Madras HC advocate flags Flipkart over alleged GST loophole exploitation

A practicing advocate of the Madras High Court has written to Finance Minister Nirmala Sitharaman, raising alarm over what he describes as a “disturbing practice” by Walmart-owned Flipkart in its billing structure that allegedly violates GST norms and deprives the government of significant tax revenue.

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In a letter dated August 13, 2025, copy of which Storyboard18 has seen, advocate K.N. Narasimhan claimed that Flipkart India Pvt. Ltd. has been restructuring its marketplace fee model to exploit provisions under Goods Transport Agency (GTA) services, thereby claiming exemptions not intended for large corporations.

According to the advocate, Flipkart has recast its marketplace fees as “transport charges” and split customer bills into product costs and transportation costs.

Under the current GST framework, GTA services, designed primarily to benefit small transport operators, are either exempt or eligible for differential tax treatment when issued under a consignment note.

“Flipkart issues a consignment note to the customer which includes a declaration of tax payment under forward charge. Since GTA is exempt from GST, they are pocketing. This in my view is a violation which should invite not only penalty but also severe action,” Narasimhan wrote in his complaint to the Finance Minister.

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Narasimhan further argues that the “arbitrary” splitting of costs not only harms seller interests by distorting pricing but also amounts to “arm twisting” smaller vendors on the platform.

He urged the Finance Ministry to direct officials to investigate the transactions and “save the nation from the looting of public money by a foreign company under President Trump’s regime.”

GTA services under GST law are subject to unique tax treatment.

While services provided by GTAs are generally taxable, exemptions exist in specific cases, including when provided to unregistered individuals. Initially set out under Notification 12/2017, these exemptions were broadened in October 2017 through Notification 32/2017 with the insertion of entry 21A.

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The intent behind these exemptions was to protect small-scale transporters and reduce the compliance burden on individual consumers. However, tax experts have long cautioned that misuse of GTA provisions by large corporations could erode the government’s indirect tax revenue base.

This is not the first time e-commerce platforms have come under the scanner for alleged GST evasion. Tax authorities have previously flagged concerns over deep discounting, differential pricing, and fee structuring practices that impact both sellers and government revenues.