According to Greenstein and Ferman3 "electronic commerce (e-commerce) is defined as the use of electronic transmission medium ( telecommunication) to engage in the exchange, including buying and selling of products and services requiring transportation either physically or digitally from location to location." E-commerce is any transaction completed over a computer-mediated network that involves the transfer of ownership or rights to use goods or services. According to European Commission4, e-commerce encompasses more than the purchase of goods online. It includes a disparate set of loosely defined behaviours such as shopping, browsing in Internet for goods and defined behaviours, gathering information about items to purchase and completing the transaction like any other sustained business activity. It also means conducting consumer satisfaction surveys, capturing information about consumers and maintaining consumer databases for marketing promotion and other related activities. The first phase of e-commerce threw up a new business nomenclature using various combination of business and consumers5. It has its own advantages and disadvantages6 as in traditional business methods. Thus, e-commerce has necessarily changed the world economy in a dynamic and interactive pattern. Taxation for Internet Transaction
The Internet has changed many of the fundamental and long standing concepts of direct and indirect taxation. Governments all over the World are grappling with the various issues of taxation raised by e-commerce. This is because of lack of comprehensive understanding of: • The communication technologies
• The complex nature of business offered through Internet business, etc. • The modus operandi of Internet business, etc. has made the operation of tax legislations more difficult. The Information Technology Act, 2000, which is the first legislation to deal with e-commerce is quite silent about tax system. Substantial amount of state revenue which is generated through direct and indirect taxes is lost when Internet transaction remain untaxed7. A way is to be found to tackle this relevant problem. Basic Principles of Taxation
Several basic principles form the foundation of taxation policy in any country. The most important of these...