Dear Lawyers, I am in a process building a online marketplace (something like ebay/flipkart/snapdeal/amazon). I am a mediator wherein I will provide the webspace, the infrastructure for sellers to sell and buyers to buy. Whenever a buyer buys an item, the transaction will go through my marketplace and money will come to my account. I will only release the payment to seller. 1. When buyer tells me that he/she is satisfied with the product/product received etc 2. I will release the payment to seller after sending mails to buyer (incase buyer does not respond to the emails marketplace sends to them) we will release the payment to the seller. 3. I might refund the payment if product is not received by the buyer or wrong product delivered. Now taking in consideration the above scenario I will quote an example:- Example 1. Buyer buys the product from my website from a seller for Rs. 100. As this market place belongs to a mediator (i.e. me) that ?100 is sent to me by payment gateway. I am holding the money till the time product is not delivered ( a simillar process is done by ebay and snapdeal and flipkart). I receive the confirmation from the buyer that product received and he is satisfied then I released the payment. Q1) As money came to my account I kept it for few days and gave it to seller ( as I am just doing buyer protection and have no intention of taking income on it), I am liable to pay any tax on this if yes what will be the tax and the amount? Q2) Do I pay tax on the entire ?100 or just the commision I take to as a service charge to sell on my website (which can be X amount) Example 2. Buyer buys the product from my website from a seller for Rs. 100. As this market place belongs to a mediator (i.e. me) that ?100 is sent to me by payment gateway. I am holding the money till the time product is not delivered ( a simillar process is done by ebay and snapdeal and flipkart). I receive the confirmation from the buyer that product received and is defective and buyer requested refund then I refund the payment to the buyer. Q1. If 100% refund is given and I even returned the commission do I need to pay tax for the amount which was on hold in mu current account ? Q2. Similar to above scenario after receiving the payment if the seller does not want to ship and want to cancel the order. How tax will work in that case. (considering money transferred in my account) Your expertise answers will be highly appreciated. I have a normal current account with one of the nationalized banks. IE code and VAT+CST number. Thanks Jay
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You would be liable to pay tax only on commission earned by you
2) you would not be liable to pay tax on sale price of goods as you have forwarded payment to seller after deducting your commission
3)if you refund the sale price for defective products you are not liable to pay tax for amount held in your bank account for couple of days
4) similarly if seller refuses to supply goods and money is refunded by you then you would not be liable for tax payments
1. The tax liability would ensue only on the earned commission. No tax liability shall accrue on the sale of goods.
2. If the sale amount is refunded to the buyer you shall not be liable to pay tax.
3. If the seller does not ship the goods then too you will not be liable to taxation.
Dear Lawyers, Please note that when any transaction will happen, first the entire amount will come in my current account and will stay there for minimum 10 days or more days and after that only it will be transferred to vendor account after deducting my commission. As per the answers please provide the detail of the law , section number etc. we have already faced one case of my previous website where service tax authorities have given notice for not submitting service tax on full transaction amount. as per them as invoice raised on the website has amount for eg ?100 so we need to pay service tax on ? 100 not on ?5 (which is our commission). below statements taken from the above answers. "the tax liability would ensue only on the earned commission. No tax liability shall accrue on the sale of goods". + "you would not be liable to pay tax on sale price of goods as you have forwarded payment to seller after deducting your commission " in both the above statements my questions below:- 1. please give clarity on which section number/amendment/notification number etc of which law your answer is based? 2. once the entire amount has hit my current account and I pay to my vendor his share after deducting my commission after 10 days or more what tax liability I have ? ( please provide support with section number as mentioned earlier ) Thanks
you must be entering into contract with the parties
2) the terms of contract are sacrosanct
3) your contract would mention the commission to be charged by you in respect of the transaction
4) hence your liability would be to pay income tax on the commission earned by you