Should there be governance for e-commerce?

By

Mr. Suhaan Mukerji

Privileged & Confidential

June 22, 2013

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Potential for e-commerce in IndiaPotential for e-commerce in India

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India: Facts and figures (“Opportunity”) India: Facts and figures (“Opportunity”)

Number of young internet users– 110

million (indicates propensity to buy

online)

Total internet users in India - 150 million

(only 13 % of the population)

3,311 e-commerce hubs; 1,267 rural

hubs

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Comparative figures around the world (“Trends”)Comparative figures around the world (“Trends”)

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Top e-commerce companies (“Players”)Top e-commerce companies (“Players”)

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Types of e-commerce models (“Options”)Types of e-commerce models (“Options”)

Business to Business (B2B)

Buyers and sellers are both business entities, comparable to a manufacturer supplying goods to the retailer or wholesaler. E.g. The Steel Exchange

Business to consumer (B2C)

Online businesses selling to individual consumers.

Consumer to consumer (C2C):

Online auction sites are an excellent example, e.g., E-bay, Quikr etc.

M-commerceUtility model where personal transactions (banking, bill payments,

insurance, tax returns) done electronically/telecommunication.

Other ModelsOther types: Other variations such as business to employee (B2E),

Government to business (G2B) and Government to citizen (G2C), which in essence is similar to the above mentioned types.

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What works for e-commerce in India (“Drivers”)What works for e-commerce in India (“Drivers”)

Demographic

dividendMore than 75 % of internet users in India less than 30 years indicating a greater propensity to shop online

Access to social media promotes better communication (promotions, advertising, influence on ‘brands'), key to driving e-commerce growth

E-commerce platforms require considerably less physical infrastructure putting less demand on the increasingly cramped public spaces

Institutionalized banking laws facilitate safe, secure and convenient payment transactions , increased use of e-money, greater spending power

No shortage of human resource to establish supply chains critical to delivery and customer satisfaction

Social media

Puts less demand on infrastructure

Robust financial system

Human resource for supply chain

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Existing regulatory framework: Is it adequate?

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Current regulatory framework: IT Act Current regulatory framework: IT Act

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Contract Act and Sale of Goods ActContract Act and Sale of Goods Act

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Consumer Protection Consumer Protection

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Data privacy Data privacy

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Payment systems, courier services

Payment and Settlement Systems Act

Authorisation to payment system operators to facilitate e-payment.

Provides duties and liabilities of the system provider operating the payment system (obligation to disclose terms/charges of payment system, maintain confidentiality).

Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 Enables electronic filing and processing of customs declarations with regard to import/export by courier companies.For domestic couriers, the regulatory ecosystem is ambiguous with each state having separate requirements for declarations, forms, sales tax (inbound and outbound), entry tax etc.

Regulation of courier services

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Taxation

Neutrality of taxation

Residence based

taxation

Permanent establishment

Domestic e-commerce

Represents a fast growing base, and falls within the direct tax net

International e-commerce

International e-commerce

‘Place of effective management’ as determining factor in ascertaining tax liability

No single rule to determine place of effective management

Provisions of the Income Tax Act and the DTAs do not require any revision.

A server at the disposal of an enterprise and hosting could constitute PE, if it is kept at a fixed place for a sufficient period of time

High Powered committee (Ministry of Finance) on e-commerce recommended moving beyond PE as does not ensure certainty of tax burden and maintenance of the existing equilibrium in sharing of tax revenues

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FDI in e-commerce

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Comparative review of e-commerce legislations

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Review of e-commerce legislations

UNCITRAL Model Law

European Union

Prior disclosure by service providers (name, location, nature etc.)

Positive obligation to enforce electronic contracts on member states

Exclusion of liability of service providers on the principle of ‘mere conduit’

No liability for service providers for ‘caching’ and ‘hosting’ of information

Obligation to frame code of conduct (trade associations) to ensure compliance

Member states obliged to facilitate out of court dispute settlement in case of dispute between service provider and the recipient of the service

Emphasises on providing legal recognition to e-contracts, electronic signatures

Rules on attribution, acknowledgement, receipt , time of dispatch of electronic communications

Legal admissibility and evidential weight of data messages

IT Act 2000 substantially incorporates UNCITRAL Model Law

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Review of e-commerce legislations

Korea

Framework Act on Electronic Trade (“FAET”) and the Electronic Signature Act Legal recognition to online contractsDisclosure of name, address, contact by service providerSecurity and reliability is the obligation of service provider Also regulates website content to prevent unfair competition and trade

UK

UK E-commerce Regulations 2002 transpose the main requirements of the EC Directive

Emphasis on by breaking jurisdictional barriers & boosting consumer confidence• Regulations apply to persons who advertise goods/services online, sell goods/

services online or transmit or store electronic content or provide access to a communication network

• Obligations in respect of information an online service provider must give a consumer

• Limitations on service providers’ liability for unlawful information they unwittingly carry or store (mere conduit, caching, hosting etc.)

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Enhanced coverage of a new legislation

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New law on e-commerce New law on e-commerce

E-commerce

Platform for emerging technologies

Effective communication

with the end user

Protection from liability: web

hosting, caching Recognition of e-commerce as a business sector

Limitation of liability for 3rd party goods

Recognition of click wrap

agreements

Mandatory disclosure of

identity, place of business, contact of

the seller

Determining place of jurisdiction for

consumer protection

Recognition of all forms of commercial

communicationHarmonisation of

laws regulating logistical services

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Thank you