Registration and Licenses Required for Starting an eCommerce Business

A recent survey stated that eCommerce business in India is set to grow at a rate of 40% per annum. With the increasing reach of the internet, the growing popularity of online shopping among consumers, and the low cost of maintaining an online site,  eCommerce business is gaining a lot of significance for new entrepreneurs looking open their businesses online rather than set up a shop.

But the question in everyone’s mind is, where and how to begin this journey.

After, you’ve done a complete market research along with the market analysis competitor’s market; you should have a general idea of how you want to start your business.

Register Your Company:

The first thing to know is, any online business who wants to accept online payments is required to be set up as a registered company. This is needed so that, they can establish a secured payment gateway on the website.

There are three ways you can register your business:

1. The easiest and the most convenient way to get your business up and running is to register as a Sole Proprietor.

A sole proprietorship offers a number of benefits like lesser legal compliance, lower costs of documentation, and the Indian law treats the proprietor’s business and the proprietor as having the same identity (unlike Pvt. Ltd and Public companies), this can help you to run it out of your home. You are taxed at an individual rate rather than corporate tax compliance. There is no additional cost required, all you need is a bank account in the name of your company at a local bank branch. Your personal PAN card can be used for taxation purposes. You can check out how to register your sole proprietorship business here.

2. The second way to go about the registration would be to go for Pvt Ltd, a Public Company or an LLP depending on the scale of your business. The first thing to do here is, set up a current account in the name of your business in order to collect profits and pay the losses in the name of your company rather than your personal account. They require a number of documentation and legal compliance. But, they are necessary for the scaling of business later on, when your turnover is larger.

Taxation:

In the case of sole proprietorship, you can use your own PAN card for taxation purposes. You have to file income tax returns under your name.

A sole proprietorship business is charged at individual rates, thus, no corporate tax has to be paid.

Service tax is applicable only on services being provided. For the sale of goods, VAT, excise, and sales tax are applicable. These taxes are required to be paid only when your business crosses the turnover of 10 lacs per annum.

Business Licenses:

The business licenses required for an online portal depend on the type of products being sold at the site. Following are a few of them:

1. Shops and Establishment Act: This is important if you wish to have a payment gateway for your online store. Also, it is mandatory if you wish to set up a physical shop and employ people.
2. CST/VAT: These are the basic taxes that you have to pay when selling goods online but, only once your annual turnover crosses 5 lacs.
3. Service Tax: This tax is required to be paid if you are offering services online but, only once your annual turnover crosses 10 lacs
4. Professional Tax: This tax is required to be registered if you have one or more employees working under you.

The taxes and registrations policies differ from state to state. So, it is advisable to check with your respective state policy regarding these registrations.To register your eCommerce, Contact LegalRaasta.