Summary of Income Tax for E-commerce Operators in India

The growing popularity and demand for online services demonstrate that digitization is the way of the future. Today, every action is automated, whether it is a domestic function or a corporate operation. 

One of the most noticeable changes in the digital economy is the growth of e-commerce operators (mostly foreign-based). In this article, we discuss the income tax and other direct tax implications for e-commerce operators who could either be a resident or a non-resident.

An overview

E-Commerce transactions consists of the following:

What is the Flow of Transactions in an E-commerce Ecosystem?

What Are The Applicable Income Tax Provisions For E-commerce Taxation in India?

Let us take a look at the various provisions under Income Tax Act, that you need to be aware of as an E-commerce operator in India:

For Resident ECO:

An ECO registered in India or having a Permanent Establishment in India or fulfilling the provisions of Section 6 (residency test) is regarded as a Resident ECO. Following compliances are required by Resident ECO under Income Tax provisions:

1. Income Tax Return

Commission on sale, which is the major source of Income for ECO, is grouped under the head ‘Profits and Gains from Business and Profession’ to compute Income Tax. The compliance for resident ECO is tabulated below

Type of PersonRateCompliance

2. TDS under Section 194-O

ParticularsSection 194-O

For Non-resident ECO:

An ECO not registered in India and not fulfilling the provisions of Section 6 is regarded as a Non-resident ECO.

Provisions of Equilization Levy and Income Tax for NRI E-commerce Operators is mentioned as below::

1. Income Tax Return

Type of ECORateCompliance

2. Equalisation Levy under Sec 165A:

ParticularsNon-resident E-commerce Operator

Summary – Income Tax for Ecommerce in Current Ecosystem

Summary: Implications of Section 194-0 and Equalization Levy on ECO

We have prepared a comprehensive list of the direct tax implications on an E-commerce operator under various circumstances:

Conclusion

The digital economy is swiftly becoming intertwined with the traditional economy, thus making it harder to delineate the digital economy’s true meaning. India has been at the forefront of digital economy taxation. Businesses will need to continually review their operating models to assess the effect, identify risks, explore planning possibilities, and meet their commitments as tax law evolves.

The taxation for e-commerce operators in India has a widespread applicability and so, e-commerce businesses should be aware of the same.

Why Choose Incorp?

Our Advisory and Taxation Team at Incorp offers seamless assistance with advisory services. We shall evaluate and assist in assessing ECO’s impact under the Direct Tax Laws. We shall help with transactions subjected to foreign taxes and comply with all applicable rules and regulations.

Apart from direct taxation, we can take care of GST on your e-commerce business as well along with other indirect taxation levies.