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Licenses required for starting an E-Commerce Business in India

By Bhavneet Vohra July 29, 2016

Flipkart aims to double sales to $8 bn this year (March 2015-The Times of India)

Amazon India scores highest in user loyalty, says study (Forbes 2016)

The Shopping Malls Really Are Being Killed By Online Shopping (NDTV Times March 2016)


We come across headlines as above related to online websites almost daily either in newspapers, television etc who have emerged as the biggies in market and have a tremendous impact on the retail trade business.


Buying products or services online is very popular these days since it is a convenient method of shopping in one click without roaming around in the market. Gone are the days when customers used to move to the retail shops and were always at the mercy of the trader selling the particular product. The recent trend of online shopping has truly revolutionized the market and transformed into customer oriented market from a trader oriented.

Are you inspired enough to start a business where you can sell your products online in India?  If so, then you would have to go through and follow a lot of steps to do the same.

E- Commerce laws and regulations in India are still evolving. This has created a lot of confusion and uncertainty among e-commerce entrepreneurs in India. It usually had to work in correspondence with the Information Technology Act, 2000.

Before reaching to the licenses and procedure required for starting an E-Commerce business in India we need to first learn about the basic concepts about the E-commerce which are as follows-

What is E-commerce?


Electronic Commerce is the trading or facilitating the trading of products or services through computer networks, such as the Internet.


What are the steps that one needs to go through for the registration of the firm?

  1. Structuring your business

As an E-Commerce business there are 5 options to register your firm which are as follows-

  1. Proprietorship firm registration – It is the simplest form of registration which requires tax registration like VAT or service tax
  2. Partnership firm registration- Minimum 2 persons with unlimited liability
  3. Private Limited Company- It is the most popular business form
  4. LLP (Limited Liability Partnership) – It is a mixture of Pvt Ltd Company and Partnership firm and enjoys many benefits
  5. One person company- It is similar to PVT LTD Company and requires only one person

After deciding the Structure of business one like to choose for E-commerce business one needs to follow the following steps –

  1. Registration of the Domain name


To attain the security for the domain name under the Intellectual Property Rights, one need to choose a unique name and preferably it has to be separately trademark protected from an appropriate national registry which gives the exclusive right to use that particular name.

  1. Attain a privacy policy

Attaining a well drafted privacy policy is a must for every E-commerce portal to prevent itself from being sued under Section 43A of the Information Technology Act, 2000 where penalty can reach up to 5 crores.

  1. Draft the Website Terms and Conditions

For any website to work it is very essential to draft the terms and conditions agreement which would usually cover all the user covenants and company covenants in order to restrict the liability of E-commerce website in every way possible.

  1. Make a Vendors Agreement

Making an agreement for vendor with well defined clauses and terms to deal with problems like default in product, late delivery, lack in quality etc and many other provisions which can be included keeping in mind the business model.

One also needs to obtain the Payment gateway and Logistics for E-commerce business

In India we basically have 2 types of Payment Gateways :-

  1. With no setup fees- Popular but have higher TDRs (examples are Payumoney, Paypal etc)
  2. With setup fees – Less TDRs and faster processing  (examples are Payu, Ccavnue)

The documents that need to submitted for obtaining a payment gateway

  1. Bank account in the name of the business
  2. PAN Card of the business
  3. Certificate of Incorporation
  4. Memorandum of Association
  5. Articles of Association
  6. Identity Proof
  7. Address Proof
  8. Website Terms of Use
  9. Website Privacy Policy

Pay the VAT/Service tax to avoid legal embroil to the government.

  1. User agreement and Data Security

We have been seeing that most companies do not feel any significance to invest in Cyber Security in the beginning of their venture but after running the business for some time and facing the pros and cons of online business eventually do turn investing in cyber security to save itself from penalties or fines.

Apart from all this a User Agreement also needs to be drafted in such a manner that it proves to be beneficial both for the user and e-commerce company. It should be able to preserve the user rights and restrict the E-commerce portal as it serves as an Intermediary.

The above article covers almost every part related to the E-Commerce which is the most emerging and flourishing venture nowadays.

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Author- Bhavneet Singh Vohra

Vivekananda Institute of Professional Studies

Tags: licenses , online , shopping , flipkart , amazon , e-commerce , website , rules , security online

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