Karnataka to set up B2C sites on public utilities

BANGALORE: Karnataka will soon set up business-to-consumer e-commerce Web sites where citizens would be able to make payments for various public utilities such as electricity and water. This was announced by the state IT secretary Vivek Kulkarni while delivering inaugural address at the day-long National Conference on IPR and legal issues for global IT companies held here on Thursday. Mr Kulkarni added that the legal issues involved towards this needed to be straightened since the service would include payments to Bangalore City Corporation or Karnataka Electricity Board and updation of individual’s records.

"E-commerce is likely to develop primarily in the B2B area and quickly too. Then companies will have a better supply chain management, procure products faster, get better choice of products, better costs and would result in better productivity," he further said.

In his address on legal issues related to Internet and e-commerce, Kochhar & Company partner Stephen Mathias said, "Legal recognition is an issue in electronic records." Further explaining the issues related to electronic records, he said, "These electronic records have to be admitted in the court of law, primary evidence to be defined, digital signature and IT Bill to be given importance." He also added that the IT Bill specified that electronic records could be considered in a court of law. On digital signature Mr Mathias added, "There are four conditions prescribed by the IT Bill to recognize Digital signatures - the signature should be unique to that person, should be capable of identification, should be such that no possibility of duplication and to be linked to the electronic record. Digital signatures are not very popular in the B2B or B2C segments in India, it is a thing of the future and would probably apply to contracts." He further added, "Court acceptance of electronic records is also an issue because the mindset of court members have to be changed, there could be infrastructure problems, there should be speedy remedies to the problem that the record is secure and cannot be tampered with."

On contracting on the Internet he said, "With regard to shrink wrapped software, what happens if you donot agree to certain conditions that are mentioned on it? - You should have the right to reject the software. In the Indian context, according to Section 3 you have to communicate your consent, you should be given reasonable notice, you should be able to reject the terms if the terms are unfair - and these make a valid contract."

Giving some tips on Internet contracting, Mr Mathias said, "All terms and conditions should be put on the main transaction page, notice of terms and hyperlinks to be present, scroll down to be ensured, terms to be displayed in a conspicuous place before purchase, reject options should be available and terms should be fair." Another issue that he mentioned was Net safety and privacy concerning credit card information and security by merchants. He also said that there were many types of Net content liability like violation of copyright, violating obscening rights, incitement, act against state. Mr Mathias also highlighted that there was a lot of literature available on non taxation of goods sold online in the US - but, he said that this was untrue as all goods sold whether online or offline was subject to sales tax. On the various contracts involved in e-commerce Mr Mathias said, " For e-commerce set ups there are - software licenses, reseller contracts, merchant agreements, online contracts and merchant bank contracts."

On International tax issues for an IT company advocate and former commissioner of income tax, Bangalore Dr V.N. Lalithkumar Rao said, "International taxation arises due to cross border transaction which in turn arises due to double taxation." Explaining double taxation he said, "It is a tax on the same income and on the same individual but at two different jurisdictions."

Regarding tax on operation through branches abroad, he said, "If a company has a branch abroad, the branch would be treated as a separate entity and will be taxed as an independent entity that is quite distinct from the head office and so the assessment will be done on its net income which is subject to foreign taxation. While in India the company would consolidate the branch incomes and get a credit of the branch tax that was paid abroad." In the case of a subsidiary abroad, he said, "The subsidiary will be considered as a resident of the country and the net income would be subject to foreign tax. In India the subsidiary income will not be included, as it is treated as a separate company and even the tax will not be credited and its dividends will also attract foreign tax." "Even if you have an agent sitting abroad, it will be considered as a branch and will attract foreign tax on its net income and dividends."