Electronic Commerce, commonly known as E-commerce or eCommerce, is trading in products or services using computer networks, such as the Internet. It refers to the buying and selling of goods and services via electronic channels, primarily the Internet.
Examples of E-Commerce companies:
Few examples of the E-Commerce systems are Flipkart, Snapdeal, Amazon, Myntra, OLX, OlaCabs etc.
Business Strategy of E-Commerce companies:
The E-Commerce chains make products and goods easily available at the doorsteps of anyone who has Internet access. Some of the strategies used by them to attract customers are:
- Cash & Card on delivery – This is a relief to people who do not own a credit card and for people who are reluctant to make online payments.
- Replacement Policy – This helps the consumer to return the product within the stipulated duration if is not satisfied with the product that has been delivered.
- Easy Monthly Instalment options (EMI) – This helps them to pay for the product in parts every month.
- Wide Payment options – Different payments methods makes shopping convenient.
- Free Shipping – Sometimes, the consumer is not charged the Shipping price.
- Discounted prices & deals – Lot of discounts and other deals are provided when purchased online.
- Wide range of products – Online shopping provides access to wide range of products.
- Zero cancellation fee – You would not have to pay anything in case you decide to cancel the order.
- User friendly website – The websites are easy to navigate, helps to search the products easily, Search can be filtered as per price range, discount, age group, hot selling etc.
- Quick Delivery – The products get delivered early, sometimes within one business day.
E-Commerce in demand:
E-Commerce in India is one of the fastest growing Economy. It has a very huge consumer base and a big mass connected to Internet. Most of the local and domestic firms are using the E-business model to enhance their business. A lot of online shopping options like ordering food, purchasing grocery, booking taxis, purchasing electronic and other items etc are available. Most of the firms today have both online and offline shopping options available.
Some of the reasons that have led to an increases demand in E commerce are:
- Explosive growth of Smartphone users.
- Rising standards of living.
- It is an easy option for people who do not have the time.
- Increased Population
Tax Evasion issue with respect to E-Commerce:
- All the e-commerce companies were subjected to tax under Karnataka Value Added Tax Act, 2003. As per this Act
- Every person who, for an agreed commission or brokerage, buys or sells on behalf of any principal who is a resident of the State shall be liable to tax.
- A dealer means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise for cash or for deferred payment or commission.
- Initially, the online companies were not paying tax. However, after strict compliance measures were initiated by the commercial tax department, many e-commerce companies started paying taxes
Amazon Tax Issue:
- It was found that Amazon was not paying VAT for transactions on its online platform. It asked the department to collect VAT directly from sellers as it was not doing the business directly.
- According to tax authorities, Amazon was acting as a dealer and was liable to pay VAT as per the provisions of the Karnataka VAT Act, 2005, as it was not merely a service provider but was providing value addition in terms of state-of-the art data analysis and prediction systems which helps in storing and arranging the products and was also acting as a commissioning agent as per the Karnataka VAT Act.
- However, Amazon has categorically stated that they are not a dealer as the legal ownership of such products is not transferred to Amazon and is merely acting as a service provider to provide fast delivery to the buyers.
- Amazon had also refused to accept it was a commission agent, but officials insisted anybody issuing a tax invoice was liable to pay.
- At present, the State government has classified all e-commerce businesses under the Section 8 and also as per the definition of a dealer under Section 2 (12) of the Karnataka Value Added Tax Act, 2003 and expects Amazon to fall in line and pay the tax accordingly.
Measures taken by Government to improve E-Commerce business:
- The proposed investments on power and infrastructure projects will help e-commerce companies reach to a larger customer base.
- The budget allocation for infrastructure development will enhance logistical outreach and strengthen delivery capabilities by allowing faster movement of goods.
- The decision to incentivise debit and credit card transactions will provide a boost to electronic payment transactions and online commerce.
- Under the new five-year Foreign Trade Policy (FTP), the government will provide incentives to eCommerce companies exporting products from sectors that create jobs.
- Firms that export goods through courier or foreign post office using e-commerce of FOB (Freight on Board) value up to Rs 25,000 per consignment will be entitled for rewards under MEIS.
- If the value of exports using e-commerce platform is more than Rs 25,000 per consignment then MEIS reward would be limited to FOB value of Rs 25,000 only.