LocalCircles seeks crackdown on 'gift' channel imports by cross-border ecommerce players

Citizen engagement platform LocalCircles has written to the Central Board of Indirect Taxes and Customs to enforce laws at all customs ports to prevent the misuse of the ‘gift’ channel by cross border ecommerce companies operating in India. 

Mumbai port has already clamped down on imports entering India through the gift channel, leading to the hold-up of bulk orders routed through the channel by Chinese-origin cross-border players like SheIn and ClubFactory. However, other ports such as Delhi, Chennai, Cochin, Hyderabad and Kolkata continue to see an influx of such orders.

The letter from LocalCircles also highlights that there are no checks on imports under ‘gifts’ handled by the postal services.

Apart from SheIn and ClubFactory, a few other cross border players such as AliExpress have also been found misusing the gift channel, which does not tax goods worth under Rs 5,000 that are sent to families by NRIs (non resident Indians). This provision has been under review with the government considering linking each parcel to a specific Aadhaar number, requiring KYC of the recipient, according to media reports.

The volumes of ClubFactory fell by one third while SheIn had to partially suspend operations earlier this month due to a strong clampdown by the Mumbai port. The authorities held back close to 500 packages imported by a seller on SheIn. An order by the Mumbai Customs to put imports on hold in December last year led to a 55% slide in volumes. 

Apart from this, cross border ecommerce companies have also been found to under-declare the value of items being imported, thus inviting lower duties. 

“We would like CBIC to intervene against the malpractice and a long term solution will be to fix a flat rate of customs and GST at 42.05%,” said Sachin Taparia, founder of LocalCircles.

Indian sellers on multiple ecommerce portals and industry bodies for ecommerce have also raised the issue at stakeholder meetings on the draft national ecommerce policy.

In a related development, the Economic Times reported today that customs officials at the Bengaluru and Delhi airports have stopped clearing parcels being shipped through the 'gift' route.

The crackdown by customs officials also comes at a time when the Central Board of Indirect Taxes and Customs is reportedly considering amending the CB-12 rule, which caps the number of gifts an individual can receive from abroad.