Understanding compliant payment collection in India for foreign merchants

Monday 20 May 2024 10:22 CET | Editor: Irina Ionescu | Interview

We discussed with Rahul Shinghal, co-founder and CEO of Tazapay, about understanding and integrating into India’s regulatory framework for foreign merchants who want to do business in the country. 

'Understanding and integrating into India’s regulatory framework is not just about avoiding penalties; it’s about building a sustainable and scalable business presence in one of the world’s most dynamic markets', Rahul Shinghal, CEO, Tazapay.

India has become a burgeoning market for foreign merchants, given its rapidly growing digital ecommerce. Can you address the complexity arising from this opportunity, especially in an intricate compliance landscape that businesses must navigate to successfully become operational in India?

India's rapidly expanding digital ecommerce sector presents vast opportunities for foreign merchants, but this comes with a complex regulatory environment that businesses must carefully navigate to be operational. The intricacies of compliance in India, from managing GST on digital transactions to adhering to the 2% equalisation levy, demand a thorough understanding and strategic approach. At Tazapay, we have experienced firsthand how critical it is to integrate these compliance measures to ensure smooth market entry and sustainable operations. Our focus has been on developing solutions that address these challenges head-on, enabling businesses to expand into India confidently while managing compliance efficiently. This proactive approach is essential for tapping into India’s dynamic market without facing regulatory setbacks.

Further exploring the compliance challenges, can you outline the most important aspects merchants must follow for conducting business in the country?

Navigating the compliance landscape in India is crucial for foreign merchants aiming to operate successfully in this dynamic market. Key aspects that need careful attention include:
  1. Direct and indirect taxes. Proper handling of taxes, including GST and other relevant taxes is essential. Merchants must ensure they are collecting and remitting taxes correctly to avoid any legal and financial penalties.

  2. Adhering to the equalisation levy. The 2% equalisation levy is designed to ensure that foreign digital entities pay their fair share of taxes. Comprehending and complying with this levy is vital to avoid double taxation and maintain smooth operations.

  3. Robust documentation and reporting. Handling key documents and maintaining No Permanent Establishment (PE) declarations and Tax Residency Certificates (TRCs) is crucial. These documents are not just regulatory formalities but the backbone of establishing a business’s compliance stance in India.

  4. Continuous compliance monitoring. The regulatory environment in India is evolving, and businesses need to stay updated with the latest changes. Continuous monitoring and adapting to new regulations are necessary to ensure uninterrupted operations.

How did the payments industry address these compliance challenges and what are some best practices you might provide to other merchants who want to expand their business in the country?

The payments industry had to evolve rapidly to address the increasing complexities of compliance in India, particularly as the digital economy grows. At Tazapay, we have approached these challenges by embedding compliance deeply into our payment solutions. This ensures that merchants can focus on their core business while we handle the complexities of taxes, the equalisation levy, and necessary documentation.

Merchants looking to expand into India should the following practices:

  • Integrate compliance from the start. Don’t treat compliance as an afterthought but rather integrate it into your business processes from the beginning to ensure smooth operations.

  • Leverage technology. Use technology solutions that automate compliance tasks, such as tax calculations, document management, and filings. This reduces errors and frees up resources.

  • Stay informed. The regulatory landscape in India changes frequently, so  staying updated on the latest developments and adjusting your compliance processes accordingly is a must.

  • Work with experienced partners. Collaborate with partners who understand the intricacies of India’s regulatory environment and can provide expert guidance and support.

  • Educate your team. Ensure that your team understands the compliance requirements and the importance of adhering to them. Regular training and updates can help maintain compliance standards.

By following these practices, merchants can navigate India’s compliance landscape more effectively and set their businesses up for success in this promising market.

Finally, how does Tazapay approach the compliance of payment collection in the country and why is compliance strategically important?

At Tazapay, our approach to managing compliance for payment collection in India is centred around a proactive, integrative strategy that ensures businesses can operate seamlessly and securely. Our methodology is designed to address the intricate compliance landscape directly and efficiently:
  1. Embedding tax collection at checkout. We integrate applicable taxes directly into the checkout process. This ensures that tax collection is handled seamlessly and accurately, reducing the burden on merchants, and enhancing the customer experience.

  2. Collaboration with partners for tax and levy filings. Understanding the complexities of India’s regulatory environment, we work closely with expert partners to assist with the filing of taxes and the equalisation levy. This partnership approach ensures that filings are timely, accurate, and in full compliance with local laws.

  3. Staying updated with regulatory changes. The regulatory landscape in India can be ambiguous and subject to rapid changes. By collaborating with consultants and experts, we keep our systems and processes up to date with the latest regulatory requirements. This proactive stance helps us navigate the grey areas effectively and ensure our clients are always compliant.

By embedding rigorous compliance measures into every aspect of our service — from tax collection at checkout to working with experts for up-to-date regulatory guidance — we protect businesses from direct and indirect losses and safeguard their reputation. This proactive approach allows businesses to expand confidently, secure in the knowledge that their operational backend is robust and compliant. We see compliance as the foundation of sustainable business growth, enabling our clients to leverage India’s vast market potential effectively and safely.

For more information, download Tazapay's latest guide to the gateway of India's ecommerce landscape.

About Rahul Shinghal

Rahul Shinghal, co-founder and CEO of Tazapay, has been a key figure in the payments industry with various senior leadership roles at Stripe and PayPal. He has experienced over three decades of fintech evolution, witnessing firsthand how innovative payment solutions can bridge global distances. Under his leadership, Tazapay aims to make cross-border transactions as easy and cost-effective as domestic ones, enhancing global commerce.

About Tazapay

Tazapay is revolutionizing cross-border commerce as the preferred 'collect, hold, and pay' payment provider, especially for businesses eyeing growth in emerging markets. With superior card acceptance and a wide array of local payment options, Tazapay guarantees high authorisation rates, enabling merchants to expand their reach and grow their customer base effectively. Our platform simplifies international transactions, making global expansion straightforward and efficient in over 173 countries.

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Keywords: merchant, merchants, compliance, ecommerce, payments , cross-border ecommerce, digital payments, transactions , regulation, regulatory sandbox, omnichannel payments solution, embedded payments, checkout optimisation
Categories: Payments & Commerce
Companies: Tazapay
Countries: India
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Payments & Commerce


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