Introduction

Because of a thriving digital economy in India, e-commerce has now become a lively part of the economy. Running an e-commerce business requires handling a special group of legal, regulatory and tax concerns, no matter if you start small or run a big site.

E-commerce firms in India need to follow basic rules plus specific rules created for the industry, for example, the Consumer Protection (E-Commerce) Rules, 2020.

The guide explains the special needs, procedures and tips for creating and running an e-commerce business in India.

Choosing the Right Business Structure

The process begins by establishing a company structure. Options include:

• It is not difficult for businesses, yet additional support is necessary for their growth.

• A partnership firm or an Limited Liability Partnership (LLP) is best for small companies.

• If you choose a Private Limited Company, you have the option for FDI, gain brand trust, grow easily and meet the laws.

Key Note: For most marketplaces (such as Amazon and Flipkart), companies or individuals can only sell if they have registered their business.

Business Registration Process

• Mandatory registrations:

1. Where your company is either an LLP or Private Limited, it should be registered with the Ministry of Corporate Affairs (MCA).

2. Any ecommerce business needs to undertake GST Registration, even if its total earning

3. PAN and TAN stands for personal account number and taxpayer account number, respectively.

4. Depending on the state, shops and establishments are required to have a Shops and Establishment License.

• Optional but recommended:

1. Trademark Registration helps protect the name of your brand.

2. If you are selling food or beverages, you need the FSSAI License.

3. If goods are intended to be brought in or sold outside the country, a name of this kind is required.

E-Commerce Specific Licenses & Compliances

• GST Compliance

1. Selling via e-commerce requires GST registration without considering your turnover.

2. Under TCS, Amazon and other e-commerce operators are required to deduct 1% from sales before giving to the government.

3. You need to produce GST-approved invoices and file returns on the GSTR-1 and GSTR-3B forms every month.

• Penalty for non-compliance: There may be heavy penalties and being blacklisted from e-commerce stores.
• Consumer Protection (E-Commerce) Rules, 2020

Applicable to:

1. People can start their own inventory and sell products either online or offline.

2. Marketplace models help people and companies make sales through a third party.

Key requirements:

1. Show all the important information about the product (how much it costs, its origin, who is the seller and when the order will arrive).

2. Orders for redressal of grievances have to be completed within 48 hours

3. We have no dishonest ads or reviews on the site.

4. There should be no flash sales that restrict your ability to choose or gain insight.

Anyone who does not abide by the rules in the Consumer Protection Act, 2019 can be subjected to penalties.

• Data Protection and Privacy

1. A business must follow the IT Act, 2000 and interim data protection guidelines.

2. It is necessary to implement the correct measures if collecting user data such as emails, payments or addresses.

• Clearly written privacy policy

• SSL stands for Secure Socket Layer and is often used to guarantee a secure website.

• Using data that is given with consent

3. Everyone is expected to comply with the Digital Personal Data Protection Act, 2023 (DPDP) in the future

FDI Rules for E-Commerce (Important for Foreign-Owned Startups)

• Press Note 2 (2018) set by the Government of India places strict rules on FDIs.

1. Under the marketplace model, foreigners can invest all their funds into the market without special permission.

2. FDI does not work in inventory-based models.

• Other restrictions:

1. The marketplace plays no role in changing the prices of products.

2. No investments in a vendor can be used for selling the vendor’s products higher than 25%.

3. The market must ensure that all sellers start on an even footing.

Failing to follow FDI rules may cause the business to face legal problems and potential closure.

Listing on Marketplaces (Amazon, Flipkart, etc.)

• You’ll need:

1. GST Number

2. PAN Card of business

3. Business bank account

4. Trademark certificate (optional but recommended)

5. Bank cancel cheque

6. Product category-specific licenses (e.g., BIS for electronics)

• Each platform also has:

1. KYC norms

2. Return/refund policies

3. Logistics integrations and service level agreements (SLAs)

Website Legal Compliance

When running e-commerce on your own website, it has to satisfy the requirements listed below:

• Rules of Use

• This website must under IT Rules, provide a Privacy Policy (mandatory).

• Refund and Return information

• Contact a grievance officer through their email address and the given phone number.

• Making sure card transactions are safe by following PCI DSS guidelines.

Logistics & Payment Gateway Setup

• Sign up with a courier assembly (for example, Delhivery or Shiprocket) for comprehensive Indian delivery.

• Add Razorpay, Paytm or CCAvenue payment gateways into your KYC-enabled system.

Check for:

• MDR (Merchant Discount Rate)

• Settlement time

• Fraud protection mechanisms

Accounting & Compliance Maintenance

• Monthly or quarterly tasks:

1. GST filing

2. Reconciling on marketplaces

3. Income tax and TDS are both methods of paying taxes

4. Managing what is in the warehouse and what has been ordered

• Annual filings:

1. ROC returns (for companies)

2. Tax audit if turnover exceeds thresholds

3. ITR and balance sheet filing

Conclusion

Even though the Indian e-commerce sector has great potential, it faces a lot of rules and regulations. A foundation built according to regulations improves your brand’s reputation, ability to grow and understanding by potential investors.

Take care of your registrations and regulatory plans for e-commerce by hiring personnel who are knowledgeable about the laws in this field.

Disclaimer

The information provided in this blog is purely for general informational purposes only. While every effort has been made to ensure the accuracy, reliability and completeness of the content presented, we make no representations or warranties of any kind, express or implied, for the same. 

We expressly disclaim any and all liability for any loss, damage or injury arising from or in connection with the use of or reliance on this information. This includes, but is not limited to, any direct, indirect, incidental, consequential or punitive damage.

Further, we reserve the right to make changes to the content at any time without prior notice. For specific advice tailored to your situation, we request you to get in touch with us.