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E-commerce Taxation
Ecommerce firm ‘Flipkart’ can be in trouble because of its revised return policy. Flipkart was threatened by merchants to either leave or be inactive on the online marketplace, objecting to new conditions imposed by the company on them. Flipkart had earlier announced a revised return policy for buyers on June 6, 2016.

Wherein, it stated that the customer would now return the products within 10 days, along with return shipping, this led to additional operational expenses for sellers. The company had decided to increase the sales commission it levies on merchants, by up to 5% in some categories, as well as charge them a shipping fee, a reverse shipping fee, and a collection fee on every product returned by customers, effective from June 20. According to ET, a trade association, representing online vendors said that merchants have decided to stop selling on flipkart as their cost is going up.

They also said that earlier flipkart used to charge fee of 1% of order only when they were at fault, but now flipkart will deduct shipping charges and collection fees from sellers (in case of returns), which will be huge since return percentage ranges from 8% to 10% (deliveries) in most of the categories. The merchant association also informed that the vendors are not upset with the increase in commission but with the change in return policy. A senior member of the All India Online Vendors Association (AIOVA) said, about 300 of its 1,000 merchants have decided to leave flipkart as their operating cost will become much higher.

According to Flipkart, its new policy will offer predictability and control over payments for sellers. It has advised vendors to ensure effective cataloguing and packaging, and prevent mis-shipments to avoid product returns.     It is a summarization of an article in INC 42. For more information, visit

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Start up Lessons, TAXATION
Equalisation levy on digital ads were introduced in the Indian ‘fiscal budget’ presented on February 29, 2016. From June 1st, an equalisation levy of 6% will have to be deducted by a business entity in India whose aggregate payment in a financial year exceeds INR 1 lakh for specific services to a non-resident service provider. The specified services covered by the levy include online advertising, provision for digital advertising space and any other service to be notified by government.

How does it impact Indian startups

Online marketing is one of the most used form of marketing and is very important for startups because of its comparatively lower cost and targeted customer reach. As we all know that Google and Facebook ads are the most effective platforms as of now, and this levy will affect the small startups rather than the giant-sized Facebooks and Googles of the world.

The startup, who mostly sustain on digital marketing, will now face the burden of ‘extra cost’ from these giants. The equalisation levy would translate into startups ending up paying six percent over the 14.5 percent service tax. Thus, making digital advertisement more expensive for local Indian advertisers. The final cost depends on the negotiation between the startups and online platforms. But this will further financially rip the fund-deficit startups that will have to eventually cut down on their marketing budgets.

Any cut of digital advertising budgets will affect customer acquisition and growth of the company.   It is a summarization of an article from Your Story. For more information, visit

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Legal base of your business should be strong enough for it to achieve long term success. Budding entrepreneurs forget about it as they are more focused towards growing their vision, hence making the most common mistakes in the early growth. This is why it is essential for startup businesses to acquire and sign certain basic legal contracts at the early stages of their growth whether it is for hiring, partnerships, proposals and disputes to ensure their business is fully protected. Here are some of the legal contracts that will make sure your business is protected:

  1. Confidentiality Agreements: Non-Disclosure, Non-Compete & Non-Solicitation Agreements If you don?t make confidentiality agreement then you may have to face loss of business, clients and it may overall affect the productivity of your business. Non-Disclosure Agreements (NDA) can be made with parties who are privilege to sensitive information and make sure that they do not use them wrongly. Non-compete or Non-solicitation Agreements are entered into to protect the training, expertise; knowledge imparted to your employees regarding your business and is often included in hiring documents.
  2. Hiring Documents: Employment And Freelance Agreements Drafting well-defined contracts between you and your employees can provide a clear understanding of duties, responsibilities, and obligations both parties expect to achieve. An Employee Agreement governs the terms and conditions of employments, as well as rights and obligations of both parties. Employment contracts have provisions pertaining to salary, bonus, benefits, leave and termination.
  3. Investment Documents: Founders? Agreement, Term Sheet & Share Purchase Agreement As the startups starts operating, the co-founders tends to become busy in day to day running of their business and leave important legal matters for discussion in later stage, this causes road blocks in the future. A Founders Agreement promotes clarity amongst the founding team outlining various roles and responsibilities, the equity vested in each entity, and the ownership of intellectual property to minimize risks in case of a dispute. When you are going for funding you need term sheet, which include the investment amount mode of payment, mode of security invested in, due diligence and pre-emption rights. Lastly you need a Shareholders Agreement, this contract will clarify the powers of your shareholders as well as the rights of your company as an issuer of shares.
  4. Collaborative Documents: MoU?s & Joint Venture Agreements It saves your business a lot of time and effort if you have a framework to negotiate business. When you do business with new party, you need to draft Memorandum of Understanding. It is a document that contains the basic understanding the two parties have reached for any project and captures the intentions of both parties. Another important business collaboration agreement is a Joint Venture Agreement, which can allow your business to access newer markets and resources, while ensuring the sharing of risk.

    It is a summarization of an article from Your Story. For more information, visit

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