E-commerce major Amazon has chosen Telangana over the neighbouring state of Karnataka to set up its largest fulfilment centre (FC) in the country.

The US-based firm, which has been facing taxation issues in Karnataka, said it has put its proposed investments in the state on hold till the matters are resolved.

The e-commerce major last year had announced investment of $2 billion (about Rs. 12,500 crores) in the country.

The new FC in India will come up near Kottur, on the outskirts of Hyderabad. Spread over 280,000 square feet, the unit will become operational by May this year.

This will enable Amazon to ensure faster and quicker delivery of products to stay ahead as it competes head on with domestic rivals like Flipkart and Snapdeal.

No investment details were disclosed.

"This is the largest investment in infrastructure in any single state, to date, by Amazon in India. The FC will allow Amazon to offer its Fulfilment by Amazon (FBA) service to thousands of small and medium businesses in the state and empower them to gain access to and service customers across the country at significantly low operating costs," Amazon Seller Services said in a statement.

Amazon's warehouse in neighbouring state Karnataka has been partially shut for some time now due to issues raised by the state's tax regulator.

"We understand the situation 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," an Amazon spokesperson said.

Needless to say, currently all future investments in warehousing infrastructure for the e-commerce business in the state of Karnataka are on hold, the spokesperson added.

"We do look forward to a resolution at the earliest," the spokesperson said.

Meanwhile, Telangana Chief Minister K Chandrashekar Rao in a release said, "The state has given all clearances in 11 days, well within the guaranteed time. We are making all efforts to make Telangana an investor friendly state."

The company has also signed an MoU with Telangana government to train thousands of sellers across the state in e-commerce and take advantage of the digital economy.

The new warehouse in Telangana will allow Amazon to reduce delivery time and cost of delivering products, especially in the southern states, the company said.

With the new FC in Telangana, Amazon will have 11 FCs operational across nine states in India covering a total of over one million square feet space with a storage capacity of over 2.5 million cubic feet.

"The new fulfillment infrastructure and customer service will allow Amazon to do the heavy lifting for the thousands of small and medium sellers from the state and help them grow profitably," Amazon Senior Vice President Worldwide Operations and Customer Service Dave Clarks said.