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Important Legal Requirements for your eCommerce Business in India

Many rules and regulations govern businesses in all parts of the world. Whether it's offline or online, you have to comply with legal requirements in force. The eCommerce market in India may reach USD 200 billion by 2027. Hence, it is important to be on the right side of the governing laws. In this article, we will go through some of the basic legal requirements for eCommerce businesses. It can prove to be a great deal for Indian sellers registered on eCommerce marketplaces such as Flipkart or Amazon or starting their own website.


Here are the laws you need to be aware of if you are selling online.

  1. Business Registration

  2. Taxes

  3. Contract Agreement

  4. Intellectual Property Protection

  5. Terms and Conditions

  6. Privacy and Data Security



Online business may save you from overheads but walking on a legitimate path is necessary to avoid any financial and legal consequences.


Let's get started.


Business Registration

The Indian Company Law allows you to incorporate a company as one of the following: a private limited company, limited liability partnership (LLP), or one-person company (OPC). Every category works on set criteria and empowers you in different ways.


Now focusing on the importance of business registration can help you avoid many predicaments. Your registered business will be a separate entity that will limit your liability to just the amount invested in it. Thus, no debtor can pull you down in case of any conflict.


Business Registration in India is a 4-step process:

  1. Acquire Digital Signature Certificate (DSC)

  2. Acquire Director Identification Number (DIN)

  3. Create an account on the MCA portal- New user registration at mca.gov.in

  4. Incorporate or Apply for the company to be registered


Taxes

Starting an eCommerce business will let you sell all over the world. Whether you're selling through an established eCommerce marketplace or on your own, you must understand that taxes apply to your goods. In India, being a GST (Goods and Services Tax)-compliant business is a must now.


Businesses dealing with taxable goods and services should register for GST and submit monthly returns. Also, they must separately register in each state where they will be selling.


Here are the steps and required information for GST registration:

  1. Complete Form GST Reg-01 that includes tax payer's details, place of establishment, and Permanent Account Number (PAN)

  2. Provide Memorandum of Association, Certificate of Incorporation

  3. List of signatories for business

  4. Any additional documents as requested


Contract Agreement

For smooth functioning of the business operations, you must bind yourself in a contract with your supplier. Or, if you are listing your products on any eCommerce marketplace, you will sign a contract with them.


The contract agreement will have the following:

  • A precise description of the goods

  • Price agreement

  • Terms of delivery

  • Terms of payment

  • Indemnity clause to cover any unwarranted issues like improper delivery, defective goods.

  • Exit clause


Intellectual Property Protection

Intellectual Property (IP) rights tend to get neglected in the eCommerce arena. The digital world has become a breeding ground for IP violations. Hence, dealing with the IP in the right way is a must.


Following are the ways IP plays a role in the eCommerce world:

  1. Safeguards your business interests and company or individual entities in case of unfair competition.

  2. Protects the various components involved in the functioning of the internet and business.

  3. Ensures safety of your patents, trademarks, and copyrights to enhance your business credibility.


Having said that, you have to understand the difference between a trademark, patent, and copyright. Based on the product you're selling, you may have to apply for one of these. Also, you must ensure that you're not infringing on other patents or trademarks with your products.


Terms and Conditions

The ground rules you set for your eCommerce business that are enforceable on your business activities are made possible through Terms and Conditions. It is present on every website, and you also need to have one to minimise legal liability if there is a conflict of interest with customers.


Your terms and conditions section should encompass the following:

  1. They must outline your pricing and payment terms.

  2. They should include your shipping, return policies, and order exchanges.

  3. They should have clear instructions about different events such as order cancellation, delivery delays, defective items, among others.

  4. They should have an explanation of the dispute-resolving process.

  5. They must include your jurisdiction and liability limitations.


Once you explain your different policies related to your eCommerce business, it will provide transparency.


Privacy and Data Security

Cyberattacks on small and medium businesses can prove to be a hard blow. According to the data released by National Cyber Security Alliance (NCSA), 10% SMBs went out of business after facing a cyber attack. Hence, you should not take it lightly.


eCommerce businesses get their hold on critical consumer data such as personal details, credit and debit card numbers, identity verification numbers. Therefore, protecting data is paramount.


Also, eCommerce businesses must list down their privacy policy. It will include information about how they will be using data collected from customers.


Some of the best practices you can follow are:

  • Collect data necessary for your business. If possible, erase them after completing the transaction.

  • If you are storing, create a secured environment to avoid a hefty penalty of INR 5 Crore in case of a breach.

  • Proactively encourage consumers to learn about your privacy policy.

These will allow you to adhere to necessary guidelines and protect consumer privacy and data.


Quick Recap

Let us have a quick recap of the necessary legal requirements of eCommerce businesses in India:

  1. Register your business as a private limited company, LLP, or OPC.

  2. Complete your GST registration.

  3. Follow signed contracts with any supplier.

  4. Ensure Intellectual Property Rights are not infringed or violated.

  5. Outline clear terms and conditions.

  6. Enforce data security and privacy policy to avoid legal troubles.


About Powerhouse91

We make eCommerce businesses big. Our expertise empowers eCommerce businesses to realise their true potential by reaching millions of customers. Merchants that sell on eCommerce marketplaces like Flipkart and Amazon can contact us to sell their business to us for a good deal of money and earn profits.


Contact us if you are looking for a lucrative exit from your eCommerce business.

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