Flipkart, cannot be considered an agent, dealer or importer [M/s Instakart Services Private Limited vs State of Maharashtra]..Consequently, the e-commerce giant cannot be made to pay Local Body Tax (LBT) which is levied on importers who bring goods into a civic body's jurisdiction, the Court ruled.A division bench of Justices Sunil Shukre and MW Chandwani, therefore, quashed and set aside a show-cause notice issued to Instakart by the Commissioner of Pune Municipal Corporation (PMC) asking it to register itself as a 'dealer/importer' so that LBT could be assessed and levied. The bench noted that Instakart brings in goods within the limits of PMC not for its own use or for earning commission or sale, but for the purpose of the goods being delivered at the door step of the individual buyer. "In other words, what the petitioner is doing here is import of goods for the purpose of delivery to some other person and for this purpose, the petitioner acts like a courier or postman or delivery person. Thus, its activity would not be covered by the definition of the word 'importer'," the bench said in its order passed on January 20.If Instakart cannot be considered a person who imports goods into the city limits for use or consumption or sale and if it is also not the person who is alleged to be selling or buying goods for commission or remuneration in the city, it would not be a “dealer” within the contemplation of Section 2(16A) of the LBT rules, the bench said."If this is so, then the petitioner would not be liable for any registration for the purpose of LBT Rules," the Court held..In its show-cause notice issued on February 3, 2017, the civic body had contended that by bringing in goods within PMC jurisdiction, Instakart was earning commission and was, therefore, covered within the ambit of 'a commission agent.'However, the bench noted that the service rendered by Instakart was that of a person, who brings goods within the limits of the corporation for the purpose of delivery to the buyer who buys the goods independently from a different seller by using internet platform provided by Flipkart."Thus, the petitioner acts like courier or a postman or a delivery person. Therefore, the Petitioner could not be said to be an agent, either of the seller or the buyer much less a commission agent. The Petitioner is also not an auctioneer who imports any goods on behalf of the principle and that is not the case of the corporation either," the bench said.Besides, the petitioner does not bring any goods within the city limits for consumption, use or sale but brings those goods into the city limits only for the purpose of delivery to the individual buyer. "It thus follows that petitioner cannot be called to be an entity which is a commission agent or any other agent or an auctioneer importing goods on behalf of the principal," the bench ruled..All these aspects, the bench said, which are very critical for the purpose of assessment and levy of LBT were not considered by the Municipal Commissioner, Pune."The impugned order is illegal and bad-in-law. Such an order cannot be sustained in the eyes of law and deserves to be quashed and set aside," the bench held..Senior Advocate Rafique Dada along with advocates Rohit Jain, Gopal Mundhra, Ginita Bodani and Ankita Vashistha briefed by Economic Laws Practice appeared for Instakart.Advocates Rohan P Shah, Surabhi Prabhudesai and Deepali Kamble represented Flipkart.Advocate Abhijit P Kulkarni appeared for PMC. Additional Government Pleader MP Thakur represented the State.