Lok Sabha Question No. 2155 (UNSTARRED), answered on 2015-12-11
Subject: e-Commerce
Ministry: FINANCE
Asked by: M. I. SHANAVAS

2155 :SHRI  M.I. SHANAVAS

Will the Minister of FINANCE be pleased to state:

- (a) whether the foreign e-commerce companies are paying tax for their online sales in the country;
- (b) if so, the details thereof; and
- (c) if not, the action taken by the Government in this regard?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE

(SHRI JAYANT SINHA)

- (a)     t o (b):  Online  sale/shopping    like  any  economic  activity  is  governed  by  the  existing laws/regulations governing economic activity. So far as collection of taxes are concerned,  the following is the legal position:

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF REVENUE

## LOK SABHA UNSTARRED QUESTION NO. 2155

## TO BE ANSWERED ON FRIDAY, THE 11 TH  DECEMBER,  2015 20 AGRAHAYANA,1937 (SAKA)

## e-Commerce

- (i)  Goods  procured  online  for  import  into  India  attract  Customs  duty  at  the  stage  of  their importation.
- (ii)   Goods procured online, if manufactured, are cleared from factory on payment of applicable Central Excise duty.
- (iii) As regards good sold online in the case of domestic trade, the following is applicable:
- (a)        If the e-tailing company sell goods on its own account, such sale is liable to VAT, which is  a  State  subject.  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.
- (b)      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.  The retailer is, in any case, liable to pay VAT, which is a State subject.

Further,   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 provisionsof the

Contd.

: 2 :

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  service  by business entity, the recipients of such service is liable to pay Service Tax.

Thus, there is no revenue loss due to e-commerce or online shopping only.  Further, as the goods sold through online are either manufactured in India or imported into India, such goods have  suffered  excise  duty/customs  duty  at  the  time  of  clearance/import  thereof.  Therefore, there  is  no  lack  of  mechanism  to  collect  Government  revenue  from  the  business  companies engaged in e-commerce or online shopping. The existing provisions are capable of taking care of collection of  central taxes, as may be applicable, from such companies.

(c)  In view of reply to parts (a) & (b) above, question does not arise.

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