E-commerce – Legal Compliances

Last Updated at: Oct 20, 2020
As per Trade Ministry sources, the Indian Govt. is planning a new policy to regulate e-commerce. This is likely to raise compliance worries for e-commerce firms operating in India. It’s coming at a time when online activity is on a surge, thanks to the COVID-19 pandemic.


The e-commerce sector in India is witnessing an incredible growth in backed by increasing internet penetration and smartphones. With the advance increase of providers in internet service and the inauguration of 3G and 4G services, at reasonable prices – the e-commerce and m-commerce sectors are set to record even higher growth. In this article, we will be discussing the legal compliances for commencing a successful e-commerce business in India.

To start an e-commerce business, proprietary e-commerce website or become a seller on a marketplace, the following registrations are necessary-

LLP Registration or Company

While starting an e-commerce business it is good to have an LLP or Company to have limited liability protection and progress the ease of doing business. Having an LLP or Company would safeguard the opening of the bank accounts in the name of the business or acquiring a GST registration are simple and fast.

Almost all the marketplaces allow Partnership firms and Proprietorships to sell on their website. If there is a case of a litigation, there would be no limited liability protection. Hence, it is a safe side to start selling with an LLP or Company.

If the promoters wish to commence a proprietary e-commerce website, then it is better to start with a Company, as it is the only type of entity which allows for the angel funding or equity funding which is a must for the successful e-commerce businesses.

GST Registration

A GST registration is mandatory for becoming a seller on an e-commerce website or while commencing a proprietary e-commerce website. It is mandatory for businesses to register for GST, with a turnover of more than Rs. 20 lakhs (Rs.10 lakhs for northeastern states) annually and who make interstate outward supplies of goods, irrespective of your turnover. GST Registration can be done online by registering your business on the official GST portal and then scan and upload all the required documents.

Ask a Free Legal advice

Bank Account

Once the LLP or Company is incorporated, a bank account can be opened easily in the name of the business by contacting the Bank. In case of the Proprietorship firm, GST registration must be acquired first to open the bank account in the name of the business. The opening of the bank account is necessary to list on the e-commerce marketplace or acquire payment gateway for a proprietary e-commerce website.

Payment Gateway

A payment gateway would be necessary for a proprietary e-commerce website to process the customer payments. Payment gateway provides for the website to accept debit card, credit card internet banking, net banking payments from different banks and credit card companies. Therefore, one payment gateway is enough to accept many forms of online payments. After the payment is received from the customer, the payment is sent to the bank account of the business by the payment gateway in one or two business days.

In case of selling goods and products through the online marketplaces, then marketplace would accept the payment through their payment gateway and credit the money directly to the bank account of the seller. So, a payment gateway is not required and only a bank account is required in this case.

Legal Documents

While selling online, it is necessary to protect the business and the promoters of the business by making use of terms and conditions document and privacy policy. In case of a proprietary e-commerce website, the terms and conditions, privacy policy and the disclaimer should be drafted in the form of business based on the nature of its activities and good and products sold online.

If the business sells the goods and products through the online marketplaces, then the seller’s agreement or legal document is provided by the marketplace and the seller must stand by the seller’s agreement. It is necessary for all the sellers to read the sellers agreements before signing the agreement