Accounting, Taxation and Risk Management: Q&A on Best Practices

accounting taxationeCommerce in India has evolved as a promising market in recent years. The industry which was perceived by many as a dotcom bubble ready-to-burst, has rather done significantly well in the last few years. But despite the northward trend of the overall eCommerce market, many players have unfortunately faced complete shutdowns.

Given these dramatic ups and downs many are reluctant to enter the Indian online retail business. Moreover, it has also been seen that retailers find it less risky to first make a brand presence offline and then expand online. One of the major reasons for this is the lack of clarity of three major phenomenons in the field, i.e. Accounting, Taxation and Risk Management.

Given that an eCommerce transaction is not bounded by geographical boundaries, new and budding entrepreneurs in this field find it hard to understand the state government laws especially for interstate/international consignments. For example, the website is hosted in USA, product is procured from China, shipped out from Europe and delivered to India? Now there is no clarity anywhere on how the taxation should happen.

Moreover the laws haven’t been properly revised to cater the changing eCommerce industry – making it even worse. But before moving forward, the businesses springing up need to be aware of the two major tax liability they are entitled for. This include Service Tax Liability and VAT.

Also many eCommerce companies today are capitalising, rather than making profit out of their business. Other than expensing their promotional or marketing costs, they heavily invest in their operational costs. Their justification to that however comes out something like “customers acquired through this expenditure are going to yield revenues over many years,” but it doesn’t sound right !

If you too are confused between usage of Sales Orders/Sales Receipt/ Invoices, and taxation procedures involving cross border transitions haunt you, attend #IRE 2014 session “Accounting, Taxation and Risk Management: Q&A on Best Practices”.

Feature Image: e27

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