E-commerce is fast gaining traction in today’s world. In simple terms, E-commerce can be described as the conduct of any commercial activity using the Internet as a medium. The scope of E-commerce is dynamic and consistently expanding. The online marketplace business model has been the most successful model in India, given the foreign direct investment (FDI) and regulatory norms currently in existence. Therefore, this study focuses more on online marketplaces while studying the E-commerce sector in India.
Multiple indirect taxes are currently levied on transactions in India. Some taxes are levied and collected by the central government, while others are collected by state governments. Furthermore, due to the dynamic and complex business models in which E-commerce players operate, the treatment of various E-commerce transactions under indirect taxes is fraught with ambiguity and disputes. Considering the issues plaguing the current indirect tax regime, India is gearing up to introduce a comprehensive indirect tax regime under the GST (Goods and Services Tax).
Since the introduction of the GST regime will affect the very fundamentals of how business is carried out in India, it is essential to reflect upon the impact on online marketplaces. This paper starts with a brief overview of the conditions under the existing indirect tax regime. It then goes on to discuss the contours of the GST proposal based on the available information. Next, the paper attempts to identify the key factors that might prove to be important for online marketplaces under the proposed GST regime.