Amazon India has run into troubles with the tax authorities in Karnataka. As per one of our sources with direct knowledge of the matter, the warehouse for Fulfilled by Amazon logistics segment has been seized and is causing a lot of trouble for the sellers who have their goods stocked there.

Update: Amazon PR just contacted iamWire to clarify that even though the merchants have received a notice, the warehouse is still functional and operating as normal. However no new sellers can register the warehouse as an additional place of business.

Update: In reference to the last statement above. It says – A few sellers have received notices saying that the fulfillment center can’t be registered as an additional place of business. However, it has got no bearing on new sellers who want to opt for FBA as a service.

Below is the official email response from Amazon India

Last week, Amazon was in the news for being targeted by the Enforcement Directorate for violating FDI norms. WSJ reported that The Enforcement Directorate of the Finance Ministry is investigating whether Amazon.com’s fully owned Indian subsidiary has been circumventing restrictions on foreign investment in retail by selling directly to customers while making it look as if the sales are being made by other companies.

Image Source: live24india

Live Mint confirmed the news earlier today, it mentioned that the Karnataka government has served notices to more than 100 third-party merchants, ordering them to stop storing their products in Amazon’s storehouses near Bangalore. The notices say these merchants cannot register Amazon’s warehouse as their “additional place of business”.

As of now only Amazon sellers have received such a notice, nothing has been heard from those selling on other marketplaces as well. A person with the knowledge of the matter mentioned that the Tax authorities have said that they will ‘not allow this Practice’.

“We understand this to be a case where the laws have not kept pace with the new-age online business models that enable a faster, convenient and nationwide access to customers for sellers, especially small and medium businesses, at significantly low costs. We look forward to an early resolution in order to avoid closing our local warehousing operations in Karnataka and to stay on course for bringing more investments in the state,” an Amazon spokeswoman told Live Mint in an emailed statement.