Dalelorenzo's GDI Blog
31May/210

Flipkart restructured biz model to exercise control over inventory, retail prices, alleges CAIT

Traders' body Confederation of All India Traders( CAIT) on Thursday urged the government to investigate the "blatant" breach of FDI and taxation rules by ecommerce major Flipkart, alleging that the Walmart-owned firm had "creatively" restructured its business pose to exercise control over stock-take and retail prices.

Flipkart was flouting FDI policy "by creatively structuring its marketplace business model and creating a facade in order to exercise control over inventory and retail prices, a practice expressly prohibited by the FDI Policy on ecommerce", CAIT said in a letter to Commerce and Industry Minister Piyush Goyal.

This warrants an immediate investigation and strict action from the Indian government, including tax governments, CAIT added.

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When contacted, a Flipkart spokesperson said as a marketplace, Flipkart's endeavour has always been to use technology and innovation to facilitate the buying and selling between lakhs of local vendors/ MSMEs and over 300 million purchasers in a transparent and effective manner.

"We will continue to operate with the same transparency, and in line with India's FDI and regulatory fabric, while generating brand-new support opportunities and jobs...With more than 3 lakh vendors on the Flipkart Marketplace, our vendor marriages are an integral part of the ecosystem, " the spokesperson said.

In 2018, Walmart had invested $16 billion for acquiring a 77 percentage stake in Flipkart. Last-place year, the US retail giant contributed a $1.2 billion fund round in the Indian e-commerce company.

CAIT noted that in 2019, Flipkart had created a two-tier model consisting of ADs and Diamond Sellers( DSs) and that currently, there are 20 DSs and 10 ADs in place.

These 30 entities were created for the sole purpose of granting control of inventory and rates to Flipkart, and to "act as an eye-wash and( to) disconcert the authorities concerned from taken due note of the absolutely illegal activities" being undertaken by Flipkart and these entities, it alleged.

CAIT alleged that the ADs and DSs exist only for GST compliance and to service their plan with Flipkart and cede control for a minuscule cost.

"Flipkart has created a plan of replacement business partners with the sole purpose of bypassing the FDI Policy and destroying the very merchants the policy aims to protect."

"On behalf of over 8 crore merchants, we are writing to you to initiate an immediate inquiry and investigation into the utterly illegal business practices of Flipkart and its cases of violation of the FDI Policy, GST, Income Tax and more serious money laundering concerns, before it wreaks ravage in the lives of our members, the families of such, and the overall retail industry, " it said during the letter.

Edited by Megha Reddy

Read more: yourstory.com

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