Regulation and taxation of e commerce transactions. Now a Days in India, E-commerce has been the largest sector where the retailers are earning money. It has grown about 500% in last few years, which is a great step towards the digitalization of the businesses. Now all the traditional businesses are going online and establishing their business and brands online creating a great value to the customers. Customers are also now much addicted to the online markets and want every product to be delivered to their doorsteps without any hard work of going out and purchasing those products which looks good or comfortable to them. In this article I have discussed how e commerce in regulated in India.
Regulation and taxation of e commerce transactions
How E-Commerce transactions are regulated ??
E-Commerce transactions have now reduced the distances between the consumers and the producer of the products. This will now eradicate the intermediaries in between the producer and the consumers in the market who were charging great amount as commission or otherwise. Due to the digitalization of the businesses the government would be facing great difficulty in forming the taxation rules. The taxation rules to be formed by the government in case of e-commerce has to be very much verified and has to be verified twice as it should not negatively affect both the producer and the consumers.
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All the e-commerce transactions are governed by the Indian Contract Act, 1872 along with the Information Technology Act, 2000. Indian Contract Act, 1872 validates that there exist valid contract between the parties which should be adult and not under the age of 18, having the lawful consideration as a part of transaction and free consent amongst them. While Information Technology Act, 2000 provides the validity for the e-contracts.
The main reason why the traditional businessmen are transferring to the E-commerce businesses is that there is no boundary restriction on the transaction online. There may be other reasons such as no physical maintenance of the stock and can be bought and sold when the consumer orders online.
Issues in Taxation of E-Commerce transaction in India
There are many issues in the taxing the e-commerce transactions by the government as every thing is happening online and nothing is constant or static where it can be taxed equally. I have discussed some them here:
1. Absence of Permanent Establishment:
As there is no business in physical terms, there would be issue in defining the place of business where the business should be taxed. As in the traditional businesses, there were the tangible assets which can identify the place of business, but as in case of virtual business, there would be no tangible assets for the existence of the business.
2. No Boundary limits:
As in the virtual kind of business there would be no boundary limits as in kind that from which state it should sell goods or purchase as the buyer may be from any country or state to order that product. As of now also the excise the customs department are facing difficulty to find the smuggling of the goods, this would be other liability on the customs department whether they are properly initiated and taxed or not.
3. No Jurisdiction Constraint:
There would be no particular taxable or legal jurisdiction for which in future if the dispute happens than where to go and where to lodge the complaint. As the transaction happens through any part of the globe, no place of existence would be decided to place the dispute in courts.