Legal Requirements of E-commerce business in India E-commerce broadly means a commercial activity conducted with the support of electronic devices. Under EFFO, there are digital business transactions/trades which are wholly/partially performed by using the internet. As E-commerce has evolved and become more feasible and a safer way of shopping/trading, it is such an industry that requires a well-built regulatory framework in order to ensure accountability and consumer protection. The legal obligations to start an E-commerce business in India are as follows:

Company or LLP Registration Every business is required to get registered with the Ministry of Corporate Affairs under the applicable laws. Such a business shall either be incorporated under the (Indian) Companies Act, 2013 or a foreign company or an office, branch or an agency outside India and necessarily be owned or controlled by an Indian resident. While establishing an E-commerce business, it is suggested to have a company or LLP in place to relish the limited liability protection and at the same time, run a business with ease. Such registration ensures that the bank account is opened in the name of the company/ LLP.

GST Registration For a successful establishment of an E-commerce business, GST registration is mandatory. Every business irrespective of its turnover is required to be compulsorily registered under the Central Goods & Service Tax (CGST) Act.

Legal Documents While selling on the internet, it is important to safeguard the business and the promoters by strict adherence to terms and conditions and the privacy policy of such businesses. In the case of a proprietary EFFO website, the terms and conditions, disclaimer and privacy policy would have to be drafted as per the business, keeping in mind the nature of its activities and products they sell online. If any business operates through online marketplaces, then the marketplace provides the seller with a legal document or sellers’ agreement and the seller must abide by the sellers’ agreement. It is important for any business to go through the sellers’ agreement(s) in detail before the execution as it is the legal binding agreement between the seller and the marketplace.

Other requirements There are a few additional requirements such as cyber law due diligence, compliance under the Competition Laws of India and the laws related to data protection and appointment of a Nodal Officer in case of an international E-commerce business setup in India which are important to always be complied with.

Compliances for E-commerce business in India The trend of E-commerce has been rapidly increasing since the last decade. Many players with new business ideas have entered the market, be it Zomato/Swiggy delivering food from various restaurants or Flipkart/Amazon delivering products or Grofers delivering groceries. The EFFO is such that you name the service and there is an E-commerce platform for it available at the doorstep. The swift development of the E-commerce industry has called for the attention of the government towards forming regulations and policies with respect to the same.

Payment and Settlements Systems Act, 2007 As per the Payment and Settlements Systems Act, the E-commerce business shall succeed as a payment system if it follows the Rules specified by RBI for online transactions and payments. Further, it is compulsory for an intermediary that is receiving payments through digital modes to have an active Nodal Account for settling the payments of the sellers on its E-commerce platform.

Consumer Protection Act, 2019 The E-commerce industry is also monitored by the Consumer Protection Act as it is working towards the interest of the consumers. In order to safeguard the consumers from unfair trade practices and further to address and solve their problems, the Ministry of Consumer Affairs, Food and Public Distribution on May 17, 2021, has notified the Consumer Protection (E-Commerce) Rules, 2021.

Conclusion The rapid growth in the E-commerce industry is proof that E-commerce has become a vital and integral part of our lives. Long gone are the days where people used to hesitate from shopping online as they had doubts about the quality, their money being stolen, non-delivery of the product. It is observed that today a huge part of the population trusts E-commerce websites for their day-to-day needs. Therefore, nowadays most of the purchases are prepaid compared to Cash on Delivery. This is a sign of the acceptance of E-commerce platforms by the general public especially during the COVID-19 pandemic, the usage of E-commerce has increased tremendously.