• Taxes to be paid by ecommerce websites in India

Hi Sir/Mam

We are starting an online website which has two kinds of sales :

1)Where we buy the product from a vendor at a price inclusive of VAT(price + VAT) and sell the products and charge 10-20% commission on the sales of the products .VAT is payable by the vendor here .
2) Where we buy the product(inclusive of VAT) and resell it at a higher price .VAT is payable by the vendor here .

In both these cases what are the types of taxes liable on us ?
Asked 5 years ago in Service Tax

Dear Sir,

Please note following :

Case - 1 :- In this case you will only provide a platform and not buy the product from vendor.

- Income Tax on commission income earned

- Service tax on commission income earned if the amount crosses Rs. 9,00,000/-

Case - 2 :- In this case you will do purchase and sell of product

- Income Tax on net profit earned (Sales Value - Purchase Value - Expenses )

- VAT on Sales Value charged

- Entry Tax as applicable on certain states in case of online sell

Vishrut Rajesh Shah
CA, Ahmedabad
804 Answers
30 Consultations

5.0 on 5.0

Hello Sir,

I have not understood your query. I request you to provide me some clarification about your business model to help answer your queries better.

1. In Case 1 - You buy a product from a vendor exclusive of Vat and charge a commission on Sales. My query is if you have bought the product from the Vendor then it is your product now so why are charging a commission on it ?

2. In Case : Firstly Vat cannot be paid by the vendor if you buying it from him. At the time of sale you will be liable for VAT since it is your product now.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP

Rohit R Sharma
CA, Mumbai
2104 Answers
95 Consultations

5.0 on 5.0

Hello,

In case of trading of goods , i.e purchase and then sell at a higher margin , you shall be liable for Income Tax on the net profit and VAT on the resale of goods.

In case of only commission income you shall be liable to pay income tax on the commission earned.

Thanks,

Ria

Ria Nagpal
CA, Ahmedabad
49 Answers
5 Consultations

5.0 on 5.0

Dear Sir,

I am bit confused on the above two models. However in a ideal scenario, taxation would work as follows:

Scenario 1 - trading of goods - You shall be liable for Income Tax on the net profit and VAT on the resale of goods.

Scenario 2 - Commission Model - You shall be liable to pay income tax on the commission earned and also service tax on the commission earned if commission income earns more than 10 lacs.

Please feel free to call/revert in case you require any clarification on the above.

Thanks and Regards,

Abhishek Dugar

CA, CS, B.Com

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

In case 1, you are just a commission agent & you are receiving commission. In case your commission exceeds 10lakhs, you have to charge service tax & deposite to deptt.

Also income tax shall be payable on income generated after claiming expenses to be paid .

In case 2. you have to obtain TIN no. and charge vat on sales made by you. you can claim the input of vat that already paid on purchases made from vendor.

Manish Gupta
CA, New Delhi
5 Answers
1 Consultation

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