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 the last decade, which is a great step towards the digitization of the businesses. Now all the traditional businesses are going online and establishing their businesses and brands online creating a great value to the customers. Customers are also now very addicted to the online markets and want every product to be delivered to their doorstep 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 transactions are regulated in India.

Regulations and Taxation of e commerce transactions

How E-Commerce transactions are regulated ??

E-Commerce transactions have now reduced the distance 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 any other intermediary fees. Due to the digitization 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 verified thoroughly as it should not negatively affect the producer or 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. The Indian Contract Act, 1872 validates that there exists a 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 also required free consent among themselves. While Information Technology Act, 2000 provides the validity of the e-contracts.

The main reason why the traditional businessmen are transferring to the E-commerce businesses is that there is no physical boundary restriction on the online transactions. There may be other reasons also such as no physical maintenance of the stock as the stock can be bought and sold when the consumer orders online.

Issues in Taxation of E-Commerce transaction in India

There are many issues in taxing of 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 of 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 as to where the business should be taxed. As in the case of traditional businesses, there were 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, the customs department are facing difficulty to stop the smuggling of goods, this would be another liability on the customs department.

3. No Jurisdiction Constraint:

There is no particular jurisdiction, especially for e-commerce transactions, for which in the case of future disputes, complaints can be lodged. As the transaction happens through any part of the globe, it will be crucial to decide about its judicial jurisdiction.

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