Ecommerce Business in Nepal – Part 2

Context to this post

Continuing the discussion on the topic of “E-commerce in Nepal,” this post serves as a follow-up to the previous parts. The previous post Ecommerce Business in Nepal – Part 1, was a comprehensive post on ecommerce in Nepal, where we dived into the multifaceted world of online commerce. Ecommerce has revolutionized the way we shop, transact, and interact in the digital age. But what exactly does ecommerce entail, and how is it defined? In the previous article, we unraveled the meaning of ecommerce and delved into its various features, such as its ubiquity, semiconductor power, demand focus, and universal standardization. While ecommerce is a vital component of the ICT-driven “Digital Economy,” we will also explore its distinctiveness within this larger context. Additionally, we navigated through definitions provided by prominent organizations like the OECD and WTO, examined the proposed Ecommerce Bill 2077 in Nepal, and shed light on the ecommerce landscape in Nepal and also exploring the intricacies of ecommerce, its operating models, revenue and accounting aspects, relevant laws, global practices, and the critical issues identified in the proposed Ecommerce Bill 2077. 

This also ties (although, not so neatly) with the topic of Digital Service Taxes (DST) that has recently been implemented in Nepal. Do visit my other posts discussing the the past, present and future of the DST in Nepal in these posts: 

  1. Direct and Indirect Tax on Digital Services
  2. Digital Service Tax: Now it’s here in Nepal
  3. Digital Service Tax: It’s not so easy to implement yet
  4. DST Registration in Nepal

During the 5th Parliament of Nepal, which was in session from 4th March 2018 to 18th September 2022, the Ministry of Industry Commerce and Supply published a draft bill entitled “Bill regulating Electronic Business 2077” for public consultation on 2077.09.14. However, the aforementioned bill did not advance to become a legally enacted Act. Link to the Proposed Bill:
In Nepali Text: Bill regulating Electronic Business 2077 (Nepali)
In English Text: Bill regulating Electronic Business 2077 (English)

Again, the incumbent 6th Parliament of Nepal (9 January 2023), the Ministry of Industry Commerce and Supply has presented a draft bill named “Bill regulating Electronic Business 2080” for on 2080/03/26 to the national assembly. Link to the Proposed Bill:
In Nepali Text: Bill regulating Electronic Business 2080 (Nepali)
In English Text: Bill regulating Electronic Business 2080 (English)

First, Ecommerce Bill 2077

The Ecommerce Bill 2077 in Nepal raised several concerns and problematic issues that needed to be addressed. One key issue is the definition of ecommerce provided in Section 2, which lacks specificity and can potentially encompass any digital transaction. This broad definition raises the question of what falls under the purview of ecommerce and what does not.

Another issue was the lack of distinction between different facets of the digital economy. The bill failed to differentiate between ecommerce and payment services, treating them as the same industry. This oversight disregarded the unique characteristics and regulations associated with each sector.

Under Section 3, the bill required all ecommerce businesses to be enlisted with the Department and obtain a registration number. This approach imposes an additional registration requirement and restricts ecommerce activities to a government-prescribed portal, which may hinder innovation and limit the autonomy of ecommerce companies to operate their own platforms. Section 4 mandated the establishment of web platforms for ecommerce businesses and the use of Secure Socket Layer (SSL) certificates. However, this requirement was redundant since ecommerce, by definition, already operates through web platforms. Furthermore, SSL certificates can be deprecated, and the bill should refer to more up-to-date security standards. Section 7 addressed the execution of contracts in ecommerce transactions. While it acknowledges the validity of digital transactions, it could have referenced existing legislation regarding the use of digital signatures and clarify the rights and responsibilities of both purchasers and sellers, thereby not causing the duplication in the legal frameworks. 

Payment-related issues were covered in Section 8, which allowed for flexibility in payment modalities. However, the provision assumed the use of legal tender and may not account for alternative payment methods that may emerge in the future. The bill should require businesses to clearly disclose accepted forms of payment on their websites. Section 9 concerned the location and transfer of goods and services. The provision better had acknowledged that ecommerce enterprises may limit deliveries based on geographical considerations, and businesses should disclose delivery options and associated costs during the checkout process.

Sections 11, 12, and 13 outlined the responsibilities of businesspersons, intermediaries, and transporters. It is important to recognize that intermediary ecommerce platforms provide services to consumers through third party merchants. The bill should not hold platforms liable for third-party products and services but can include provisions for returns and quality control. Section 23 addressed complaint handling, requiring businesses to provide contact information for complaint resolution. To enhance responsiveness, the bill could have specified timeframes for reviewing and addressing complaints and provide digital acknowledgment receipts. Lastly, Section 18 established fines and penalties for offenses under the Act. However, treating ecommerce as a distinct and separate industry from traditional commerce may result in unnecessary regulatory duplication. 

See these critical comments in more detail in my previous post here: Ecommerce Business in Nepal – Issues Identified in the Proposed Ecommerce Bill 2077 

Therefore, to improve the proposed Ecommerce Bill 2077, it was crucial to refine definitions, consider the unique aspects of different digital economy sectors, promote innovation, ensure up-to-date security standards, and strike a balance between consumer protection and business autonomy. But has the new ecommerce bill, Ecommerce Bill 2080, been able to resolve the issued identified in the ecommerce bill 2077 and if there are provisions in ecommerce bill that we need to critically examine while we are at it. We will discuss this in detail in the section below. 

2080 Ecommerce Bill compared with 2077 Bill

Comparing the issues that were identified with ecommerce bill 2077 with the newer bill i.e. Ecommerce Bill 2080: 


Ecommerce Bill 2077

Ecommerce Bill 2080

Definition of ecommerce

See detailed discussion here: Definition of ecommerce u/s 2 

This issue has been resolved by the newer bill. 

The definition of ecommerce purposed in the Ecommerce Bill 2080 resolves the problem with the earlier definition that more or less defined everything under the sun as ecommerce and how it failed to distinguish the difference facets of the digital economy. 

The newer definition of ecommerce is much simpler and thus harmonic. 

Section 2(l): “Ecommerce” means the process of purchasing or selling goods or services through an electronic platform.

Listing requirement

See detailed discussion here: Listing requirement u/s 3 

This issue has not been resolved by the newer bill. 

The implication of this listing requirement under Section 5 of 2080 Bill is that e-commerce can only take place through registration in a government-prescribed portal. It is a rather outmoded approach and adds yet another registration requirement for the ecommerce. Why can’t ecommerce companies simply operate their own websites / mobile / platforms / apps and set up a digital store for selling goods and services.

Web platform and SSL certificates requirement

See detailed discussion here: Web platform and SSL certificates requirement u/s 4 

This issue has been resolved by the newer bill. 

There is no longer a need to maintain a “specific” security layer to the web platforms as such hard coding in the law would not make sense in the dynamic environment of information technology. Probably this has been addressed as the SSL security specified in the 2077 bill has already been deprecated. Transport Layer Security (TLS), the successor of the now-deprecated Secure Sockets Layer (SSL), is a cryptographic protocol designed to provide communications security over a computer network. 

Execution of Contract

See detailed discussion here: Execution of Contract u/s 7 

This issue has been resolved by the newer bill. 

The 2077 bill had the provision that when any goods and services are demanded made by a purchaser from businessperson by adopting e-commerce operation method, if the businessperson accepts to provide such goods or services, a contract shall be deemed to have been entered into between purchaser and seller via electronic platform and liability shall be deemed to have been created as per the contract.

Since, provision for the validity of the digital signature already exists in the prevalent Electronic Transaction Laws and Contract Laws of National Civil Code, this provision has been referenced around such existing legislation, thus making the law more harmonious. Reference to Section 7 of the 2080 Bill. 

Further, Section 7(3) of the 2077 Bill had stated that the purchaser can cancel his demand before such goods or services are dispatched or before commencing to provide the services and the amount will be refunded to him. This allowed for better consumer rights but the ecommerce provider might already have incurred scheduling and sourcing costs in relation to the demand so the provision could be improved by requiring the seller/platform by disclosing that the scheduling has begun and cancellation will lead to some fixed fees, clearly and unambiguously in the website, to prevent resource drain on the ecommerce enterprises’ side. Fortunately, this has been removed in the newer 2080 bill. 

Payment related issues

See detailed discussion here: Payment related issues u/s 8 

This issue has been resolved by the newer bill.  

The 2077 bill had hardcoded the methods of the payment into the law and accepted their validity. The newer bill 2080 rather refers the payment as valid referencing it around the federal law regarding payment and clearings, thus making the law more harmonious. Reference to Section 8 of the 2080 Bill. 

Location and transfer of goods and services

See detailed discussion here: Location and transfer of goods and services u/s 9 

This issue has not been resolved by the newer bill. 

The provision should acknowledge that the ecommerce enterprise may limit the delivery of the goods or service based on the location of the purchaser. Of course this is a commercial decision depending on the logistics, supply network, availability of the fulfillment stores, availability of the modes of payment and so on. Perhaps, the Act should require the ecommerce enterprise to clearly and unambiguously disclose those things during the check-out-session and also disclose the different delivery time and cost depending on the location selected by the purchaser. Reference to Section 9 of the 2080 Bill. 

Responsibilities of businessperson, intermediaries and transporter

See detailed discussion here: Responsibilities of businessperson, intermediaries and transporter u/s 11, 12 and 13 

This issue has been resolved by the newer bill.  

The newer bill clearly delineates the responsibility of the intermediary business person, business person selling items off their list and the carriers. Ecommerce platforms generally set Terms and Conditions and these intend to limit the responsibility and liability of the ecommerce platform providers. They generally set the conditions as follows: Disclaimers, Indemnity, Creation of Contract and so on. Ecommerce platform also sets the Returns Policies. As expected, return policies are specific to the category of the product. Ecommerce platforms generally limit their liabilities with these Terms, Conditions, Disclaimers and Policies.

Numerous courts in numerous decisions have held that ecommerce platform providers cannot be held liable as a seller of products from third-party vendors. The new proposed Ecommerce Bill also does buck this trend since it has clearly put the liability for the goods to the seller of the goods in case of the intermediary business person. Reference to Section 14, 15, 16 and 17 of the 2080 Bill. 

But as a safeguard to the consumers, Section 20 of the bill doesn’t provide an outright waiver to the ecommerce business person when a complaint has been lodged. They have the responsibility of addressing such complaints and grievances even when such goods or service is not produced, imported or provided by them. 

Complaint Handling

See detailed discussion here: Complaint Handling u/s 23 

This issue has been resolved by the newer bill. 

The newer bill ensures the responsiveness of the complaints handling process by requiring the platforms / sellers to review and address the complaint within a certain time period of time. Further an acknowledgement receipt should be provided to the customer via digital means, including a reference number for the complaint which can be used to reference it in future communications for the remedial actions. Reference to Section 33 of the 2080 bill. 


See detailed discussion here: Punishment u/s 18 

This issue has not been resolved by the newer bill. 

The problem is that the ecommerce bill appears to treat ecommerce as a special type of commerce, different to all other types, which is not the case. There are always parallel industries in digital commerce to the industry in traditional commerce. Few of the offenses under the proposed law are also punishable through the other regulations which would lead to duplication of fines and penalties for the same offense. The regulatory under the Act is the Department of Commerce, Supplies and Consumer Protection of the Government of Nepal. Reference to Section 21 of the 2080 Bill. 

More on Ecommerce Bill 2080

The incumbent 6th Parliament of Nepal (9 January 2023), the Ministry of Industry Commerce and Supply has presented a draft bill named “Bill regulating Electronic Business 2080” for on 2080/03/26 to the national assembly. Link to the Proposed Bill:
In Nepali Text: Bill regulating Electronic Business 2080 (Nepali)
In English Text: Bill regulating Electronic Business 2080 (English)

Electronic Platform

This is the point where there will be most disagreements. Section 2(Ta) of the Bill defines an electronic platform as a system established for the collection, transmission, or storage of information and the conduct of the business of goods or services through means such as websites, applications, software, the internet, intranet, etc. Section 4(1) of the bill requires that every businessman conducting electronic business shall establish an electronic platform. But this begs a question, does the requirement to establish an electronic platform by the ecommerce business necessarily require the establishment of a website? The typical website that we establish using shared hosting and a dedicated domain name? Sumana Shrestha, Member of 6th Parliament of Nepal had also raised the same issue through her Instagram.

But is this true? Are all the online shops operating in Instagram, Facebook that are currently operating require establishing a website for this purpose? Does the bill necessarily require all ecommerce businesses to establish a website? 

Comment: In my view No. This is because the definition does not limit the operation of ecommerce just through websites – it extends to other applications, software, internet, internet and other means. Besides, what is the difference between operating an online shop through Facebook on the one hand and operating it though the woocommerce / shared hosting website? Intrinsically, nothing. This is because both are providing software/platform as a service. There essentially is no difference except for the additional ecosystem that Facebook offers – which again does not impede it from being qualified as a software or application provider. 

But there is another genuine concern however that has not been discussed as much as it should be. What about the aggregator platforms like eBay or Hamrobazar that operate on a consumer-to-consumer model? Because looking at the definition  of the buyer, seller, ecommerce and ecommerce platforms that are provided in the 2080 bill, it sure seems to require the end-to-end consumer-to-consumer dealing like in eBay or Hamrobazar to be listed to be able to deal in C2C ecommerce business platforms. And how would that work? That would not work because Hamrobazar is just a platform provider, it is not involved in the transaction at all – unlike Daraz who is an intermediary seller. In many ways, the services that Hamrobazar provides to buyers and sellers are comparable to what Facebook and Instagram provides to its merchants operating in their platform. They sure are providing the platform as a service but it is a kind of digital service that again is operated through its separate merchant management system and are registered for digital service taxes for the purpose of paying taxes in Nepal as applicable. 

But again, is this bill intentionally discouraging the C2C market? Because that might require another critical take. Using sites like eBay or Hamrobazar can have lots of positive externalities to improve the ecommerce sector but it should always be a commercial decision. Once it is a legal requirement to register, the participation and benefits from those platforms would significantly diminish. Further, the scope of the Act extends to the foreign ecommerce service providers. Even foreign ecommerce service providers are required to enlist under Section 3 of the Act. So this enlisting requirement applies to all, including the foreign ecommerce service providers as well who may not have taxable presence in Nepal. Similarly, the ecommerce platforms provided by facebook, instagram have also been a catalyst to drive the ecommerce success in the grassroots. The Act is not clear whether those platforms do qualify as the ecommerce platform, whether the merchant needs to comply with the commercial platform or the facebook and instagram themselves. Perhaps some threshold should be set where the Act would not apply to small merchants registered and operating in Nepal through ecommerce? Or something like that as appropriate. Or am I getting it completely wrong and does this provision require the even the facebook, instagram, hamrobazar and likes of eBays to be registered in Nepal? That would be absurd !!

Delineation of types of ecommerce businesses

The provision that is most welcome is the definition and delineation of the various types of the ecommerce business through the 2080 bill.  In the context of ecommerce operating models in Nepal, the prevalent approach is the business-to-consumer (B2C) model. Within this model, two primary operating models exist: the inventory model and the marketplace model. The inventory model involves ecommerce platforms maintaining their own inventory and directly selling products to customers. Meanwhile, the marketplace model serves as an online platform connecting buyers and sellers, without the platform itself holding inventory. Under the marketplace model, there are two fulfillment strategies: fulfillment by ecommerce, where the platform manages inventory and logistics, and fulfillment by merchant, where the responsibility falls on the merchant for inventory management and order fulfillment. These operating models shape the ecommerce landscape in Nepal and are important considerations for businesses and consumers alike.

In Nepal, the business-to-consumer (B2C) model dominates the ecommerce market. The inventory model is adopted by some players, where ecommerce platforms maintain their own inventory and sell products directly to customers. However, the more prevalent model is the marketplace model, where online platforms connect buyers and sellers without holding inventory. Within the marketplace model, there are two fulfillment strategies: fulfillment by ecommerce, where the platform handles inventory management, payments, and shipment, and fulfillment by merchant, where the merchant takes on these responsibilities. Understanding these operating models is crucial for navigating the ecommerce landscape and engaging in online transactions in Nepal. 

This certainly bring clarity and the bill properly acknowledges the different types of business model that may exist in the ecommerce market: 

  1. Section 2(Ana): “Business person engaged in list based ecommerce” (i.e. Inventory Model) means a domestic or foreign individual, firm, company, or institution that prepares a list of goods or services owned and directly sells such goods or services to consumers through an electronic platform.
  2. Section 2(cha): “Intermediary Business Person” (i.e. Marketplace Model) means a domestic or foreign individual, firm, company, or institution that conducts the business of goods and services through an electronic platform, facilitating the transaction between the buyer and the seller, using exchange of electronic information.
  3. Section 2(Cha): “Seller” means a person, firm, company, or institution that makes goods or services available for sale to an intermediary business person in accordance with this Act.
  4. Section 2(Gha): “Carrier” means a person, firm, company, or institution engaged in the carriage of goods for the purpose of selling them, including their representative.

But is the bill still confusing on what "ecommerce" is?

Let’s look at the definition of goods and service that the latest bill provides: 

  1. Section 2(wyan): “Goods” means a product that is consumed or used by a consumer or a combination of products that is made in such a way that it does not cause harm to health or any kind of negative effect, and the word also refers to raw materials, dyes, fragrances or chemicals used in the manufacture of such products.
  2. Section 2(ta): “Service” means electricity, drinking water, telephone, information technology, health, education and counseling, carriage, tourism, entertainment, transportation, waste management, banking, insurance, or other similar natural services, including legal, auditing, medical, or engineering services.

Okay hold on. In which universe would services including legal, auditing, medical or engineering services would completely and unequivocally qualify to be an ecommerce transaction? I agree that just the definition of “ecommerce” doesn’t cause this confusion – but when professional services of the likes of auditing, legal, medical and engineering are particularized in the list – this definitely gives a room for misinterpretation. 

Let’s to go back to the same old discussion about what ecommerce is. For detailed analysis see this post here: Definitions on Ecommerce 

“Ecommerce” is a part of the “Digital Economy”. The report titled Addressing the Tax Challenges of the Digital Economy within Base Erosion and Profit Shifting Project of OECD has categorized the Digital Economy into a non-exhaustive list: Ecommerce, Online Advertising, Cloud Computing, App Stores, Payment Services, High Frequency Trading, Participative/Collaborative Networks, Sharing Platforms, Content Networks and Virtual Currencies. The report also analyzes a number of broader tax challenges raised by the digital economy, and discusses potential options to address them. Reference to the OECD’s Report: Electronic commerce, or e-commerce, has been defined broadly by the OECD Working Party on Indicators for the Information Society as “the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders. The goods or services are ordered by those methods, but the payment and the ultimate delivery of the goods or service do not have to be conducted online. An e-commerce transaction can be between enterprises, households, individuals, governments, and other public or private organizations” (OECD, 2011).

E-commerce can be used either to facilitate the ordering of goods or services that are then delivered through conventional channels (indirect or offline e-commerce) or to order and deliver goods or services completely electronically (direct or on-line e-commerce). 

Important Question #1

Question: What constitutes the “method specifically designed for the purpose of receiving or placing orders”?
Answer: OECD’s report has offered comments regarding this. To be included in the methods, are orders made over the web, extranet or electronic data interchange. But this excludes orders made by telephone calls, facsimile or manually typed e-mail. The list offered in the OECD’s report is only indicative. Thus this should be understood to mean where the orders are received, analyzed and processed through the use of a computer or automated process, with little to no human intervention. So this safely excludes the services provided through emails or online meetings or other digitally accessible media that are negotiated with human intervention. 

Important Question #2

The digital economy has given rise to a number of new business models. Although many of these models have parallels in traditional business, modern advances in technology have made it possible to conduct many types of business at substantially greater scale and over longer distances than was previously possible. The OECD report has discussed the various prominent examples of Digital Economy using a non-exhaustive list: Ecommerce, Online Advertising, Cloud Computing, App Stores, Payment Services, High Frequency Trading, Participative/Collaborative Networks, Sharing Platforms, Content Networks and Virtual Currencies. The report also analyzes a number of broader tax challenges raised by the digital economy, and discusses potential options to address them.
Question: Why did the OECD’s report attempt to categorize the various elements of the Digital Economy although some of these business models do complement and work together with another model in most cases? (for example, payment services could be described under e-commerce or under cloud computing).
Answer: Firstly, the report discusses that these business models (listed above) are by no means exhaustive. Indeed, just as innovation in the digital economy allows the rapid development of new business models, it can also quickly cause existing businesses to become obsolete.

  1. The need for the categorization of the business model under digital economy is to dissect these models and implement separate and targeted tax/revenue and laws strategically to regulate each facet of the rapidly growing and changing digital economy.
  2. Another reason for the categorization is that some models of the digital economy have their parallels in the traditional economy of commerce, and thus existing laws are adequate enough to regulate those specific unique business models.
  3. Another reason for the categorization of the models is that some models of the digital economy like advertisement, payment services, high frequency trading and virtual currencies are already being regulated by the existing laws, so there is a need for the demarcation of the regulated and unregulated models of digital economy.

Important Question #3

Question: Ecommerce means the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders. If so, what “goods or services” fall into ecommerce and what does not?
Answer: There is not a clear distinction as such in the OECD’s report. Mainly because this needs to be decided based on the fact whether the transaction qualifies as an ecommerce transaction or not. We have learnt from the OECD’s definition of ecommerce that:

  1. Ecommerce means the sales/purchase of goods/services, and
  2. Ecommerce is conducted over computer network, and
  3. The computer network for the ecommerce is specifically designed for the purpose of receiving/placing orders.

These criteria tests need to be applied to ascertain whether the particular transaction is under the purview of the ecommerce or not. Examples:

  • When a user proceeds to buy the standardized service of Google Drive Storage or AWS Transparent Pricing Calculator where the pricing for each tier/service is clearly pre-determined and set, this qualifies as an ecommerce transaction.
  • When a buyer places the order to buy from the ecommerce platform like, the contract for purchase/sale of the goods will be made between the buyer and seller (sastodeal being the ecommerce platform provider), this qualifies as an ecommerce transaction.
  • When a buyer requests for a quote like getting a quote for machinery from JCB, the request gets through to the sales representative and a quote as per your needs are sent to you after further inquiries. This does not constitute an ecommerce because the order has not been placed in the first place and secondly there is manual intervention before the quote gets through.

When a customer requests for the quote to the consultant submitting his propositions and after agreeing to the quote provided by the consultant, the consultancy services are delivered through video meeting, this doesn’t constitute ecommerce as the quote is provided by the consultant through email/other digital means but with human intervention and also the services are provided through emails or online meetings or other digitally accessible media with human intervention. Since professional services are generally quoted for and delivered to match the client’s specific needs, it usually doesn’t fall under the ecommerce transaction as there is no scope for ubiquity and standardization (as discussed above).

And while we are at it: Section 95Ka(6nga) of ITA

Entirely, different topic from the above but here is one interesting addition that was made by the Finance Act 2080 to Section 95Ka of the Income Tax Act, 2058. It comes into effect from 2080.04.01 and it’s quite a compliance to the ecommerce businesses. 

Section 95Ka(6nga) of Income Tax Act, 2058
In Nepali: बासिन्दा विद्युतीय व्यापार सञ्चालक ले आफ्नो प्लेटफर्ममा आबद्ध भई कुनै वस्तु, सेवा वा वस्तु र सेवा प्रदान गर्ने व्यक्तिलाई वस्तु, सेवा वा वस्तु र सेवा बिक्री बापतको रकम भुक्तानी गर्दा एक प्रतिशतका दरले अग्रिम कर असुल गर्नु पर्नेछ।
In English: The resident e-commerce operator shall collect advance tax at the rate of 1% when paying the amount of the sale of goods, services or goods and services to the person who joins his platform to provides any goods, services or goods and services. 

Okay, basically, ecommerce platforms in Nepal, who also facilitate payment to the seller would now need to withhold 1% of the sales revenue collected from the buyer while releasing the payment to the seller. 

How does this work? Ecommerce platforms (eg. Daraz, Sastodeal etc) they operate under a marketplace model. In addition to providing a platform for B2C transactions in their platforms they also provide other attractive services to the sellers like Refunds, Last Mile Delivery, API Services, Integration of Payment Systems etc and make a certain income from those services. That is different. But the ones who facilitate integration and handling of the payments of the transactions, they later release this amount to the seller, at which point an advance tax of 1% would need to be withheld as per Section 95Ka(6nga) of the Income Tax Act, 2058. 

So there are multifold withholding taxes on transactions of the ecommerce platforms with their sellers. On the one hand they charge the customers for their services (aforementioned), which is a digital service on which their sellers would deduct 1.5% on the amount of service under Section 88. But as per Section 95Ka(6naga), the ecommerce platform would need to deduct 1% of the revenue collected while making payment to the seller. If the transactions are settled in net basis, the accounting would be somewhat like below, not necessarily though: 




Revenue collected from buyer



VAT collected from buyer



Withholding under Section 95Ka


Tax Liability

Service Income (say 20%)



VAT collected form seller


VAT Liability

Tax withheld by seller under Section 88


Tax Liability

Net Payment to Seller (Total)