I-T Department Uncovers INR 10,000 Cr Tax Fraud By Sellers On Facebook, Insta

The Income Tax Department of India has reportedly discovered tax evasion of around INR 10,000 Cr over a period of three years by etailers selling goods via social media platforms such as Instagram and Facebook.

The taxman had already sent notices to 45 pan-India brands and more are anticipated to receive notifications for not paying taxes or underreporting, as per a report by ET.

Out of the 45 brands, 17 are in apparel sales, 11 in jewellery, six in footwear and bags, five in local fashions and four in home decor and furnishings. While, the remaining are engaged in selling gifts and various other items. 

The list comprises well-known retailers leveraging social media to broaden their user base, an official said. Besides, many of them were also shipping their products globally.

“They are selling via Instagram with just a small shop and warehouses and had a turnover of INR 110 Cr, while they had filed the return declaring income of INR 2 Cr,” the official said, refusing to divulge further details.

The notices were sent between the last week of October and November 15 and are for assessment years from 2020 to 2022.

India has over 385 Mn Facebook users, the highest globally, constituting approximately 22.1% of the population. Additionally, India leads in Instagram usage, with over 332 Mn active users, as per a recent report. After Covid-19, more retailers started using highly engaged platforms to sell their goods.

The digital economy and payments through UPI or net banking aid the department in monitoring sales figures.

Despite the increasing use of social media platforms for selling goods, such income is often undeclared, and taxes go unpaid.

Meanwhile, the Indian Income Tax Department is investigating potential tax non-payment by the Indian units of Apple, Google, and Amazon. 

Initiated in 2021, the probe focuses on detailed clarifications regarding their transfer pricing practices, with a contemplated tax demand of over INR 5,000 Cr. The companies, including Apple India, Amazon Seller Services India, and Google India Digital Services, have faced rejections of their justifications during the investigation.