Registering an Ecommerce Business in India

Setting up an online store is not as easy as it sounds. You need to work on your products, logistics, website, marketing strategy, payment gateway, feedback channel, business plan, handle recruitment of technical personnel, and so on. Add legal compliance to it (as if these weren’t enough!). And since it is related to the Indian government, we all know that it is wise to comply with their provisions so that they do not interfere in the operations of our business.

That’s right…But which legal provisions do I have to follow? I have no clue!

Don’t worry. That’s why we are here. In this comprehensive post, we will discuss the easiest method of complying with the government’s rules and regulations i.e. by registering your business as a sole proprietor.

Understanding the Need for Registration of your online business

As per the existing Indian law, if an e-commerce business wishes to accept online payments via an authorized payment gateway on its website, it will have to get registered with relevant government authorities (depending on the scale, operation and location of business). In other words, you cannot accept online payments without registering your e-commerce business.

Now, several options are available for registering an online store. Each option has its own merits, demerits and associated cost. After analysing all the available options, we came to a conclusion that registering an e-commerce store as a sole proprietorship is the easiest, most advantageous and cost-effective option for small start-ups. Here’s why-

Structure of a Sole Proprietorship

• The government does not view sole proprietorship as a separate entity. In simple words, you and your business are the same persons in the eyes of the government. This means no need of filing two returns. Sounds easier, doesn’t it?
• A sole proprietorship is relatively easy to register. You don’t have to follow long procedures of registration as in the case of a company.
• You can anytime open or shut down your business. No questions asked!
• You will have ultimate control over the operations of your business. Government will hardly interfere (unless you violate any law).
• Lowest rates of taxation (individual rates) are applicable to a sole-proprietor, thus saving you a handsome percentage of your profits.

Owing to the above merits, we advise our clients to register as a sole proprietorship concern. In order to register your online store as a sole proprietor, you just need to follow a simple registration procedure as mentioned below.

The Registration Procedure

a) Where to Register?

You can register your online store as a sole proprietorship at your nearest local municipal corporation office.

b) What is the Procedure?

1. Fill and submit the Shops and Establishment form.
2. Submit an undertaking (available with the form).
3. Pay registration fees (varies from state-to-state and city-to-city).
4. Submit an address proof of your e-commerce business. It might be your home or your office.

All the above forms, fee schedule, etc. are available online on your city’s municipal corporation’s website. It is advisable to thoroughly go through it before registering your business.

c) What is the Additional Cost of Setting up a Sole Proprietorship?

There is NO additional cost involved. You just need a current account in the name of your business, that’s it.

Which other provisions will I have to comply in future?

Depending upon the nature, scale and volume of your business, you may have to acquire different licenses in order to comply with the existing laws.

• PAN card
• TAN (tax collection and deduction account number)
• Service Tax – if you are providing a service (not selling a product)
• VAT/CST Registration – if you are selling a product (not providing a service)
• Central Excise License
• Importer Exporter Code – if you are exporting outside India
• ESI (Employee State Registration) – if you have employees
• Employee Provident Fund Registration – if you have more than 20 employees
• Professional Tax

If you wish to know more about registering and setting-up your e-commerce business? Subscribe to our Free Ecommerce training course and get started.