Big Blow For Shein, Club Factory As Import Of Goods As Gifts Barred

At a time when Indian ecommerce companies are awaiting clarity on draft policy while also juggling it with issues of deep discounting etc, the government has now turned its attention again towards Chinese ecommerce companies such as Club Factory and Shein, who had been caught importing ecommerce orders as gifts to avoid paying duty.

In a notification on Thursday (December 12), Directorate General of Foreign Trade under the ministry of commerce prohibited the import of goods under ‘gifts’.

“Import of goods, including those purchased from ecommerce portals, through post or courier, where Customs clearance is sought as gifts, is prohibited except for life-saving drugs/medicines and Rakhi (a sacred thread tied by a sister to her brother on occasion of Raksha Bandhan).”

The notification further clarified that a gift with rakhi is also prohibited. Hence, the import of goods as gifts with “payment of full applicable duties is allowed”.

Will Chinese Ecommerce Giants See Growth Dip?

Sachin Taparia, founder and chairman, LocalCircles told Inc42, “This will put an end to the misuse of India’s gift clause by many sellers associated with some of the China-based ecommerce apps, who were using this route to send commercial shipments to India and evading duties and IGST.”

“We also hope that with this rule in place, some of the China-based ecommerce platforms will reduce reliance on imports from China and start working with India-based MSMEs which is good for domestic industry,” said Taparia.

It is to be noted that till now, the government allowed the import of goods as gifts up to INR 5000. However, this year, multiple organisations highlighted that this rule is being leveraged by several Chinese ecommerce companies to import goods without paying customs duties.

As a result in June, Mumbai Customs seized about 500 packages belonging to customers of Chinese ecommerce platforms Shein and Club Factory.

Customs officials had alerted other ports of entry about the malpractice and also informed the National Risk Management portal, an alert system for duty evaders. As a result in July, Shein had to shutter its operations partially and began refunding money to customers with pending orders.

The major reason for this was a lull in sales and delivery issues.  Soon, customs officials at the courier terminals in Bengaluru and Delhi had started to stop clearing parcels shipped under the CB-12 (gift and samples) route.

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