Lok Sabha Question No. 224 (UNSTARRED), answered on 2015-11-30
Subject: E-Commerce
Ministry: COMMERCE AND INDUSTRY
Asked by: ANTO  ANTONY

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY

## DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION

## LOK SABHA

UN STARRED QUESTION NO. 224.

TO BE ANSWERED ON MONDAY, THE 30 TH  NOVEMBER, 2015.

## E-COMMERCE

## 224.   SHRI ANTO ANTONY:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज्य एवं उद्योग मंत्री

- (a) whether  the  Government  is  encouraging  e-commerce  and  if  so,  the  details thereof;
- (b) whether  the  Government  has  any  statistics  regarding  revenue  generated through e-commerce;
- (c) if  so,  the  details  of  revenue  generated  through  e-commerce  in  the  country during each of the last three years and the current year;
- (d) whether the Government has any mechanism to identify tax evasion through ecommerce and if so, the details thereof; and
- (e) whether  the  Government  has  any  plan  to  impose  service  charge  on  ecommerce  and  if  so,  the  details  thereof  along  with  the  steps  taken  in  this regard?

## ANSWER

## वाणिज् यएवंउद्योगााज् यमंत्रीस् वतंंत्र्रभााा(स्ीमतंीिरममलााीीतंाामि(

THE MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF COMMERCE & INDUSTRY (SHRIMATI NIRMALA SITHARAMAN)

To encourage investment in e-commerce sector, FDI policy permits 100%  foreign  investment  under  the  automatic  route  in  companies engaged  in  e-commerce  provided  that  such  companies  would engage only in Business to Business (B2B) e-commerce. Further, it has  been  decided  an  entity  will  be  permitted  to  undertake  retail trading through e-commerce under the following circumstances:

- i) A manufacturer is permitted to sell its products manufactured in India through e-commerce retail.
2. ii) A single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through ecommerce.
3. (a):
4. iii) An Indian manufacturer is permitted to sell its own single brand products through e-commerce retail. Indian manufacturer would be  the  investee  company,  which  is  the  owner  of  the  Indian brand  and  which  manufactures  in  India,  in  terms  of  value,  at least 70% of its products in house, and sources, at most 30% from Indian manufacturers.
5. (b) & (c): No  separate data  is  maintained  in  respect  of  revenue  generated through e-commerce.
6. (d): The  Government  has  a  mechanism  to  identify  tax  evasion  based  on intelligence, complaint and third-party information. The same mechanism is used for identifying tax evasion by e-commerce businesses as well.
7. (e): Trading of goods online does not attract levy of Service Tax, as they are included under 'negative list' of services under Section 66D of the Finance  Act,  1994.  If  the  e-  tailing  company  provides  support  to  the retailer  by  way  of  business  support,  such  as,  affiliation,  storage, delivery, technical support, etc. and goods are sold by the retailer, the fee  collected  by  the  e-tailing  company  attracts  service  tax.  Besides, any service by way of online advertisement also attracts service tax. Ecommerce web- sites dealing with services are mostly intermediaries or aggregators.  Under  Rule  2(aa)  of  the  Service  Tax  Rules,  1994, 'aggregator'  means  a  person,  who  owns  and  manages  a  web  based software application, and by means of the application and a communication  device,  enables  a  potential  customer  to  connect  with persons providing service  of a particular kind under the brand name or trade  name  of  the  aggregator.  However,  aggregators  may  provide services on their own account also. In that case, the services provided are liable to service tax as per the provisions of the Finance Act, 1994. In Union Budget 2015, with effect from 01.03.2015, the aggregator has been made liable to pay Service Tax on behalf of the service providers if the service is so provided using the brand name of the aggregator in any  manner.  In  so  far  as  the  intermediaries  are  concerned,  they  are liable  to  Service  Tax  for  the  commission  received  and  the  service provider will pay the Service Tax for the services provided. In case of import  of  taxable  service  by  business  entity,  the  recipients  of  such service are liable to pay Service Tax.

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