How Can Indian Businesses Capitalize on ASEAN’s E-commerce Boom?

Posted by Written by Ayman Falak Medina Reading Time: 8 minutes

ASEAN countries have been forced to accelerate their digital transformations because of the pandemic, with sectors such as e-commerce seeing a surge in users and transactions.

Having a combined population of 655 million people, of which 400 million are internet users, ASEAN’s e-commerce sector presents ample and scalable opportunities for Indian businesses looking to sell in this market.

According to a report from Bains & Co and Google, Southeast Asia’s 2020 digital economy is expected to reach a gross merchandise value (GMV) of US$300 billion by 2025 from its US$100 billion valuation in 2019.

The pandemic has changed the purchasing habits of ASEAN consumers whereby an increasing number have sought to use e-commerce to obtain more basic goods compared to lifestyle products before. In turn, local retailers and producers now view e-commerce as an ‘essential’ business initiative rather than as an option.  

Tech startups are also on the rise in ASEAN, although compared to more established markets, such as China or India, the proportion of venture capital is on a smaller scale. However, the last 10 years have seen venture capital investments of over US$52 billion, and in the last five years alone, more than 2,000 startups received funding from venture capital sources.

Why establish in Singapore for ASEAN expansion?

Indian businesses seeking to sell their products and services through ASEAN’s e-commerce platforms will likely need to establish separate business entities in their respective target countries.

However, the most cost-effective option would be for businesses to incorporate a holding company in Singapore.

Singapore has long been a preeminent destination for setting up a regional headquarters to pursue business opportunities across ASEAN and Asia. The country’s legal and tax regimes are considered one of the most business and investor-friendly in the world, and its financial markets are highly integrated with all major international markets.

It costs US$254 (S$300) to register a company and US$10 (S$15) to register the company’s name in Singapore. Most applications are processed within the same business day. To set up a holding company in Singapore, applicants only require S$1 (US$0.75) as initial paid-up capital, one shareholder, at least one local director, a local registered physical address, and one resident company secretary.

Further, Singapore-based holding companies can own domestic or foreign subsidiaries or assets, and benefit from the country’s over 90 double taxation agreements (DTA), as well as comprehensive free trade agreements (FTA). Singapore has exclusive access to the largest combined free trade areas due to its agreements with ASEAN as well as its FTAs with China, Hong Kong, India, and the EU.

Singapore as a gateway to ASEAN

In addition to these advantages of incorporating in Singapore, there are softer factors that make the country ideal for businesses that want to establish regional headquarters.

Singapore has a highly skilled labor force that is equipped to be intermediaries for Indian investments in the region. Singaporeans also share the same cultural and linguistic connections with many ASEAN members but still use English as the main working language.

The largest online marketplaces in ASEAN

ASEAN is a fast-growing e-commerce market but western companies are notably absent with local brands leading the market share. The largest players are Shopee, Lazada, and Tokopedia, who share similar business models to Amazon by selling a diverse range of goods.


Established in Singapore in 2015, Shopee is ASEAN’s largest online marketplace with 198 million visits per month, of which the largest portion is from Indonesia (76.2 million visits per month).

All products are sold by third parties and not Shopee itself, and in addition to being active in ASEAN, the company has a localized website and app in Brazil.

Shopee recorded Generally Accepted Accounting Principle (GAAP) revenue of US$2.2 billion for 2020, an increase of 159 percent year-on year. Gross orders totaled 2.8 billion and the GMV reached US$35.4 billion, an increase of 101 percent year-on year.


Lazada is a Singaporean company established in 2012 and originally operated as a conventional retailer before an online marketplace was added in 2013. It now accounts for the majority of Lazada’s sales.

The company recorded some 161 million monthly visitors in 2020 and has established a special division named LazGlobal. This division helps international sellers who have no local presence ( for example, sellers based in China, Taiwan, South Korea, Japan, and the UK).

Lazada was acquired by Alibaba in 2016, which has invested at least US$4 billion in investments.


Founded in 2009 in Indonesia, Tokopedia is mainly focused on Indonesia, ASEAN’s largest economy and e-commerce market.

The company also provides digital products, such as credit cards, utility payments, game vouchers, and healthcare payments, in addition to its main consumer-to-consumer (C2C) business platform. There are now more than 7 million merchants on Tokopedia and more than 200 million curated products.

Tokopedia saw 72 million monthly visitors in 2020 and GMV reached US$32 billion in 2020.

In May 2021, Tokopedia completed an US$18 billion merger with Indonesian ride-hailing company and decacorn, Gojek, to create ‘GoTo Group’. The ultimate goal of GoTo is to go public, with a market valuation estimated at between US$30 and US$40 billion in Jakarta and the US.

The combined ecosystem of Gojek and Tokopedia accounts for some two percent of Indonesia’s GDP, with a combined number of active users in excess of 100 million.

Indonesia: ASEAN’s most important e-commerce market

Indonesia is the most important market for online marketplaces given its size and economy. According to the same report by Bains & Co and Google, the country’s digital economy is expected to have a GMV of US$124 billion by 2025 — half of the expected GMV of Southeast Asia’s digital economy in 2025.

This large value will mainly be powered by e-commerce, which is projected to grow to US$83 billion by 2025, from US$40 billion in 2020.


For Indian businesses to succeed in this retail segment, they will need to collaborate with local e-commerce platforms, such as Tokopedia and Bukalapak. In addition to joint ventures, the best way to gain access to Indonesian consumers is for businesses to develop their own mobile app and a high-quality online payment and delivery system.

Indonesia is known as Asia’s foremost mobile-first market with over 58 percent of e-commerce transactions conducted through mobile shopping services.

We explore more in-depth the opportunities in Indonesia through our magazine: Opportunities for Foreign Investors in Indonesia’s Digital Economy.

Vietnam’s e-commerce sector to see double-digit growth

According to Bains & Co and Google, Vietnam’s digital economy will also see double-digit growth and the e-commerce market is likely to reach US$15 billion by 2025, up from US$7 billion in 2020. 

E-commerce has driven significant growth in Vietnam, at 46 percent (2019 to 2020) and 41 percent of all digital service users were new in 2020, which is higher than the Southeast Asian average.

Looking at 2025, the overall digital economy will likely reach US$52 billion by 2025, spurred by increasing internet access, a relatively young population, and an expanding number of local businesses opting for e-commerce as a distribution channel.

Taxation of e-commerce in ASEAN

ASEAN members have joined the global digital era in implementing new rules on e-commerce, particularly as the industry has been an important source of tax revenue when most members suffered from economic recession, caused by the pandemic.

Investors should note that not all ASEAN countries have applicable tax rates for e-commerce activities. We highlight those that do.


Cambodia issued Sub-decree 65 on the implementation of value-added tax (VAT) on e-commerce transactions in April 2021, made by non-resident entities that do not have a permanent establishment (PE) in the country.

Non-resident entities that do not have a PE in Cambodia must first register for VAT with the Cambodian tax authority – if their estimated revenue meets the threshold to register as a taxpayer.

They are then classified into small, medium, or large taxpayers.


If the declared turnover does not reflect actual turnover, then the General Department of Taxation has the authority to re-determine the classification of the taxpayer based on the value of their assets.


Non-resident e-commerce entities that provide digital products or services directly to consumers (B2C) are obliged to register for VAT (if they meet the revenue threshold), file a monthly VAT return, and pay the 10 percent VAT rate on the value of their online transactions. This must be done on the 20th day of the following month from the month the payment was made.

Under the business-to-business (B2B) scenario, resident taxpayers who purchase digital goods or services from non-resident entities must collect the 10 percent VAT output based on the reverse charge mechanism. This is done by paying the tax to the tax administration.


Indonesia’s Reg 50/2020 serves as the implementing regulation to the country’s Law on E-commerce.

Under Reg 50/2020, merchants, e-commerce organizers, and intermediary service organizers will be subject to tax and business licensing requirements.

Foreign e-commerce organizers must establish a representative office in Indonesia if:

  • The company has completed over 1,000 transactions with Indonesian consumers within a year; or
  • Has delivered over 1,000 packages to Indonesian consumers with a year.

The company will need to establish a specific type of representative office, namely, a representative office for a foreign trading company (KP3A).

Further, the government issued Reg 48/2020 and Regulation No. PER-12/PJ/2020 (Reg 12/2020) in 2020, which imposes a 10 percent VAT on digital services provided by non-resident companies. The tax will apply to companies that have a ‘significant economic presence’ in Indonesia operating in sectors, such as big data, multimedia, and software.

According to Reg 12/2020, a digital service provider is appointed as a ‘VAT collector’ by the Ministry of Finance if they achieve a certain amount of annual transactions or reach a certain number of website traffic per year.

Reg 12/2020 states that for the aforementioned businesses to be classified as VAT collectors, they must fall under the following categories:

  • Must have total transactions in Indonesia worth more than 600 million rupiah (US$41,500) per year or 50 million rupiah (US$3,400) per month; or
  • Have total web traffic in Indonesia that exceeds 12,000 visitors per year or 1,000 per month.


From January 1, 2020, foreign digital service providers (FSPs) in Malaysia were obligated to pay a six percent Digital Service Tax (DST).

However, only those that had reached the 500,000 ringgit (US$120,000) in annual turnover were obligated to register and remit the tax.

The government also defines FSPs as:

  • A person who sells digital products to consumers in Malaysia;
  • A person who sells digital products through intermediaries; or
  • An online platform that sells digital products on behalf of an overseas provider.


From January 1, 2020, foreign digital service providers have to register and be charged for goods and services tax (GST) under Singapore’s Overseas Vendor Registration (OVR) regime. Previously, only services procured from local businesses were subject to GST.

GST, also known as value-added tax (VAT), is a consumption tax imposed on goods and services in Singapore regardless of whether they are acquired from domestic or overseas suppliers. 

Businesses will need to have a yearly global turnover of more than S$1 million (US$744,879) and sell more than S$100,000 (US$ 74,493) to be obligated to pay the seven percent GST rate.

The government was also planning to increase the GST rate to nine percent between 2021 and 2025, but this has been suspended.

About Us

ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in SingaporeHanoiHo Chi Minh City, and Da Nang in Vietnam, Munich, and Esen in Germany, Boston, and Salt Lake City in the United States, Milan, Conegliano, and Udine in Italy, in addition to Jakarta, and Batam in Indonesia. We also have partner firms in Malaysia, Bangladesh, the Philippines, and Thailand as well as our practices in China and India. Please contact us at or visit our website at