Flipkart's Delivery Partner Instakart Not Dealer, Agent Or Importer Under Maha Municipal Corporation Act; Not Liable To Pay Local Body Tax: Bombay HC

A division bench of Justice Sunil B. Shukre and Justice M. W. Chandwani while setting aside Pune Municipal Corporation’s notice asking Instakart to register for assessment of LBT held –

“the goods which are brought from outside by the Petitioner (Instakart) into the limits of Pune Municipal Corporation, as can be seen from the operations carried out by the Petitioner, are not for his own use or for earning commission or sale, but are for the purpose of 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, activity of the Petitioner would not be covered by the defnition of the word “importer”.”

The Pune Municipal Corporation issued a notice calling upon Instakart to register itself as “dealer/importer” for assessment and levy of local body tax. Instakart’s challenge to the order was rejected by the Commissioner. Hence the present petition.

Senior Advocate Rafiq Dada for Instakart submitted that once the transaction of sale and purchase between the individual buyer and seller on Flipkart is completed, Instakart delivers the goods on behalf of the seller to the individual buyer. It does not charge commission or percentage of price but only the delivery charges. It only acts like a transporter, and it is the individual buyer who imports goods for his own use. Even if this is to be understood as import, it will not be covered by the definition of “import” under the Act as it is not done for own use of the petitioner. It is hence not required to register under these rules to pay local body tax.

Advocate Abhijit P. Kulkarni for the Pune Municipal Corporation submitted that as of now, no assessment of LBT has been made and Instakart is only required to register itself for assessment. It can contend that it is not liable to pay any LBT, but it would have to register itself first. He further submitted that Instakart is amenable to the LBT.

Section 2(28A) of the Act provides the definition of importer as a person who brings any goods into the city for use, consumption, or sale. Any person bringing any goods into the limits of the corporation for any other purpose would not be an importer under the section. The court said that Instakart is doing import of goods for the purpose of delivery to some other person and hence acts like a courier, postman, or delivery person. If it is not covered by the definition of import and is also not selling or buying goods for commission, Instakart would not be a “dealer” under Section 2(16A), the court said.

Rule 3 of the Local Body Tax Rules requires registration for the purpose of assessment and levy of LBT only in case of a dealer who is an importer or whose turnover of all sales or purchases during the year is not less than the prescribed amount.

Rule 7 provides that commission agent or other agent and the principle, shall, both jointly or severally be liable to pay LBT in respect of goods brought within the limits of the Corporation for consumption or use or sale.

The petitioner is not a dealer under the Act and therefore would not be a dealer under Rule 3 of the LBT Rules, the court said. The impugned order considered Instakart a commission agent. However, the court noted that it actually brings goods within the limits of the corporation for delivery to the buyer who buys the good independently from different sellers online.

“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 court held. Hence, Instakart would not be covered under either Rule 3 or Rule 7 of the LBT Rules, the court concluded.

The court said that these aspects are critical for assessment and levy of LBT and were not considered by the Municipal Commissioner.

Case no. – Writ Petition No. 2565 of 2017

Case Title – M/s. Instakart Services Private Limited v. State of Maharashtra and Ors.

Citation: 2023 LiveLaw (Bom) 68