India has started a major crackdown on online purchases of goods from Chinese e-commerce platforms that were escaping customs duty and goods and services tax, two people with direct knowledge of the matter said.
After shooting letters to the tax officers and customs officers, the government is now asking the post office and courier companies to monitor shipments from China.
“Up until now, customs department was asked to undertake strict action, now even post office would be asked to scrutinise such purchases,” said a person aware of the development.
The Department for Promotion of Industry and Internal Trade (DPIIT) through a written communication had directed that all ports across India to see if the shipments were genuine gifts. The government had stopped the import of goods through Mumbai and is now looking to start similar crackdown across India and other ports including Chennai and Kolkata said people aware of the development. According to the people in the know, many Chinese e-commerce platforms were shipping goods ordered by Indians to various cities claiming these were “gifts”.
As per the domestic laws, any gifts received by Indians up to Rs 5,000 don’t attract any taxes. People in the know say that the Chinese retailers such as Club Factory, AliExpress, and Shein were allegedly taking undue advantage of the exemption from customs duties on gifts of up to Rs 5,000.
“It is often brought to the notice that authorised registered couriers are outsourcing activities without prior permission from or intimation to customs.. and without exercising necessary due diligence and checks,” an official communication by customs department reads.
“Investigations revealed that at its peak anywhere around 2,00,000 orders were placed every day through Chinese e-commerce platforms in India which escaped any form of taxes, which are otherwise applicable on imports. After a major crackdown, this has now come down to around 1,20,000 orders per day but that too is high and the government wants that all major ports across India intensify their checks to stop such practices,” said a person with direct knowledge of the matter.
Compared to orders delivered by the Chinese e-commerce players, companies like Flipkart and Amazon record an average of around 1 million shipments every day. According to the government investigations, most Chinese ecommerce platforms were circumventing Indian taxes by claiming these purchases were “gifts” which are not taxable as per domestic laws.
Recently, the government made it mandatory for all the Chinese e-commerce platforms to register domestically. This could help bring them under the domestic laws, said both the people quoted above. “Many people were able to place orders on Chinese e-commerce sites and the goods were being delivered in India without paying IGST and customs duty which would make them a lot cheaper compared to similar products sold in India.
The government has now made mandatory for these Chinese e-commerce companies to get registered in India and enforcement action like Mumbai customs from other customs ports would ensure that such commercial transactions disguised as gifts will further come down drastically,” said Sachin Taparia, Founder and Chairman, LocalCircles, an online platform, that had first complained to the government about Chinese e-commerce companies in 2018.
People in the know said that the price difference between goods delivered by Indian players and those by their Chinese counterparts was as high as 40% in several cases. Several Chinese e-commerce sites display prices in Indian rupee and also did not give an invoice when the goods were delivered. In most cases, cash on delivery option was opted by the buyers, which made it even more difficult for investigators to find out which products were being brought and shopped to what location.