STEPS FOR LEGALLY STARTING E-COMMERCE WEBSITE

QUESTION:

From- Ravi Kant

I want to run an eCommerce website,but not on very big scale. I want to know want i need to start for this small business without any government problem.
I don't want to cheat any dept. What's the minimum requirement for this.

ANSWER:

Hi Ravi Kant,

Your solution as per my understanding of your query are as follows:

1. First of all we will come to the legal status of your organization which will run the E-commerce website. Your organization can either be in Proprietorship/Partnership/Company. Since you are saying that it will only be a small business you can start it by being the proprietor of the business, it will also save Income Tax (see point 5). 

Mostly it is recommended to open a Company for E-commerce business as it will provide seperate Legal entity to your business and also it will be more beneficial (better image of the business and in valuation of business) for you in long run. But it would depend on your budget, so if you have money to invest open a Private limited company and select a particular Brand name for your business or run as proprietorship and afterwards convert it into company.

To know steps to register a company, please go to following page:

http://www.ngoandtaxconsultant.in/2013/10/company-registration-procedure.html

2. Select a Brand name for your business, it will build image of your business and register the brand name. You can go forward by not registering the brand name but it is recommended to have a brand name registered.

3. The most important part would be to register yourself with VAT authority of the state from which you will do business. As you may be knowing that on selling the goods you will have to collect VAT and pay it to the government. So see that your product is a taxable one and get your firm registered with VAT Department of your State. The rate of VAT ranges from 5-14% for near about all goods but it can be different and would depend on States and your product type.

4. If you are also providing service to the buyers, you will have to register with Service Tax Department. The rate of tax at present is 12.36%.

5.  During the year you will have to pay Income Tax on the Net profit earned from the business. If you are doing business in proprietorship your Income upto Rs. 2.20 lakhs will be exempt (As per Income Tax rates for A.Y. 2014-15). Then it will be taxable at the rate of 10% and will go upto 30%. If you start a Company it will be taxable at flat rate of 30%.

Hope this will help you, feel free to contact for any queries.