How Company Taxation Works for eCommerce Businesses in India in 2022

 Starting an online store in India is now quite simple. Almost anyone can create a website and start accepting online payments in less than a week thanks to technology and simple website builders like Shopify. Of course, joining internet bazaars like Etsy and Amazon is another very substantial alternative.

A tax consultant in Kolkata warns that there are hundreds of businesses that refrain from selling online because they think it is expensive and there are heavy tax liabilities that will hardly allow them to generate any revenue. But that is not true. Compared to offline enterprises, setting up an eCommerce business in India is far less expensive, easier, and more profitable.

Regardless of the platform or methods you choose to sell your products online, you must be aware of your tax obligations and the deadlines for filing them. Get a head start on this article.

What Is the Status of an eCommerce Business in India?

It starts with Sec. 2(44) of the CGST Act, 2017, which defines electronic commerce or eCommerce as a means to sell either physical or digital products or services through an electronic network, website, marketplace, social media, or any other platform.

E-commerce businesses in India must obtain tax registration. There are two types of business status: an e-commerce operator and an e-commerce participant.


➔   eCommerce Operators (ECO): individuals that have their own website, Shopify store, or any other electronic platform or facility, through which they sell their goods or services, either handmade, manufactured, or procured products, online classes, etc.

➔   eCommerce Participant: selling goods or services through a third-party eCommerce operator, such as Amazon or any digital marketplace.

What Tax Registrations Do You Need To Start An eCommerce Business In India?

Small sellers that sold their goods or rendered services through e-commerce operators were previously exempt from taxes because there were no regulations governing such transactions, which allowed for tax avoidance. Additionally, non-resident e-commerce operators gained money in India without paying taxes. So, the government changed the company formation laws for e-commerce companies to include the following provisions:

●     VAT Tax

●     Sales Tax

●     Service Tax

The Finance Act, 2020, has introduced a new 2% levy on the e-commerce operator on receipt of consideration for the online sale of goods or services made, provided, or facilitated by it in an amount of at least INR 20 million in aggregate, effective from 1 April 2020.

To sell your goods and services online through e-commerce, all you have to do is apply for online company registration and obtain GST registration. The top tax audit firms in Kolkata recommend individuals looking to start their own e-commerce business get professional audits and consultancy right at the starting point of their business.

How the Tax Threshold Exemption Works for eCommerce Businesses

E-commerce operators are not eligible for the threshold exemption and must register regardless of the value of the supplies they make. There are no threshold exemptions applicable for eCommerce businesses or individuals that supply goods or services through online marketplaces and platforms that are required to collect tax at source, until and unless the marketplace or the eCommerce operator is liable to pay tax on behalf of the supplier as per the directions under section 9 (5) of the CGST Act, 2017.

Does the Supplier Have to Collect TCS If They Sell Their Products on Their Website?

According to Section 52 of the CGST Act, ECOs don't have to collect tax at source (TCS) if they are artisans or manufacturers selling their products through their website, electronic medium, or self-made platform. ECOs are liable to collect TCS when they are supplying products crafted, developed, or delivered by another supplier. In the latter case, the consideration is to be collected on the net value of the taxable supplies.

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