Beginner Series : Selling Online

There is huge buzz in the Indian e- market. The arrival of Amazon and the growth of Indian competitors like myntra, flipkart & snapdeal have heated up the e-war.


  1. Identify a business opportunity –selection of goods that you would to sell online.
  2. Work out the landing cost of the product – purchase cost + transportation cost + handling cost + taxes (not recoverable)
  3. Decide on the selling price – consider the costs incurred with sales (eg. Credit card charges, listing charges, eshop rentals)
  4. Prepare a Break Even Analysis chart – how many goods have to be sold to nullify the cost and remain at a no profit no loss situation.

If you think you have identified a profitable business then move on to STEP # 2


  1. Firstly you need to decide whether you will be doing it alone, or with help of friend. Secondly, how big will the initial business be?
    1. In case you are starting alone – Proprietary concern
    2. In case you have a friend or relative as a part of the business – Partnership Firm
    3. In case it’s gonna be big business – Pvt Ltd Company or LLP
  1. Once you have decided on the above, then it is time for starting the setup
    1. Proprietary Concern
      1. Obtain a PAN card if you don’t have in your name
      2. Obtain VAT Registration
      3. Local registrations as applicable [shop & establishments, Professional tax etc]
    2. Partnership Firm
      1. Prepare a Partnership Deed
      2. Register the same with the Registrar of Firms [Optional]
      3. Obtain PAN Card in the name of the firm
      4. Obtain VAT registration
      5. Local registrations as applicable [shop & establishments, Professional tax etc]
    3.  Private Limited Company
      1. Decide the first directors of the company
      2. Obtain PAN card for all the directors if they don’t have one
      3. Obtain DSC [Digital Signature Certificate] for all the directors
      4. Obtain DIN [Director Identification No] for all the directors
      5. Apply for availability of Name
      6. Prepare MOA, AOA & other documents
      7. Submit the same to the Registrar of Companies online
      8. Once the company is formed, bring in the paid up capital mentioned in the MOA
      9. Apply for Certificate of Commencement of Buisness
      10. Apply for PAN in the name of the Company
      11. Obtain VAT registration
      12. Local registrations as applicable [shop & establishments, Professional tax etc]

LLP also has similar procedure T

he purpose of this article is to answer few Frequently Asked Questions.

[#1] I am a dealer selling goods online. I am liable to register under VAT?

Yes, VAT is a state subject. Each state has its own VAT Act. If you have crossed the turnover limit mentioned in the act you will have to register under VAT and start complying with the same.

Food for thought: There a quite a number of instances where the person selling online is not registered under VAT or not remitting the VAT collected to the department. This enables him to sell the product lower than the market value. Beware if the department catches you, you will not only pay the VAT but also with interest and penalty. Generally the total payouts will 3 times more than what you were supposed to pay.

[#2] In which state should I liable to get registered?

You will have to get registered in the state from where you are operating.

[#3]  What rate should I charge to the customer? The rates are generally mentioned in the act itself. In Karnataka  VAT shall be based on the classification of goods in the schedules. Food for thought: The easiest method is to find out what the other people are charging in the market. Even consider obtaining the VAT rates from the manufacturers. Since the manufacturers produce and sell it in large numbers they would have consulted professionals before deciding on the VAT. You could in turn check the rates from them and start charging the same.

[#4]  When should I charge VAT & when should I charge CST?

You should charge VAT when you are selling it to a person whose delivery address in within the state. For Eg. If you get a customer who wants the delivery at Bangalore, Karnataka and you are also a dealer registered in Karnataka, you should charge VAT. If you are delivering it outside the state then you need to charge CST. [#5] What are the General Documents required for VAT registration?  The following documents will be generally required for VAT registration

  1. PAN Card
  2. Address Proof
  3. Rental Agreement in case of rented premises
  4. Property Tax paid challan in case of own premises
  5. List of directors / List of Partners
  6. PAN of directors / Partners
  7. Bank Account No.
  8. Mobile No


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