The tax authorities finally revoked the suspension on Tuesday afternoon, after more than 20 hours of confusion among scores of Cloudtail vendors who were not able to generate e-way bills to send their supplies to Cloudtail warehouses in Haryana, the sources said.
“We would like to reiterate that Cloudtail’s Haryana GST registration is current and valid. We continue to operate in adherence to all applicable GST requirements,” a Cloudtail spokesperson said without specifying why the GST disruption happened in the first place.
According to a tax official, the company’s monthly GST returns were in order, therefore the suspension could have been due to either an outstanding demand that was not complied with by the company, or an additional input tax credit availed which was not meant to be taken.
The disruption is seen as a setback to the online retailer, especially at a time when ecommerce companies are working overtime to fulfil surging demands as millions of Indians feel safer to stay at home and order everything from food to clothes online rather than venturing out to malls and high streets amid the pandemic.
As per provisions in law, GST registration can be cancelled if a company has not filed returns for six months, for taking extra input tax credit on the back of fake invoices or bills and therefore taking wrongful tax exemption, or for not having started business operations after six months of taking GST registration.
Some experts felt the sudden suspension of GST registration was not fair. “Power to suspend tax registration should be exercised with extreme caution,” said Harpreet Singh, indirect tax partner at KPMG India. “Internationally, such stringent steps are taken only against taxpayers who are regular defaulters and have proven track record of fraud, mala fide or wilful misstatements.”
Whatever may be the reason for tax authorities’ move, experts said it cannot be just wished away for a large company like Cloudtail that had reported a 25% jump in revenues for 2018-19 at Rs 8,945 crore along with a profit of Rs 29.4 crore, according to regulatory filings.
Its numbers for 2019-20 are not available in public domain.
In Haryana, Cloudtail operates fulfilment centres in Gurgaon, Jamalpur, Mewat and Sonipat.
“Cloudtail’s case is the first big instance of GST registration getting suspended after the relaxation period given due to Covid-19 pandemic got over,” said Rajat Mohan, senior partner at chartered accountants firm AMRG Associates.
MS Mani, tax partner at Deloitte India, said, “Since GST is a transaction-based tax, any disruptions in the ability to issue e-way bills, invoices, etc. leads to major business issues. Hence it is essential to formulate safeguards to protect revenue concerns without any business disruptions.”
The suspension of GST registration sparked some confusions among Cloudtail vendors, many whom approached the Bengaluru-based vendor for answers.
“Haryana is a very big geography and is one of the largest hubs for Cloudtail in terms of number of orders and the value of orders place from that state,” one of the large suppliers to Cloudtail told ET.
Another large supplier said, “If somebody is unable to generate the e-way bills, then they (Cloudtail) will not give appointment for deliveries and deliveries could be delayed by one or two days for inbound shipments.”
Cloudtail is owned by Prione Business Services, a joint venture between Amazon and Infosys founder NR Narayana Murthy’s Catamaran Ventures. It was in the news in 2018 after India amended its foreign direct investment rules for ecommerce marketplaces and the joint venture had to change its shareholding structure to stay compliant with the changed norms. Amazon had reduced its stake in Prione from 49% to 24% in February 2019 as part of this exercise.