Lok Sabha Question No. 929 (UNSTARRED), answered on 2015-12-04
Subject: e-Commerce
Ministry: FINANCE
Asked by: ANTO  ANTONY, OM BIRLA

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF REVENUE

## LOK    SABHA UNSTARRED QUESTION  NO. 929

TO BE ANSWERED ON FRIDAY, THE 4 TH   DECEMBER ,2015 AGRAHAYANA 13, 1937 (SAKA)

## E-COMMERCE

929. SHRI  ANTO ANTONY: SHRI OM BIRLA:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government proposes to encourage e-commerce;
- (b) whether  the  Government  maintains  any  statistical data  regarding  revenue generated through e-commerce;
- (c) if so, the details thereof including revenue generated through e-commerce in the country during the last three years and the current year;
- (d)  whether  the  Government  has  any mechanism to identify tax evasion through ecommerce;
- (e) if so, the details thereof along with the number of tax evasion cases relating to ecommerce companies detected during each of the last three years and the current year; and
- (f)  whether  the  Government  proposes  to  impose  service  charge  on  e-commerce companies, if so, the details thereof and the action taken thereon?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (JAYANT SINHA)

(a):  There are no specific tax incentives for e-commerce business under direct tax and indirect tax laws.   However, 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 eCommerce under the following circumstances:

- (i) A manufacturer is permitted to sell its products manufactured in India through e-commerce retail.
- (ii) A single brand retail trading entity operating  through brick and mortar stores, is permitted to undertake retail trading through e-commerce.
- (iii)  An  Indian  manufacturer  is  permitted  to  sell  its  own  single  brand  products  through  ecommerce 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.

(b)  &  (c):    No  separate  data  is  maintained  in  respect  of    tax  revenue  generated through  e-commerce.

(d)  &  (e):  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.  However, details of number of tax evasion cases relating to e-commerce companies are not maintained separately.

(f)  :  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. E- commerce 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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