Flipkart, Snapdeal being probed for violating foreign exchange rules

Editor | Sep 10, 2020

On one hand, The Department of Industrial Policy and Promotion (DIPP) have asked the government to squash allegations laid out against ecommerce companies by brick-and-mortar retailers about flouting FDI rules. On the other hand, fresh reports suggest that The Enforcement Directorate (ED) is going to keep a close watch on online companies for violating Foreign Exchange Management Act (FEMA).

Flipkart, Snapdeal, Jabong among others on ED’s radar

Eight ecommerce firms including, Flipkart, Snapdeal, Jabong and Amazon’s Junglee are being closely watched by the ED department for breaking foreign exchange rules. The companies’ account books are meticulously scanned to find any discrepancie

An unidentified source revealed, “There are several pointers that show such online sites indulge in multi-brand retail: their business models are based on the working of a typical shopping mall conducting multi-brand purchase and sale.”

Another ED official said, “All these sites offering heavy discounts to their customers are actually playing with the foreign investment norms of the country.”

The agency plans to submit updated reports in the next hearing to be held in February.

May bring respite to trade associations

Various retailers’ associations have been fighting hard from months to get the authorities to look into ecommerce FDI violations.

AIMFRA’s lawyer, Rishi Agrawalatio justified the objection raised by retailers’ body, “There is clearly no difference at all between a physical retailer having a shop and an e-commerce site, since they are both retailers offering the same services to a customer. But the e-commerce site gains an unfair, perverse advantage over the physical retailer by doing multi-brand retail despite having FDI funds.”

Besides the ongoing case to discover if online marketplaces are breaking any rules, the government too is trying to define an online marketplace to avoid such disputes. What comes out of the ED investigations, we will hopefully know soon. As always, IndianOnlineSeller will keep you posted about the latest developments.


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