The Enforcement Directorate (ED) on Thursday raided offices of some sellers operating on Amazon and Walmart-owned Flipkart for alleged violations of foreign investment norms and prevention of money laundering Act (PMLA).
Official sources said that searches took place at 19 locations in New Delhi, Gurugram, Panchkula, Hyderabad and Bengaluru.
Some reports indicate that Appario Retail, Shreyash Retail, Darshita Retail and Ashiana Retail are some of the entities under the scanner. However, this could not be independently verified.
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Sources said that there are complaints that these sellers have been importing products from China by routing them through other locations by paying lesser import duties. There are also complaints regarding under-invoicing.
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A source said that since Chinese consignments are held for long at ports for security checks, several sellers route their products through some other locations for faster clearance.
When contacted, both Amazon and Flipkart declined to comment. Sources said that since the searches were made on sellers and not the e-commerce firms, they may not be aware of all the details.
Official sources said there have been several complaints from affected parties that certain sellers are being given preferential treatment by the e-commerce firms and even prices of the products were being directly or indirectly influenced by them.
As foreign direct investment (FDI) is not allowed in inventory-based e-commerce, firms like Flipkart and Amazon operate on the marketplace model. This means they do not keep their own inventory but offer an internet-based platform for sellers to sell their products. However, Amazon and Flipkart also have offline B2B stores where FDI is allowed. Through these stores they sell products to sellers, who then sell those products on their platform.
To check any FDI violation, the government has put certain additional curbs. For instance, the marketplace platform cannot have stakes in seller entities. Further, sellers on their platform cannot source more than 25% of goods from their B2B stores.
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