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December 31, 2013

HOW TO START A E-COMMERCE BUSINESS

With the success of the companies such as Flipkart, Myntra, Jabong and the establishment of foreign companies such as E-bay and Amazon in India. Many of the companies and young entrepreneurs are trying to open their own website on the same Business model. But the problem comes when its the time for legally establishing the business by following all the Taxation laws and other government regulations.

In this post we would discuss some laws and regulation which should be followed by young entrepreneurs:


1. REGISTER A COMPANY-

First step in opening any E-commerce business should be to establish a private limited company. A company being a separate legal entity would provide advantage to the owners that company doing the business and the shareholders are separate legal persons. Shareholders will not be liable to pay the debt if any suffered by company in long run. Second advantage would be in terms of valuation, if by any chance the owners wants to sell their stake to others and if also they want to raise further capital they can run an IPO in future by converting their Private company into public company and by listing it on the Stock exchanges.

It is not necessary that a company is to be formed compulsorily for running the business but it is advised to do so for better future prospects.

Please click the below mentioned link to view the steps to register a company:
http://www.ngoandtaxconsultant.in/2013/10/company-registration-procedure.html


2. REGISTER A BRAND NAME-

After starting the company, select a brand name for your website, such as those used by companies like Flipkart, Myntra etc. Register your brand name with the " Controller General of Patents Designs and Trademarks". Registering a brand name is necessary to avoid future Brand name infringement.


3. SELECT WEB HOSTING SERVICE AND GET YOUR WEBSITE RUNNING-

Third step should  be to register for domain name and web hosting services and get started to run your E-Commerce website.


4. GET REGISTRATION WITH VAT/CST AND SERVICE TAX DEPARTMENT-

After launching your business you should get your tax registration done before earning income which exceeds threshold limit. The tax on the E-commerce business can be either Service Tax or VAT or it can be both.

Service tax as the name suggests is the tax on services offered. If you are providing the services from your E-commerce website your will have to take service tax registration after your fees/commission crosses threshold limit of Rs. 10 lakhs. If you are running on the business models such as Flipkart or E-bay then you will have to get Service Tax registration, as these websites doesn't sell goods directly but they bring buyer and seller together and in turn charges commission. This commission in turn is a service fee and service tax has to be calculated from the E-commerce company.

VAT is the tax which is charged on purchase and sale of goods. If the E-commerce website directly buys and sells goods to the final consumer, it will have to take the VAT and CST registration from the state it is situated in.

5. PAY INCOME TAX-

Thats not all the business will also have to pay Income tax in the form of TDS, Advance Tax and Self Assessment Tax to the Government of India on Net profit it earns from the business activity. The rates of taxation would be flat 30% plus EC and SHEC for companies and Partnership Firm and for others it would be slab rate basis.

6. OTHER REGULATION-

In some states there are other regulation as well such as Shop Establishment Registration. These regulation would differ from State to State.




Hope this small article will help lots of Young enrteprenures. For further query feel free to contact us at:

Akshay Jain
ngoandtaxconsultant@gmail.com

or write your query at:
ngoandtaxconsultant.in/p/blog-page.html







1 comment:


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