• Taxation in online ecommerce marketplace ?

Dear Lawyers,

I am in a process building a online marketplace (something like ebay/flipkart/snapdeal/amazon). I am a mediator wherein I will provide the webspace, the infrastructure for sellers to sell and buyers to buy. Whenever a buyer buys an item, the transaction will go through my marketplace and money will come to my account. I will only release the payment to seller.

1. When buyer tells me that he/she is satisfied with the product/product received etc 
2. I will release the payment to seller after sending mails to buyer (incase buyer does not respond to the emails marketplace sends to them) we will release the payment to the seller.
3. I might refund the payment if product is not received by the buyer or wrong product delivered. 

Now taking in consideration the above scenario I will quote an example:-
Example 1.
Buyer buys the product from my website from a seller for Rs. 100. As this market place belongs to a mediator (i.e. me) that ?100 is sent to me by payment gateway. I am holding the money till the time product is not delivered ( a simillar process is done by ebay and snapdeal and flipkart). I receive the confirmation from the buyer that product received and he is satisfied then I released the payment. 

Q1) As money came to my account I kept it for few days and gave it to seller ( as I am just doing buyer protection and have no intention of taking income on it), I am liable to pay any tax on this if yes what will be the tax and the amount? 
Q2) Do I pay tax on the entire ?100 or just the commision I take to as a service charge to sell on my website (which can be X amount)
 

Example 2. 
Buyer buys the product from my website from a seller for Rs. 100. As this market place belongs to a mediator (i.e. me) that ?100 is sent to me by payment gateway. I am holding the money till the time product is not delivered ( a simillar process is done by ebay and snapdeal and flipkart). I receive the confirmation from the buyer that product received and is defective and buyer requested refund then I refund the payment to the buyer.

Q1. If 100% refund is given and I even returned the commission do I need to pay tax for the amount which was on hold in mu current account ?
Q2. Similar to above scenario after receiving the payment if the seller does not want to ship and want to cancel the order. How tax will work in that case. (considering money transferred in my account)

Your expertise answers will be highly appreciated.

I have a normal current account with one of the nationalized banks. IE code and VAT+CST number. 

Thanks
Jay
Asked 7 years ago in Taxation

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3 Answers

You would be liable to pay tax only on commission earned by you

2) you would not be liable to pay tax on sale price of goods as you have forwarded payment to seller after deducting your commission

3)if you refund the sale price for defective products you are not liable to pay tax for amount held in your bank account for couple of days

4) similarly if seller refuses to supply goods and money is refunded by you then you would not be liable for tax payments

Ajay Sethi
Advocate, Mumbai
95208 Answers
7610 Consultations

5.0 on 5.0

1. The tax liability would ensue only on the earned commission. No tax liability shall accrue on the sale of goods.

2. If the sale amount is refunded to the buyer you shall not be liable to pay tax.

3. If the seller does not ship the goods then too you will not be liable to taxation.

Ashish Davessar
Advocate, Jaipur
30763 Answers
972 Consultations

5.0 on 5.0

you must be entering into contract with the parties

2) the terms of contract are sacrosanct

3) your contract would mention the commission to be charged by you in respect of the transaction

4) hence your liability would be to pay income tax on the commission earned by you

Ajay Sethi
Advocate, Mumbai
95208 Answers
7610 Consultations

5.0 on 5.0

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