The petition filed last month has alleged online market places, such as Flipkart, and Amazon of violating the FDI policy.
Delhi High court on Wednesday has sent a notice to Union Government in response to a petition filed by All India Footwear Manufacturers and Retailers Association that alleges the ecommerce companies of violating the existing foreign direct investment (FDI) regulations, an ET report has said.
A Single Bench of Justice RS Endlaw has issued the notice and a reply to the notice is sought within two weeks.
The petition filed last month has alleged online market places, such as Flipkart, and Amazon of violating the FDI policy.
The plea states that the e-commerce companies have created a complex business structure behind which they are evading the law, adding that the entities are taking an undue advantage of the footwear retailers and manufacturers present in the physical world as they are giving discounts on the products, which has left the brick-and-mortar retailers only as a trail room or showrooms.
Senior Advocate AM Singhvi presented the case for the petitioner. He argued that e-retailer business functions in the same as offline business; e-retailers accept payments, make deliveries, take returns, and make refunds.
FDI policy prohibits foreign investment in retail e-commerce or traditional multi-brand retail. However, 100% FDI is allowed in business-to-business (B2B)segment.
With the expansion of their businesses, marketplaces like Snapdeal, Flipkart and Amazon have adopted a model in which they provide a platform for retailers and distributors to sell products to customers. However, the transactions by these online mongals are taxed on the basis of Business-to-Customer business, which means that they should directly sell the product to the customer.
On this, Singhvi said various state governments have treated these transactions by ecommerce marketplaces as sales and have accordingly issued demand notices.
The next hearing is on October 4. The petition has impleaded the Enforcement Directorate, Reserve Bank of India, Department of Industrial Policy and Promotion,Ministry of Finance and the Ministry of Corporate Affairs as Respondents.
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