How To Start An E-commerce Business in India: Laws and Regulations Simplified
With the increasing purchase power of people in India, starting an e-commerce business is one of the most attractive business propositions. Further, with the growing number of internet users and rapid digital transformation, it is becoming easy to sell products digitally. But to start an e-commerce brand, you must know about certain legalities and regulations.
E-commerce, or electronic commerce, is a platform to buy and sell goods over the Internet. For the past decade in India, it has become extremely popular with the rise of sites like Flipkart, Amazon, Myntra, etc. Therefore, if you want to start your own e-commerce business in India, we have created a step-by-step guide on going about it and the laws and regulations you must keep in mind.
Select A Business Model For Your E-commerce Company
There are five main e-commerce business models to choose from:
- Business to Business (B2B): Businesses selling to other businesses. Example – IndiaMART
- Business to Consumer (B2C): Businesses selling directly to end consumers. Example – Myntra
- Consumer to Consumer (C2C): Consumers selling to other consumers. Example – OLX
- Consumer to Business (C2B): Consumers selling products/services to businesses. Example – Freelancer
- Business to Government (B2G): Businesses selling products/services to the government.
You must select one or more business models based on your resources, expertise, and business goals. B2C and C2C are the most popular options for new entrepreneurs starting a business.
Decide the Business Structure You Want To Register
Before you start to sell products online, you, as the brand owner, need to decide the structure of your business. There are mainly three choices:
Sole Proprietorship: This is ideal if you are the only owner. Setting it up is easy, but remember, you’ll be personally liable for any debts.
Partnership: If you and a friend or colleague consider starting together, this might be for you. But like the sole proprietorship, each partner is responsible for the business’s debts.
Private Limited Company: If you’re looking at a more significant venture and need to attract investors, this option protects you from personal liability.
To register, you need to:
- Choose a unique business name
- Obtain Digital Signature Certificate (DSC)
- Create a Directors Identification Number (DIN) if registering a company
- Prepare required documents like a rent agreement, NOC, electricity bill, etc.
- File required forms per your entity with the Ministry of Corporate Affairs (MCA). Forms include SPICe, MOA, AOA, etc.
You can take help from a professional Chartered Accountant (CA) to ensure smooth compliance and registration. On average, the process can complete within 15-20 days.
Get All The Necessary Registrations Done With Help Of Expert
Business Registration: Once you decide and choose the structure, you must register your business with the relevant authorities. For example, a Private Limited Company needs to be registered with the ROC.
GST Registration: With the introduction of the Goods and Services Tax (GST) in India, you need to register for GST if your annual business turnover exceeds the threshold limit. This is especially crucial for e-commerce businesses as they deal with multiple states.
Obtain Licenses and Registrations
Your business needs specific licenses and regulatory registrations to operate legally in India:
- FSSAI License: Needed to sell food products and issued by the Food Safety Standards Authority of India.
- Udyog Aadhaar: For MSME registration to avail government benefits and subsidies.
- Trademark Registration: To protect brand name and logo from infringement. It can be obtained from the Trade Marks Registry.
- E-commerce Policy: Required to do cross-border e-commerce or FDI in e-commerce.
- Shops and Establishments Act: Registration under state laws for employing workers.
Consult a chartered accountant to ensure you have all licenses per your business activity and location.
Understand Ecommerce Laws And Compliances
The Indian government has established regulations to ensure smooth online transactions and protect consumers’ rights.
Information Technology (IT) Act, 2000 primarily addresses online transactions and digital signatures issues. It provides the legal framework for electronic governance and brings e-commerce activities within the ambit of the law.
Consumer Protection Act, 2019: With e-commerce in its purview, this act ensures that online consumers are not misled and receive only authentic goods.
Draft Proper Policies For Your E-commerce Brand
Return and Refund Policy: It’s imperative to have a clear policy. This protects you from potential disputes and builds trust with customers.
Privacy Policy: As you collect customer data, ensure they know their information is safe with you. Clearly state how you’ll use their data and how you’ll protect it.
Terms and Conditions: This is your contract with the buyer. It can include payment terms, product delivery, dispute resolution, etc.
Payment and Logistics
Payment Gateways: To accept payments, integrate reliable payment gateways like Paytm, Razorpay, or others popular in India. Ensure they’re secure and provide a seamless experience for users.
Shipping and Delivery: Partner with reliable courier services. Offering timely deliveries can boost your business reputation.
Protect Intellectual Property
Consider registering for a trademark if your e-commerce business has a unique logo, tagline, or product design. This prevents others from copying or using it without permission.
Follow The Advertising Standards
E-commerce businesses often use online ads for promotion. Make sure your ads are not misleading. The Advertising Standards Council of India has guidelines to ensure ads are honest and don’t mislead consumers.
Start Your E-commerce Business Now
Starting an e-commerce business in India is exciting but requires diligent preparation, especially understanding the legal landscape. Once you have ticked all the right boxes, you can focus on growing your business and connecting with customers. We hope this simple guide helps you take those first confident steps in your e-commerce journey. Remember, it is always a good idea to consult with professionals when you need clarification on the laws and regulations. You can connect with a chartered accountant to understand the process in deep and register your startup business.
