Operating in specific cities or all over India and even abroad, these sites sell products ranging from books to computer software, music to movies, jewellery to vegetables and flowers, etc. In the fast-changing world of Internet, disintermediation is the new virus. To tax business over the Internet, might mean curbing the development of this fledgling industry. But, it could also ensure that a businessman does not dodge the taxman merely by changing the mode of transaction. Internet creates difficult problems for applying existing tax schemes to its activities.
Government collects taxes based on where and when income is being earned.
The tax systems that have been developed to facilitate the role of government are structured for a manufacturing economy and the industries within it, rather than an information economy and the services it entails. The problem e-commerce poses for taxation stems from existing tax law's inability to address the fundamentally different medium. Successful e-commerce tax needs to maintain neutrality, fairness and simplicity, and to encourage all desirable economies activity, new and old. Rules that provide certainty and prevent double-taxation are required. What the tax enthusiasts don't understand is that by the time their bureaucrats print the tax code, the mercurial Internet will have made it irrelevant.