How to set purchased song as your ringtone ?

I purchased a song from Tone Store, but I am not getting the option to select that song as ringtone (even after downloading the song)

To make and/or use a song as a ringtone, you must first make that song suitable for a ringtone.

See the following Apple articles:

Create and manage ringtones -> Create and manage ringtones - Apple Community

Create a ringtone of your Logic Pro or GarageBand for Mac song

Create a ringtone of your Logic Pro or GarageBand for Mac song – Apple Support (UK)

Create Ringtones in Garageband

https://discussions.apple.com/docs/DOC-250006796

It sounds like you purchased the song, NOT the ringtone version of the song. If you want the song as a ringtone, buy the ringtone of that song. Otherwise, as noted above, you'll need to use something like Garage Band to make a ringtone version of the song yourself. The simplest thing to do would be pay for it as a ringtone.

But I need help in selecting the purchased song (via tone store) as my ringtone

Go to your Music Library, select that song.

Then to make and/or use a song as a ringtone, you must first make that song suitable for a ringtone.

...see what posted.

Are you using the correct Apple ID that you used to purchase the Tone?

Did you see the pic as shown below before you made the purchase?