Rakesh Negi (Ecommerce) (147 Points)
13 February 2015I know 3 persons which manufacture products like soft toys, mud pots and decorative items and car seat covers.
I want to sell these products online.
Pl tell me the registration requirements.
They cant provide me any bills. So no scope for Tax invoice.
I am ready to pay taxes if any.
Pl guide.
1. Float a Private Company if your vision is to become next Flipkart. ( VC/PE firms prefer companies to invest in ) BUT Sole Proprietorship has its own advantages for a 1st generation entrepreneur, when you know you have no vision to make your business in Fortune 500.
2. Make a Non Compete Contract with the manufacturers. Insert a clause for Piece Rate Compensation (Now they are your Job workers)
3. Now comes the Compliance part : Why Sole proprietorship will be a good idea for you:
Sole proprietorship is the easiest to start, has lower legal compliances and is fairly easy to tackle. A proprietorship business and its proprietor (i.e. you) are a single entity in all legal matters. Indian law doesn’t treat the two differently as is the case with a company registered as a Private Ltd or a Public Ltd or even a Partnership firm. And in view of this, you are taxed at individual rates instead of the corporate rates. So it greatly reduces your tax formalities as you have to file only one personal income tax return.
So you and your brand are one soul, with no biases whatsoever. You can even run it out of your home, for which no special registration is required. But a note for whenever you intend on expanding and setting up a physical commercial store, you will have to fill in some paperwork with your local municipal corporation and will need to check in with the Shops and Establishment Act.
Now to dive straight into the nitty- gritty of Sole Proprietorship : how to register, the cost of setting up your online brand, taxation of a sole proprietorship and business licenses required.
Registration of Sole Proprietorship
You can register your ecommerce business under sole proprietorship at your nearest local municipal corporation office. You need to submit the Shops and Establishment Form to complete your registration. Along with it, you are needed to submit an undertaking. The fees for registration may vary depending on the state and the city’s municipal corporation area.
For the greater Mumbai municipal corporation area, the Shops and Establishment Registration form, the undertaking needed with it and the fee schedule for the same can be found on the following links.
You can find a list of municipal ward offices in your city on your city’s municipal corporation’s website.
Note: While registering, you will be needed to submit an address proof for the Shops and Establishment registration. You may submit an address proof for your home or any other place you will be working out of.
Cost to set up a Sole Proprietorship business
There is absolutely NO additional cost required. All you really need is a current account in the name of your business, at a bank of your choice. That is it! All you need to do is, at the local bank branch of your choice, ask for a form for proprietorship firms and get a bank account ready for all financial transactions.
When opening an account you may also need to submit an address proof such as an electricity or telephone bill or a rental agreement if you’re going to be renting out a space or your shops and establishment registration.
Taxation
You don’t need a separate PAN for your business for taxation purposes. Your personal PAN will serve the purpose. And when filing Income Tax returns, you will have to file returns in your personal name.
As you and your sole proprietorship business are one soul, you don’t need to pay corporate tax rates. As mentioned earlier, individual tax rates apply as all profits, losses, assets and liabilities are the property of the proprietor. And the proprietor pays self employment taxes on any profits made, making it all the simpler.
Service tax is applicable only if you’re selling a service to your customers. And similarly if you are selling goods, VAT, Excise and/or Sales Tax are applicable. But all these taxes come into play once you’ve crossed an annual turnover of 10 lacs. You may also need to consider Professional Tax, if you’re employing people.
Business licenses
Depending on the nature of the business, you may need different registrations and licenses.
1. Recommended- Shops and Establishments Act: This registration would be needed incase you want to set up a physical shop and plan to employ people. And it is very essential for getting your own payment gateway for your online store.
2. CST/ VAT registration: If you are going to be selling goods, then VAT or CST (between states) may be needed once your annual turnover crosses 5 lacs.
3. Service tax: Registration for service tax is mandatory and may be required once your annual sales turnover crosses 10 lacs.
4. Professional Tax: This tax is mandatory if you have even one single employee. Each state is allowed to create its own guidelines, so it would be advisable to check whether it is mandatory to register for professional tax in your particular state.
All these registrations and licenses may vary from state to state, so please do check your state’s guidelines and regulations (exemptions, if any) to know better.
Before you go ahead, think up a catchy name for your online business. And get it trademarked. Avoid going in for generic names, as you’ll have to suffix your city name or India at the end for it to be distinguishable.
Source : Internet
Rakesh Negi
(Ecommerce)
(147 Points)
Replied 13 February 2015
Thank You Hammad for such a great information.
I am also interested to know about input purchase proof. As they dont have any accounts and dont give bills and therefore I have nothing to show as purchase bills / purchase proof.
Is there any problem.
I have heard from CA that there should be purchase bills as it may be considered as stolen.
Any comment on this.
PF & ESI Course - Labour Code 2019 Along with Examples and Case Studies
CAclubindia
