This article does elaborate on the concepts and issues of e-commerce in a general course concerning it’s functioning. Legal acceptance of e-commerce culture by the United Nations Commission on International Trade Law (UNCITRAL’s) for the growth of the economy is being highlighted moreover a brief description of the electronic taxation policy and online payment system concerning various laws and amendments made by the government is being given with special reference to India.
Introduction: Concept of E-commerce
E-commerce stands for electronic commerce where commerce means the practice of buying and selling goods and services therefore doing the trading electronically over the electronic network, such as the internet is referred to as e-commerce. In other words, e-commerce refers to the medium of trading between the buyers and sellers through electronic means. The e-payment systems such as electronic funds transfer, etc are widely being used in e-commerce. Here the consumers can find what they want to buy and do purchase it easily, moreover, the consumers are generally willing to purchase if the purchasing process is easy and immediate.
• Online Travel, ticketing, etc. -Ticketing for air, rail, bus, movies. events
• Online Retail – Retail products sold through the online route
• Online Market place – Platform where sellers and buyers transact online
• Online Deals – Deals purchased online redemption may or may not happen online
• Portal Classified – Includes car, job property, and matrimonial portals
Features of E-Commerce
- Ubiquity- Ubiquity refers to the quality of being available anywhere. Consumers can connect to the internet anytime and anywhere, including their homes, offices, video game systems, and mobile phone devices.
- Global Connect- e-commerce effortlessly goes beyond tradition, culture, and national boundaries and allows companies to access consumers across the globe.
- Interactivity- e-commerce technologies facilitate two-way communication between the merchant and the consumer.
- Social networking- e-commerce players have partnered with social media networking sites to allow users to share content and to deploy the company’s e-marketing systems
Advantages of E-Commerce
- It does operate for 7 days a week and 24 hours a day that is 24*7.
- There is no need for setting up a physical outlet.
- There is no geographical limitation on e-commerce.
- A wide range of products and services are there on the e-commerce platform
- It does help the consumers to compare different products
Disadvantaged of e-commerce
- E-commerce does lack the tangibility
- E-commerce does lower down the barrier to entry of new companies
- It’s a highly competitive market (online market)
- Scope of customer service while purchasing the product is low.
There are four different models of e-commerce, namely-
- Business-to-Business (B2B)– refers to the electronic trade is limited between companies only that is consumers are not involved here.
- Business-to-Consumer (B2C)– it is the simplest and recognizable form of e-commerce where online selling of goods and services to the consumers do take place.
- Consumer-to-Business (C2B)- it is the most rapidly growing trend in e-commerce where consumers can directly tell marketers their exact requirements.
- Consumer-to-Consumer (C2C)- it does showcase the egalitarian side of e-commerce that is consumers are given a venue to trade among themselves.
E-Commerce: An Indian Perspective: Phase I
The first phase of e-commerce lasted from 1996 to 2001. It helped in shaping new rules of commercial transactions in the electronic marketplace. India followed the models of developed countries while creating e-commerce models, without realizing that one needs technology tools and business maturity to understand this new medium of business.
E-Commerce: An Indian Perspective E-commerce: Phase II
Post-2002, the useful lesson, which e-e-commerce got was one has to have a sensible business model, which should not only work technology-wise but also business-wise. It also gave a message that without electronic banking e-commerce will not be successful.
E-commerce: Changing Perceptions
The reasons for this change in perception from phase I to phase II are provided as under:
- Better Information Technology Infrastructure
E-business models are moving from the proprietary Electronic Data Interchange(EDI) ‘specific’ solutions to Internet-based ‘mass’ solutions. It has more to do with better computer penetration, increases in the number of mobile phone users and Net users, high-speed connectivity rather than anything else.
- Wider Acceptance of Online Payment System
Online payment mechanism means ‘payment’ and ‘acceptance’ of virtual money. Any such online payment system requires not only the parties transacting business over the Net but also a ‘payment gateway’ facilitating such transactions, Eg. Credit cards and other modes of online payment. Proprietary online payment systems like fiber Cash, E-Cash can be used online for making payments such as Secure Sockets Layers (SSL, developed by Netscape provides privacy, integrity, and authentication through digital certificates).
- Legal Recognition to E-commerce Practices
Legal recognition of E-commerce practices has come a long way from the initial adoption of the United Nations Commission on International Trade Law (UNCITRAL’s) Model Law on Electronic commerce by the General Assembly of the United Nations in early 1997. The purpose is to encourage the use of electronic commerce and to provide nations with model legislation.
- Adoption of Security Standards by the Industry
A business thrives on safety, security, and trust whether it is offline or online. Internet being an open, integrated, and public system requires far better security coverage than its offline counterpart. It needs an ‘encryption’ technology that provides Confidentiality, Authentication, Integrity, Non-repudiation, and Auditability.
Online Payment System
For the effective growth of e-commerce, a secured online payment system is a necessity. Often online payment system is being referred to as Electronic Fund Transfer (EFT). EFT means transferring money from one bank account to another in the same (Intra bank) or different bank branches (interbank). EFT has been in use since the 1960s when banks first started using a proprietary EDI network to share banking information. The payment instructions arc sent through telex, SWIFT (Society for Worldwide Interbank Financial Telecommunications), Wire Transfer, CHIPS (Clearinghouse Interbank Payment System), etc. In India, the electronic fund transfer system has got a stimulant when the Central Government brought in forth the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002, by introducing the concept of a “truncated Cheque” in section 6 (b) of the said Act.
Taxing E-Commerce in India
The term “taxation” has been defined in Article 366(28) of the Constitution of India as: `taxation’ includes the imposition of any tax or impost, whether general or local or special, and `tax’ shall be construed accordingly;” it should be read along with Article 265, which states that: “no tax shall be levied or collected except by authority of law”.
Establishing Business Connection
A business connection usually means the existence of a business relationship between the `business entities’. The Income Tax Act, 1961 has not provided any exact definition of the expression “business connection”. As per section 9(1)(i), the said expression has often been used to denote a business relationship between a resident and a non-resident, also, even as an agent, any person in India may have any business connection with the non-resident [section 163(1)(b)]
Taxing Digital Goods & Services
In India, under Article 366 (13) of the Constitution, the expression good includes all materials, commodities, and articles. Different enactments over the years have further enlarged the definition of goods.
There is no Constitutional provision, Central or State tax legislation. which specifically defines “intangible goods” it would be difficult to extend the expression “sale or purchase of goods” to cover the “intangible goods” as well. However, the Constitutional Bench of five judges in Tata Consultancy Services v. State of Andhra Pradesh, it was held by the Hon’ble Supreme Court that in India, the test to determine whether a property is “goods”, for purposes of sales tax, is not whether the property is tangible or intangible or incorporeal. The test is whether the concerned item is capable of abstraction, consumption, and use and whether it can be transmitted, delivered, stored, possessed, etc.
E-commerce is the backbone for the new economy which is revolutionary a dynamic in nature, moreover, e-commerce creates a good opportunity for entrepreneurs and consumers. However, there are some challenges for maintaining a balance between technology and improvement in the legal framework. Moreover, to have growth concerning the e-commerce industry and privacy policies, more and more improvements in the legal terms are essential. The taxation policy regarding e-commerce is at a budding stage. The government should make appropriate provisions dealing with the challenges concerning e-commerce on both state and central levels. The taxation policy in India should be more consistent with the international taxation policy for the development in the sector of e-commerce.
Frequently Asked Questions-
- Define e-commerce concerning the eco-system under the e-commerce regime.
- How many models of e-commerce are there, elaborate?
- Give the reasons for the change in perception from phase I to phase II in eCommerce.
- Write a short note on the online payment system.
- Mention 3 the Constitutional provisions dealing with tax in India.
-  https://indiankanoon.org/doc/1499382/
-  https://indiankanoon.org/doc/210639/
-  https://indiankanoon.org/doc/1405898/
-  https://indiankanoon.org/doc/492579/
-  https://www.taxmanagementindia.com/visitor/detail_act.asp?ID=4129
-  https://indiankanoon.org/doc/460264/
-  https://indiankanoon.org/doc/153638/