Online E-Commerce selling at market places Flipkart-Amazon and Snapdeal legal and taxation - Business & Economy - Entrepreneurship - TIK Share

Online E-Commerce selling at market places Flipkart-Amazon and Snapdeal legal and taxation


Rahul Rai

2015-03-21

Online selling at market place of Flipkart, Amazon and Snapdeal is a hot business nowdays. Everyone wants to sell online. People those selling offline are now listing their products on the online market places such as Flipkart, amazon and Snapdeal.

Taking business to these portals is new trend and new business wave. Many business owners have seen significant growth in their business once they started making transactions online.

Taxation and legal requirements are a headache when it comes to online trading of commodities. There are many registrations one need to get done.

If someone specially CA Pulkit Sharma, the expert on this can explain the following:

  1. How does online trading works?
  2. What are the different tax registration required to trade on online portals?
  3. Accounting system and how to properly account high volume transactions?
  4. What type of business entity or structure is most suitable for online trading on E-Commerce portal?

CA Pulkit Sharma

2015-03-21

Selling online has become a trend. It is more of a business necessity than a trend or fashion. Within deep internet penetration and acceptance of users, E-Commerce has become a hot business.

I get everyday 2-3 clients having doubts on setting up an E-Commerce business (Taxation, accounting and legal part). Setting up an E-Commerce business is not very difficult, since you already have many portals readily available to sell your products.

I will give you a detailed idea on how to handle your tax, accounts and legal requirements while starting or while running the business of E-Commerce.

Stepwise chart on starting E-commerce

First step is to have an Idea or product. If you don’t have a product you cannot sell it on online portals. You should prepare a complete business plan of what you will sell, how you will procure the raw material, how you will manufacture etc. This is much of operational part and I believe since you are starting your venture you must be more aware of these things.

Second step, once the product planning is completed you should think of business entity or type of business registration. You can open a Company, LLP, Partnership or proprietorship to start your business. Always think of long term while deciding type of business structure.

Things you must consider before choosing a perfect business entity are:

  1. Whether you will go for VC funding? To get any kind of investment you need to have a Company.
  2. ESOP’s are possible only in Companies.
  3. If you have a family business and scale is already fixed, LLP would be a better option.
  4. If you have a person specific product, you can register on your own name (Proprietorship).
  5. You must think of long term before choosing type of entity.

Other than the pure need of funds or scale, you must also consider the impact of changing the type of entity at later stage. In case you started your business as LLP and later you need investment, you have to waste a lot of time and resources in registering new company and again registering on each portal.

Always think of at least 2 years before you go ahead with type of registration.

Third Step, once you have decided the kind of business registration the next step is to prepare for registration at different portals and also registering under different tax laws. Registration at portal is again a operational activity and you must be more aware of it.

The various tax laws that you must consider are:

  1. VAT, portal such as Flipkart, Amazon etc. needs that seller have VAT. VAT registration is must to start selling online. As per VAT ACT, Karntaka you must register under VAT Act if you have interstate trade and once you are registered on online portals, you will be doing interstate trade since buyers can be from anywhere in India.
  2. Excise, you should consider excise only if you are already manufacturing. Excise registration is required only if you are manufacturing and cross the minimum limit.
  3. Profession Tax, Again states have profession tax. Few states such as Delhi do not have profession tax requirements.
  4. Trade license is required as per local municipality rules. Etc.

Fourth step, You are ready to sell on online marketplaces and must have successfully sold at last step.  Fourth step is very important. You must establish an accounting system. The system should be able to handle you business reporting and legal requirements.

Plan an accounting system which should help you generate legal reports and most importantly management reporting. You must be able to get the reports which helps management to make decisions.

The accounting system should efficiently provide you cost structure of each item, profitability of each item and should be able to support any decision taken based on financial performance of you business.

General compliances

At the year end, you should get your accounts audited*. File the income tax returns and other returns depending on your business registration.

Final words

If there is a will to do something, you will always find a way. It is not very difficult to do online business if you can operate offline EFFICIENTLY.

Must Read: Startups and Entrepreneurs guide to accounting and legal compliance

Reply

Rahul Rai

2015-03-22

Thank you very much. This is a complete information on how to start online E-commerce business on established portals or starting your own portal.

I think everyone should make use of this opportunity and ask their specific doubts here itself.

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