AVOIDANCE OF GST BY E-COMMERCE COMPANIES

AUTHOR :EDITOR1

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CAIT India has sent an important communication to all Chief Ministers of Indian States drawing their attention
towards GST avoidance by e-commerce players causing huge loss of GST revenue to both state & central Govt
and also urged support for E-Commerce Rules under the Consumer Protection Act. Full text of their
communication is as follows:-

Shri Shiv Raj Singh Chauhan

Hon’ble Chief Minister
Government of Madhya Pradesh
Bhopal

Dear Shri Shiv Raj Singh Ji,

Sub: Avoidance of by E-Commerce Companies and E Commerce Rules under Consumer Protection Act

1. Avoidance of GST by E-commerce Companies :

We invoke your kind and immediate attention towards the transactions those happened on different e-commerce
portals where goods are being sold much below the prevailing market price by way of predatory pricing, giving
large discounts and by other means causing huge loss of GST revenue to State Governments and Central
Government. Further, several foreign funded major global e-commerce companies are holding different kind of
“Sales Festivals” round the year. During such sales unbelievable discounts are offered which reduces the prices
to a great extent in comparison to prevailing market price. These foreign funded companies, under FDI in e
commerce policy, are authorized to do only Business to Business (B2B) activities are conducting whereas they
are conducting Business to Consumers (B2C) sales activities right under the eyes and nose of the Government.

We invite your attention towards the sales of large number of commodities particularly on the portals of these
foreign funded companies where the sales price of commodity purchased is lower than the prevailing market
price and the Government is entitled to accrue GST on the prevailing market price. However, these companies
by adopting predatory pricing and loss funding methods and in an artificial manner brings down the prices of the
commodities quite low and charge GST on the artificial sales price directly causing a huge GST revenue loss to
both State Governments and Central Government. For example, a mobile is costing Rs.io,000 thousand rupees in
the physical market and therefore the Government should get GST @ Rs. 50 thousand. However, on portals of
these companies, the same mobile is sold at a much lower rate i.e Rs.6 thousand and these companies charge
GST @ Rs. 6 thousand only whereas the prevailing market price was Rs 50 thousand. Therefore, they are
avoiding GST for Rs. 4 thousand which is a considerable revenue loss to the Government.

During the period of ” festival sales” of these e commerce companies, the goods are being sold at a much lesser
price than the actual price by offering deep discounts from lo% to 8o% which is nothing but a predatory pricing
and the GST which is supposed to be charged on the actual market price of the commodity in normal case is now
being charged on the price after deducting the discounts offered and this is nothing but underpricing of the
commodity by these e commerce portals thereby causing huge loss of GST revenue to the Government.
Likewise, proportionally if goods are rightly valued, it could earn substantial Income Tax as well to the
Government.

In the light of the above, it is demanded that an investigation should be held by your Government towards
the selling pattern of these companies and if found avoiding GST, strict action must be taken against
them.

2. Draft E-Commerce Rules under The Consumer Protection Act :

We would like to inform you that to streamline the fast growing e-commerce business of India, the Ministry of
Consumer Affairs, Government of India, after due consideration has recently introduced draft of e-commerce
rules under The Consumer Protection Act. The rules added in the draft are truly great since they are actually
focusing and think first only about the consumer. These are kind of reforms in laws, rules and regulations that
our country needs to safeguard and protect consumer. Much exploitation of small sellers, preference only to few
sellers who have direct or indirect stake with marketplace ecommerce entity through relationship, lack of strong
consumer redressal system — are some very important points that the new ecommerce rules try to gives
solutions to these issues.

We are sure that if these rules are implemented, the e commerce landscape of India will become a neutral
platform where every small or big entity can undertake e-commerce business and cater to the requirements of
consumers in a more structured and responsible manner. We shall request you to kindly impress upon the
Union Government to implement the rules as early as possible and ensure the implementation by one and
all both in letter and spirit.

We would like to make it clear that we are not against e commerce business and having a firm view that e
commerce is future mode of business in the Country and also do not fear from any competition but there has to
an even level playing field where there should not be any element of predatory pricing, deep discounting or loss
funding which is also the motive of FDI policy. But since a long time these companies have scant respect for
FDI policy.
We shall be grateful if you kindly accord us an earliest convenient appointment to apprise you with the
factual position in person and seek your kind support. We are sure that it will receive your kind attention
and you will be pleased to accept our request and we await for your valued response.

Thanking you. With kind regards

Yours truly

Praveen Khandelwal
National Secretary General
Confederaton of All India Traders

*****

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