Taxation on e-commerce: Govt panel for levy on e-com through emails, blogs

A high-level government committee on Taxation of E-Commerce set up by the Central Board of Direct Taxes (CBDT), has recommended a 6-8 per cent tax on several online services (13 services, in a bid to prevent tax avoidance by multinationals) such as online advertising, cloud computing, website-hosting, digital platforms for sale of goods and services or download of software and applications, provided by a company not resident in India. It recommended that payments of over Rs.1 lakh made by a resident individual or company to a non-resident enterprise will be covered by this levy. Digital transactions such as emails, blogs and downloads may soon be taxed if the recommendation of a committee on e-commerce levy are accepted. However, all those services have to be B2B in order to attract this levy and not business-to-consumer.  The committee submitted its report on February, but it was made public on 21st March.

An eight-member CBDT-appointed committee, which included representatives of industry biggies such as Flipkart and Amazon, had in early February suggested that an “equalisation levy” of 6 per cent be imposed on 13 specified digital transactions. However, Budget 2016-17 had proposed the 6 per cent “equalisation levy” only on “online advertising” payments to non-resident recipients.


The e-commerce industry continues to evolve and experience high growth in both developed and developing markets. Indian e-commerce market is expanding at a rapid pace due to benefits of online platforms – wider reach, always on, personalization to name a few and by increasing mobile and internet penetration, m-commerce sales, advanced shipping and payment options, exciting discounts. The sector is also heating up because of recent deals like Softbank’s $627 million deal with Snapdeal, Flipkart acquired Myntra for $370 million, Ola Cabs acquired TaxiForSure for $200 million).

The supply chain and logistics in e-commerce business are highly complex to manage in a vast country like India where infrastructure is not well-developed to reach every remote and rural area. The taxation policies for the e-businesses are not well-defined depending on different business models and transaction types. The complexity has further amplified with transactions happening across borders for online selling of goods and services. The issue with e-commerce is that the services are often provided by companies that have no office space in the country where the service is rendered and so are not subject to tax, providing them an advantage over domestic players. The other issue, that experts feel needs to be addressed, is based on whom the onus of payment of the levy will fall.

Moreover, e-businesses do not take sufficient steps to deploy a security solution, which is hindering the consumer from transacting online. It is therefore important to overcome challenges in Financing, Infrastructure, and Logistics. The major issues faced by e commerce industry in India are: Infrastructural Problems, Absence of Cyber Laws, Privacy and Security Concern, Payment and Tax Related Issues,  Digital Illiteracy and Consumer Psyche,  Virus Problem and  English Specific software and high competition.

                         E-commerce (electronic commerce or EC) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the Internet. These business transactions occur business-to-business, business-to-consumer, consumer-to-consumer or consumer-to-business. The terms e-commerce and e-business are often used interchangeably. The term e-tail is also sometimes used in reference to transactional processes around online retail.

                     Cloud computing means storing and accessing data and programs over the Internet instead of your computer’s hard drive. The cloud is just a metaphor for the Internet. What cloud computing is not about is your hard drive.

When you store data on or run programs from the hard drive, that’s called local storage and computing. The practice of using a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server or a personal computer is called cloud computing.


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