A CRITICAL ANALYSIS OF THE TAXATION OF E-COMMERCE TRANSACTIONS IN INDIA

AUTHOR – AJAY PRATAP SINGH, STUDENT AT AMITY UNIVERSITY LUCKNOW

BEST CITATION – AJAY PRATAP SINGH, A CRITICAL ANALYSIS OF THE TAXATION OF E-COMMERCE TRANSACTIONS IN INDIA, ILE MULTIDISCIPLINARY JOURNAL, 4 (1) OF 2025, PG. 1015-1021, APIS – 3920-0007 | ISSN – 2583-7230.

ABSTRACT

When compared to the previous decade, India’s e-commerce sector has grown phenomenally due to heightened internet access, increased use of smartphones, and the adoption of online shopping. The Indian e-commerce market is expected to hit important, new milestones by 2025, cementing its status as one of the rapidly evolving digital economies in the world. Faster growth rate opens up new challenges and opportunities, especially concerning taxation, which is necessary for competition, income, and regulation.

Tax levies in e-commerce are equally significant for many underlying reasons. First, it assists in balancing competition between online stores and shopping malls by ensuring that every entity pays taxes into the economy. Secondly, taxation helps generate revenue for the government which is a key requirement in sustaining public resources. However, the fast-paced culture of e-commerce gives rise to challenges for tax jurisdiction such as avoidance of tax payment, intricate cross-border dealings, and vague existing taxation frameworks.

The objective of the study is to evaluate the existing taxation policies—both direct and indirect, such as The Income Tax Act and The Goods and Services Tax (GST)—linked with e-commerce activities in India. It was revealed in the course of this study that the government, to some extent, has attempted to formulate laws of taxation concerning e-commerce in India but there are still some areas which need more attention. This includes a lack of clear guidelines for taxation; barriers to compliance for e-commerce businesses, and difficulty in monitoring digital transactions, especially international ones. 

A number of other conclusions were drawn to improve taxation policies for e-commerce business in India. There should be improvement in processes an e-commerce business has to follow in fulfilling tax obligations, provision of appropriate directions regarding payment of taxes, and measures should be taken at the international level to deal with taxation of international business activities. These steps would enable the India Government policy makers to forward an agenda for fair and effective use of tax policies that will encourage the development of e-commerce in India while balancing the tax income policy of the state. 

Taxes always lag the market, and in this case e-commerce has managed to stay ahead of any regulation. Jokes aside, keeping in mind that e-commerce needs, India should come up with a taxation policy that wires payments beforehand administered, to allow entrepreneurs flexibility and anticipate changes. This will prove beneficial not only for the government but also for enabling ecosystem growth and innovation in India.

KEYWORDS- E-commerce taxation, GST, Equalization Levy, digital economy, tax compliance, Income Tax Act, FDI in e-commerce, SEP, OECD BEPS, digital services tax, cross-border transactions, marketplace model, tax jurisdiction, legal framework, policy implications.