Business transacted through E-Commerce :
E-commerce is but a method of conducting business transactions and not a business transaction by itself. Therefore, the contents of a business transaction done through e-commerce are no different from that of a business transaction carried out through traditional means.
Divergence however arises in two dimensions – the business methods and the business concepts. The first area, which is very different, viz. the means of doing business, is analysed. In e-commerce there are three distinct means of doing business: electronic advertising, electronic sales and electronic delivery. The presence of anyone or more of these is sufficient to characterise the business as e-commerce.
These are separately discussed below:
Electronic advertising: Advertising is done on the open networks, through websites. Potential customers access the websites and obtain the information they need which enables them thereafter to proceed with the transaction is suitable cases. If the e-commerce business is restricted to putting up a website alone, then the rest of the transaction is completed through traditional means; i.e. the placing of orders by telephone or mail, the making of payment by cheque and credit card and the delivery of goods through a carrier, the telephone etc. being referred to as intermediaries
Electronic sales: This is done through ‘smart’ resources which enable the potential customer to place an order on the internet. The payment is effected through a closed network by means of credit cards.
Electronic delivery: This is of course possible only for goods and services that can be fully digitised, but this range is quite wide and ever expanding. Texts, visual materials, audio materials and computer software are digitised. Therefore products like journals, books, music, plans, designs, drawings and games to mention a few, would be goods available in digitised form. Besides goods, services like diagnostic services, could also be available in digitised form. Therefore a whole host of goods and services could be delivered electronically.
One way of classifying E-commerce is based on parties involved in transactions. Major types are mentioned below:
1. Business to Customers (B2C)
2. Business to Business (B2B)
3. Government to Customers (G2C)
4. Government to Business (G2B)
5. Customer to Customer (C2C)
The name of a type indicate the parties involved in that type of E-commerce transaction.
The Committee of Fiscal Affairs of the OECD has been actively working on taxation issues relating to e-commerce. The committee has developed the taxation framework conditions setting forth the governing principles in relation to e-commerce. The key conclusion was that the taxation principles that guide Governments in relation to conventional commerce, should also guide them in relation to e-commerce. It was postulated that this would be possible only by adapting and adopting the existing principles to e-commerce situations.
For adapting and adopting the existing principles, the following key areas in the context of international tax were identified:
(1) the extent to which a website or a server can constitute a permanent establishment and how income may be attributed to it; and
(2) the manner in which payments for digitised products are to be characterised.