CAIT urges Jaitley to make specific rules for direct selling businesses

The Confederation of All India Traders (CAIT) has asked the Centre to make specific rules and regulations for the direct selling industry in the country.

In a communication sent to Union Finance Minister Arun Jaitley on Thursday, the traders body also said there is mass scale of tax avoidance in direct selling business. Therefore, a policy needs to be framed to bring direct sellers under the tax net.

CAIT National President B C Bhartia and Secretary General Praveen Khandelwal, in communication sent to Jaitley, said goods sold by such companies to its members or franchisees are taxed at origin stage only. After that the said goods travel through channels but neither the tax is charged nor any sale statement is filed with the tax authorities. The current value-added tax (VAT) system is a destination-based taxation system and the ultimate consumer has to pay the tax while each sale in supply chain attracts VAT. This is a major lacuna in direct selling business. Since the Goods and Services Tax is likely to be enforced from April 1, 2016, adequate provisions must be made in the Act to bring the sector under its ambit, said both leaders.

Bhartia and Khandelwal said currently, the sector is regulated by the Prize Chits and Money Circulation Schemes Act which is not the right Act. It is time to regulate the sector before it blows into a big thing and a separate legislation is required.

Considering mass potential of this business, Countries such as the UK, the US, Singapore, Malaysia, Thailand, Korea, Indonesia, China, Vietnam, Japan and Taiwan do have specified legislation for direct selling business.

The sector contributes to self-employment opportunities to more than fives million people in the country. Nearly 60 per cent of these direct sellers are women.

According to an estimate, the industry has the potential to reach a size of Rs 64,500 crores by 2025 with a potential to employ nearly 1.8 crore direct sellers.

With almost 1.1 crore of them as women. About 407 Companies are conducting business of direct selling in the Country.

It is learn that Ministry of Consumer Affairs has constituted an inter-ministerial Committee on this issue but so far nothing much has happened in this direction. " A delegation of the CAIT will soon meet Union Consumer Affairs Minister Mr. Ram Vilas Paswan and will urge for early steps in this direction.