CALLS FOR INVESTIGATION INTO BUSINESS MODULE OF E COMMERCE COMPANIES

​                           DEMANDS A REGULATOR FOR E COMMERCE BUSINESS​

Much hyped advertisements by certain e commerce companies organising 'big sale" on forthcoming ​days​ or "Diwali Sale" on their online portals has prompted the Confederation of All India Traders (CAIT), an apex body of the trading community of India, to called for an investigation in the business module and trade practices of e commerce companies in India. How can the marketplace model companies can offer "big sale" or​"​ Diwali Sale​"​ when they are not the owners of the inventory. The CAIT has further asked for the investigation as to how the e commerce companies are able to sell same brand and quality of goods much cheaper than brick and mortar shops. The CAIT has also raised a question of diversion of VAT tax by these companies which is causing great revenue loss to consuming States.​ The CAIT has demanded the Union Government to set up a Regulatory Authority to regulate and monitor e commerce business in India.​

In a communication sent today to Union Commerce Minister Mrs. Nirmala Sitharaman, the CAIT has demanded a thorough probe in to the working and business module of e commerce companies in India. The CAIT has urged Mrs. Sitharaman to constitute a "special task force of experts" to conduct an in depth probe of working of such companies.​If need be,​​t​he CAIT ​may​ lodge a complaint with Competition Commission of India since the online business is ​indulging into unfair competition practices​. It is estimated that there is nearly a business loss of about 30% this year to offline markets due to online shopping. However, the CAIT favours the marketplace module and hence called the Commerce Minister to eliminate unhealthy business practices from online shopping.

CAIT National President Mr. B.C.Bhartia and Secretary General Mr.Praveen Khandelwal in a joint statement issued today said that recently big advertisements were appeared in newspapers for "big sale" by e commerce companies. Such companies pretend to be a marketplace. In such model, the e commerce companies are merely providing technology platform and the ownership of the products lies with sellers who are registered on such marketplace platform. How can the e commerce companies calls for big sale when they are not the owners of the products being sold. Certainly, there is some fishing which is hidden behind the scene and which needs to be unearthed to provide fair play and competition.​ Are such companies providing any subsidy to sellers registered on their online portals ? if it so, it amounts to predatory pricing which is again not permitted.​

The traders leaders further said that it is astonishing that same brands of large number of products are being sold at a much cheaper rate by these companies in comparison to offline market. Such tendency is causing much business loss to brick and mortar shops particularly in segments of Cosmetics, daily use items, footwear, apparels, watches, gift articles, electronics, computer hardware and software, Mobiles and its accessories, Toys, Home Furnishings, Kitchen Appliances, Sports goods, Travel Luggage and Accessories, books and many other. Jewellery is yet another segment which is also being hit due to online market.It is further surprising that even after paying the Commission and shipping charges to the e commerce companies, the online shopping is cheaper than offline markets. It is understand that commission of such Companies ranges from 5% to 20% of the cost of the product which is generally not the profit margin of offline market.

Both Mr. Bhartia and Mr. Khandelwal alleged that e commerce companies are causing loss of tax revenue to consuming States. Such Companies are registered with taxation department of one State and making deliveries of the products through their logistic arrangement in different states across the Country. They seems to pay the applicable tax to State where they are registered but the goods consuming state does not get any revenue though the basic fundamental of the VAT taxation system is that the end consumer has to pay the tax. In the instant case, the consuming state is devoid of any revenue which it is eligible to get. Such anomaly needs to be corrected.

The CAIT ​favours ​competition but the level playing field should be equal. In fact it has launched a ​" CAIT Retail School Project" conducting a ​nation wide drive to educate traders across the Country to adopt modern techniques of business and to upgrade and modernise existing business format of retail trade. It is prompting traders to register themselves on marketplace module of e commerce and obtain benefits of online shopping since there is a rising trend in online business and traders need to convert their business format according to customer behavior and choice.