All you need to know about the E-Commerce Industry in India

E-commerce has revolutionized the way businesses operate, not just in India but around the world. It is a business model that enables firms to conduct business over an electronic network, typically the internet. E-commerce operates in all four major market segments: B2B, B2C, C2C, and C2B. The ease and convenience of conducting commercial transactions over the internet have led to the rapid popularity and acceptance of e-commerce worldwide.

Here are some frequently asked questions about e-commerce in India:

1. What are the benefits of starting an e-commerce business in India? – The government of India has been promoting e-commerce initiatives such as Startup India, Digital India, allocating funds for the BharatNet Project, and promoting a cashless economy. Registering an e-commerce business in India is a fairly open space, with no entry barriers imposed on domestic and foreign direct investment.
2. What are the steps to start an e-commerce business in India? – The most basic step is to create a business plan designed according to market research, financial budget, and profit margin. Next, register the business for tax compliance and establish a payment gateway on the website. It is also mandatory to register with the Shops and Establishment Act, 1948 and the Employees State Insurance Act, 1948, if applicable. Finally, registration for domain name, Microsoft software licenses, and other software licenses is also needed.
3. What are the benefits of MSME registration for e-commerce businesses? – MSME registration comes with its own set of benefits and is required for any e-commerce business falling within the limits of maximum investment for service providers to be INR 100 crore to appropriately register under MSME.
4. What are the legal compliances needed for setting up an e-commerce business in India? – Legal compliances include registration for tax compliance, payment gateway establishment, registration for licenses such as the Shops and Establishment Act, 1948, Employees State Insurance Act, 1948, and registering the business for domain name and software licenses.
   
   

FAQs about Setting up E-commerce Business in India

1. What is FDI in e-commerce?

FDI (Foreign Direct Investment) in e-commerce refers to the investment made by a foreign company in an Indian e-commerce business. The government has formulated certain guidelines and regulations that govern FDI in India’s e-commerce industry.

2. Is FDI allowed in inventory-based e-commerce models?

No, FDI is not permitted in the inventory-based model of e-commerce.

3. What are the conditions that e-commerce entities need to fulfill?

E-commerce entities must follow specific conditions, such as not directly or indirectly influencing the sale price of goods or services and not exercising ownership or control over the inventory beyond a particular limit.

4. Who is responsible for post-sales services and customer satisfaction in e-commerce?

The responsibility for post-sales services and customer satisfaction lies with the seller, as mentioned in the FDI guidelines.

5. Can entities with equity participation or control over inventory sell their products on the marketplace run by the marketplace entity?

No, entities with equity participation or control over inventory cannot sell their products on the platform run by the marketplace entity.

6. What consumer protection measures are emphasised in the e-commerce policy?

Genuine reviews and ratings, anti-counterfeiting and privacy measures, and e-courts for grievance redressal are some of the consumer protection measures highlighted in the draft e-commerce policy.

7. What is the emphasis on Made-In-India in e-commerce?

The Indian government intends to promote the Made-In-India initiative by allowing foreign MNCs to invest in Indian e-commerce companies that hold inventory, with a condition that 100% of the products in the inventory must be Made In India.

8. Are foreign companies allowed to operate e-commerce businesses in India?

Foreign companies are allowed to operate e-commerce businesses in India, subject to compliance with Indian laws and regulations.

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Rohit Gandhi

Senior Associate | Tax & Regulatory | rohit.g@treelife.in

Specializes in financial due diligence, valuations, business structuring, and income tax advisory. Contributes to the Financial Advisory team by helping startups and businesses make informed strategic decisions.

Priya Kapasi Shah

Associate Partner | Tax & Regulatory | priya.k@treelife.in

Heads Treelife’s Financial Advisory practice, specializing in investment structuring, cross-border transactions, and tax and regulatory advisory. Also leads on AIF setups and advisory services for GIFT IFSC.