Amazon shutting down?

If we have to start making sense of what the media reports have been saying and what the key people of Amazon have said, we might have to get ready to bid goodbye to Amazon.
This means one of the online market’s biggest name would have to leave the country. After its recent fiasco with the Karnataka authorities, Amazon has been facing a tough position.

The same has been happening in China too.
After Amazon’s awful third quarter this year, investors haven’t been too happy. Shares were down by 7.1%.
This decline alone has wiped out $10 billion in market value, that too in one day.
Shares of Amazon are down by 29% in the last one year. It’s really been going down for them. Things aren’t looking too good and Amazon just wouldn’t stop spending.
The recently launched device by Amazon called Fire has welcomed another blow of $170 million.

Jeff Bezos, its CEO, has been widely criticized for investing too much in things that don’t execute well.
If a bad quarter at its end and a new quarter with no new prospects to start with wasn’t enough, this new Asian problem has blew right in the face of Amazon.
For the last one week we have been seeing Amazon make controversial statements saying that they see “substantial uncertainties” in interpreting Indian laws.
But to lose out on India and China would be to lose out on a lot of revenue. No matter how tough Indian laws may be, India still remains one of the fastest growing multi-billion dollar online shopping market.
One of these “unique risks” are the fact that India doesn’t allow foreign direct investment in direct online retail.
This means they cannot just accept the cash and sell products that they own. They have to host 3^rd party sellers on their website, from whom the customers would buy their goods.
Another problem in India has been the VAT. The Karnataka authorities believe that online retailers like Amazon have been finding loopholes in the system to escape without paying VAT.
“Some e-commerce companies have separate entities controlling different areas of the business. We want to make them liable or ensure that one particular entity shoulders the responsibility to pay the tax,” said the Karnataka authorities.
“We don’t want to drive out e-commerce companies from the state but we want to ensure rules are followed,”
At the same point Amazon has been arguing for long that since it does not actually sell anything but rather just acts as a platform for retailers to sell their products through the Amazon logistics, it isn’t liable to pay VAT.


“For www.amazon.in, we provide certain marketing tools and logistics services to third-party sellers to enable them to sell online and deliver to customers. Though we believe these structures and activities comply with existing laws, they involve unique risks,” Amazon added.
Karnataka authorities have as of now issued notices to 75 retailers operating under Amazon.
And this isn’t just one problem. China too has been monitoring Amazon closely and isn’t very happy with it.
“If our international activities were found to be in violation of any existing or future PRC (the People’s Republic of China), Indian or other laws or regulations or if interpretations of those laws and regulations were to change, our businesses in those countries could be subject to fines and other financial penalties, have licences revoked, or be forced to shut down entirely,” the company said in the filing.
With Flipkart yet to recover from Big Billion Day and Snapdeal yet to reach its peak, Amazon could have had the upper hand.
But seeing Amazon make such statements, it doesn’t seem to turn out that way.
State government is yet to approve the changes proposed by the sales tax department in the law and if approved, it will drive Amazon out of the state.
“There are substantial uncertainties on the interpretation of China and India’s laws, and is possible the government will take a view contrary to ours,” Amazon said in a regulatory filing to the US Securities and Exchange Commission (SEC).
India is a big market and Amazon had said that India was one the first markets to reach $1 billion in gross sales. But that could all be undone soon enough.

If Amazon is unable to cope up with the Indian authorities, Amazon would have to finally shut down its Indian operations, completely.
And it is likely to happen that way.