Abstract
Taxes are of two kinds: Direct Taxes and Indirect Taxes. In the area of e-commerce, problems arise in Taxation of Income in the field of Direct Taxes and imposition of Customs Duty and Sales Taxes in the area of Indirect Taxes. In India, Income Tax and Customs Duty are imposed by the Central legislature whereas Sales Tax on sales that take place inside the state is levied by respective State legislatures. Central Sales tax is imposed by the Central legislature in the cases of sales taking place in the course of inter-state trade or commerce but the tax is collected and appropriated by the State from where the goods are sold. Where the sale takes place in the course of import into India, or export out of India, no tax is levied under the Central Sales Tax Act or under the Sales Tax laws of the States.
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Notes
- 1.
Although Sales Tax in the states have been replaced by Value Added Tax, in India, Value Added Tax itself is not a tax, rather it is a method of computation of tax which can be applied in computation of any indirect tax, Value Added Tax in States derives its validity from Entry 54 of List II of Seventh Schedule to the constitution i.e. “Taxes on the sale or purchase of goods……”.
- 2.
See OECD Model Tax Convention on Income and on Capital, 2010; and United Nations Model Double Tax Convention, 2011 .
- 3.
Ibid.
- 4.
The OECD Model Tax Convention, 2011, Article 12.
- 5.
The Income Tax Act, 1961, Section 9 (1)(vi)(b).
- 6.
Motorola Inc v. DCIT [2005] 95 ITD 269 (Del) (Special Bench); ADIT v. Tata Communications Ltd. ITAT (Mumbai) (ITA No. 1473/Mum/2009); DDIT v. Alcatel USA International Marketing Inc [2009] 43 SOT 31 (Mum); DDIT v. TII Team Telecom International Ltd [2010] 40 SOT 28 (Mum) (URO); Kansai Nerolac Paints Ltd v. ADIT [2010] 134 TTJ 342 (Mum); ADIT v. Solid Works Corporation [2010] 42 SOT 13 (Mum) (URO); Velankani Mauritius Ltd v. DDIT [2010] 132 TTJ 124 (Bang); DDIT v. Reliance Industries Ltd. [2011] 43 SOT 506 (Mum); DIT v. Ericsson A.B. [2012] 204 Taxman 192 (Del).
- 7.
The decisions find support from the observations of the Supreme Court in Tata Consultancy Services v. State of Andhra Pradesh (a case under Sales Tax law) [2004] 141 Taxman 132 (SC) wherein the Supreme Court held that software is “goods”. On the basis of this decision of the Supreme Court, many Tribunals and High Courts held that income earned by the overseas vendors from sales of software are “business income” and as the overseas vendors did not have a Permanent Establishment (“PE”) in India, the business income was not chargeable to tax in India.
- 8.
[2011] 203 Taxman 477 (Kar); See also Millennium IT Software Ltd., in re, [2011] 338 ITR 391 (AAR).
- 9.
[2010] 327 ITR 456 (SC).
- 10.
Director of Income Tax v. Nokia Networks OY IT Appeal nos. 359 of 2005, 1137 and 1138 of 2006, 503, 505, 506, 512 and 1324 of 2007, 30 of 2008 decided on September 7, 2012.
- 11.
Supra note 6.
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Srivastava, D.K. (2018). Taxation of E-Commerce: Problems and Possible Solutions. In: Nirmal, B., Singh, R. (eds) Contemporary Issues in International Law. Springer, Singapore. https://doi.org/10.1007/978-981-10-6277-3_32
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