To overcome the above-mentioned difficulties with taxing E-Commerce businesses, the concept of Equalisation levy was also introduced by Modi Govt. Under this scheme although initially only the business of online advertisement is covered but it has its scope open for govt. To notify any further services or goods. Under the said provision 6% of the payment made to any for online advertisement to any Non-resident not having PE in India is deducted towards full and final payment of tax liability on such services.

2.2.2 Significant Challenges in Existing Legal Structure

Looking at the need of an hour, India has already moved forward and has applied Equalization Levy since 2016 at a rate of six per cent on the payments made by Indian businesses to non-residents providing digital advertising services. In 2018, India recognized virtual presence as constituting nexus to assert taxing rights and introduced the concept of Significant Economic Presence (SEP) in its tax laws.

The SEP provisions may be interpreted to mean that the entire income attributable to a transaction giving rise to a SEP is taxable in India, even though operations of such transaction/business activities may be carried outside India. This leaves significant room for ambiguity and raises questions over extra-territorial applicability. The OECD acknowledges that without effective changes to profit allocation rules, the introduction of standalone nexus provisions is likely to be ineffective. The SEP provisions, in the present form, deviate from this precept which is likely to increase controversy in India without a meaningful increase in profit allocation and tax collection.

With newer technologies such as blockchain, virtual reality and artificial intelligence on the rise, the pace of digitalization is only going to accelerate. Any new legislative enactment must be fully considered, and its broader impact fully evaluated, before being implemented. A unilateral move can only expose India to retaliatory measures from other countries. As the OECD works towards a solution towards digital taxation, India's interests will be better served if it works through developing a consensus-based, longer-term, multilateral solution to digital taxation.

Although government enacted the law in regards to the concept of virtual PE through inserting provisions of SEP, the rules to make the provisions effective are yet to be notified. As in other fields, a law for taxing e‐ commerce income has to evolve. In such an evolutionary model, guidelines will be laid through court's Rulings and guidelines for developing income classification rules and residency rules. In the initial faces things are going to be dicey and every stand is to be taken with caution as it can lead to unnecessary litigations. A wide range of tangible/intangible goods and services are being traded through technology‐aided new and even multimodal methods. For example, a book can both be a part of a database which is accessible to users and can also be downloaded as an e‐book with the possibility of receiving updates. Such features of the business/income blur the distinction between "trade income" and "service income". E‐commerce thus cannot be easily classified according to the conventional categories.

Enforcement of an international tax regime in e‐commerce is not easy due to the limited physical presence or the virtual nature of the transactions. Besides, the anonymity of the transactions and transacting parties makes it hard for the enforcement agencies to identify the existence of transactions.

These challenges have been created by technology and it is possible to meet such challenges with the help of technology itself. Technology is becoming fast available to specify the geographic locations of the parties involved in e‐commerce transactions, thanks to the demand made by the advertising world that wishes to target consumers based on their location and preference for selling their products and also by administrators seeking to target families and groups on locational basis. The virtual feature can be overcome by making use of the "tracking" technology to reveal the details of a transaction to the tax authorities.

In any dispute, one of the primary issues that a court determines is whether or not they said court has jurisdiction to try the dispute. A court must have both subject-matter jurisdiction (i.e. jurisdiction over the parties involved in the dispute) and territorial jurisdiction. The increased use of the internet has led to a virtual world which is not possible to be restricted in terms of traditional concepts of territory; this has led to complications in determining jurisdiction. According to the traditional rules of jurisdiction determination, the courts in a country have jurisdiction over individuals who are within the country and/or to the transactions and events that occur within the natural borders of the nation. Therefore, in e-commerce transactions, if a business derives customers from a particular country as a result of their website, it may be required to defend any litigation that may result in that country. As a result, any content placed on an e-commerce platform should be reviewed for compliance with the laws of any jurisdiction where an organization wishes to market, promote or sell its products or services as it may run the risk of being sued in any jurisdiction where the goods are bought or where the services are availed of.

3.1 Introduction

GST is a comprehensive, multi-stage, destination-based tax on value addition and it has very clear rules and regulations for specific segments which makes it more powerful and applicable, specifically in the field of e-commerce. For eg. Section 2(43), (44), (45) provides the meaning of following-Electronic Cash Ledger, Electronic commerce, Electronic commerce operator. This shows the inclusion of E-commerce transactions in GST legislation.

GST helped in removing the cascading effect. (double taxation, tax on tax) and it expanded the horizon of e-commerce operators. In simple language it can be understood as now E-commerce has become easier and more compatible to be done. The way you pay GST depends on the type of online business you run.

There are two main types of online businesses. The first uses a direct-sales method, where one buy or make products and sell them to customers through their website. If that's how one operates, one can simply follow standard GST filing rules.

The second type of online business is an e-commerce aggregator. An aggregator is a website like Flipkart, which connects buyers and sellers and takes a commission on each sale. Since they don't always sell the products directly to customers, these types of e-commerce businesses must handle GST differently. This happens with a tax collected at source, or TCS. When your website facilitates a sale between a buyer and a seller, GST law requires them to deduct 2% of the sale before they send payment to the seller. They must pay that amount to the government. Then, their sellers can claim that tax as a deduction on their own GST filings.

If you're an aggregator, both you and your sellers must report all sales to the government. Your reports and their reports must match exactly. If they don't, your sellers are responsible for the outstanding GST. The TCS requirement helps you spot and remove sellers who aren't reporting sales accurately.

To avoid any malpractices in e-commerce business about GST, Tax collection at source (TCS) provisions were rolled out on 01^st October 2018. TCS refers to the Tax which is collected by the e-commerce operator (ECO) when a supplier supplies some goods or services through its portal and the payment for that supply is collected by the ECO.

3.2 Issue about composition scheme, registration, etc for E-commerce
3.2.1 Existing Legal Structure

Every E-commerce operator as defined under the CGST Act, 2017 who is required to collect tax at source u/s 52 of the CGST Act, 2017 is required to get registered under GST.

In respect of specified services, tax shall be paid by the ECO on behalf of the service suppliers if such services are supplied through it and all the provisions of the Act shall apply to such ECO as if he is the supplier liable to pay tax about the supply of such services. The Government has notified following categories of services, the tax on intra-State/ inter-state supplies shall be paid by the ECO-

1. 1.Transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle.
2. 2.Providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes.
3. 3.Services by way of house-keeping, such as plumbing, carpentering etc.

Every electronic commerce operator, not being an agent, shall collect TCS at such rate not exceeding 1% (0.5% CGST + 0.5% SGST), of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

ECO should make the tax collection during the month in which the consideration amount is collected from the recipient. The amount of TCS collected by the ECO is to be deposited to the Government and ECO is required to furnish a statement in Form GSTR-8, electronically within 10 days after the end of the month in which amount was so collected.

There are also separate set of provisions under GST act in respect online information and database access or retrieval services (OIDAR services).

For any supply to be taxable under GST, the place of supply in respect of the subject supply should be in India. In case, both the supplier of OIDAR Service and the recipient of such service is in India, the place of supply would be the location of the recipient of service i.e. it would be governed by the default place of supply rules. What happens in cases where the supplier of service is located outside India and the recipient is located in India. In such cases also the place of supply would be India and the transaction would be amenable to tax subject to various other conditions.

3.2.2 Significant Challenges in Existing Legal Structure

Person who is engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52 can't take registration under composition scheme u/s 10. This could be discouraging for the small sellers to sell goods through e-commerce operator.

E-commerce operators are very confused about the collection of TCS. When to collect TCS, when to deposit TCS to the credit to the government, are largely the major concerns. TCS has to be collected once the supply is made through the e-commerce operator. Irrespective of the actual collection of the consideration, TCS will be collected in the month of supply of such goods and/or services. For instance, if the supply has taken place through the e-commerce operator on 15 October 2018 but the consideration for the same was received on 6 November 2018, then TCS on such supply will be collected and reported in the return statement for the month of October 2018.

Moreover, the e-commerce operators who are liable to collect TCS u/s 52 of the CGST Act, 2017 are obligated to register under GST regardless of how much they sell. This could be unfair to some small eCommerce operators, as the same rule does not apply to offline sellers who sell any amount below the threshold of 20 Lakhs for the North Eastern states and 40 lakhs for the rest of India. (CA Harshad Shinde, Avalara, 2016). Moreover, there are multiple GST compliances which are to be followed by the e commerce business houses as compared to normal business houses such GSTR 8 & GSTR 9B (for E-commerce operator liable to collect TCS u/s 52 of the CGST Act, 2017).

The sales reported by the e-commerce operator will have to match with the sales declared by the supplier himself at the end of every month, and any difference will be added to the turnover of the supplier and consequently be liable to discharge GST on such additional turnover. Additionally, the e-commerce operators will have to register in each state and file the reports separately on a monthly basis. This process increases the challenges in compliance and costs of running the business.

The GST Act is a welcome move toward legal recognition of the ecommerce model in India, but further modifications will be required to avoid problems in execution. The sooner these issues are settled, the smoother the GST rollout will be.

Even in regard to domestic levies on e‐commerce transactions taking place within the country, e‐commerce is posing challenges for revenue collectors. The growing volume of e‐commerce in India promises a good tax base. Business groups would argue on merits that if e‐commerce is allowed to grow there will be a general reduction in transaction costs everywhere. Resulting output increases will widen the tax base. Therefore, an argument is made out not to tax e‐commerce. However, the states, in the hunt for revenue earning avenue and also on the principles of neutrality and equity, cannot let this module of business go tax‐free. Even within the country with federal structures where tax levying powers are distributed between centre and states, the traditional tax models, in case of e‐commerce, break down. The question of jurisdiction crops up since the vendor and the customer may be located in different states.