💻 What Is E-Commerce?
E-commerce means buying and selling goods or services online, using websites, apps, or digital platforms.
It includes:
- Online shopping (Amazon, Flipkart)
- Digital services (Netflix, Spotify)
- Online booking (MakeMyTrip, Swiggy)
- Cross-border sales from one country to another
🧾 Why E-Commerce Needs Taxation
E-commerce companies make huge profits, often from international users.
Governments need to tax these profits to:
- Raise revenue
- Create fair competition with local sellers
- Control tax evasion by foreign tech companies
📜 How India Taxes E-Commerce
India introduced specific laws to bring e-commerce under the tax net:
1. Equalisation Levy (Google Tax)
| Rule | Details |
| Started in 2016 | On online ads by foreign companies |
| Rate | 6% on payments to non-resident companies like Google |
| Expanded in 2020 | 2% levy on e-commerce sales to Indian users by foreign firms |
2. GST on Online Services
All online platforms (foreign or Indian) must collect Goods & Services Tax (GST) on:
- Subscriptions (like Netflix, Udemy)
- Online consultancy
- E-books, downloads
3. TDS on E-Commerce Payments (Section 194-O)
| Rule | Explanation |
| Platform like Amazon collects TDS | 1% on payments to Indian sellers |
| TDS applies if annual sales > ₹5 lakh | For sellers without PAN, TDS is higher |
🌍 Global Tax Challenges in E-Commerce
E-commerce breaks national boundaries.
A company in the US can sell to a user in India without physical presence.
This creates problems like:
- Double Non-Taxation: Company not taxed anywhere
- Base Erosion: Shifting profits to tax havens
- Difficulty in tracking digital income
- User data as digital currency (value without tax)
🧠 Real-Life Example
A UK company sells digital courses to Indian students via an app.
- No office in India
- No GST registered
- But earns lakhs every month from Indian users
➡️ Under Equalisation Levy, India can now tax this 2% on gross receipts.
📘 Key Concepts to Learn
| Term | Meaning |
| Equalisation Levy | 2% tax on foreign e-commerce revenues from Indian users |
| TDS – Section 194-O | Tax Deducted at Source by e-com platforms like Amazon |
| GST on Digital Services | Tax on online services even by foreign firms |
| Permanent Establishment | Physical presence for tax purpose (not needed in e-com) |
| Cross-border Taxation | Taxing income earned in other countries |
🎯 Why Students Should Know This
- Exam questions are now asked on digital tax and e-commerce
- Commerce careers in tax, accounting, and consultancy require updated knowledge
- Understanding this helps students connect traditional tax rules to new-age business
✅ Conclusion
As e-commerce grows, taxation becomes more complex.
Governments like India are building digital tax laws to ensure fairness and accountability.
Students must understand how technology, law, and economy connect in today’s world.