social media sellers: Social media sellers get ‘dislikes’ from I-T department

The income tax department is said to have detected tax evasion of nearly Rs 10,000 crore over a three-year period by etaliers selling goods via social media platforms such as Instagram and Facebook. The department has sent intimation notices to 45 such pan-India brands with more to follow.

They were either not paying tax or had underreported it, ET has learnt.

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“Apart from the large ecommerce companies, we are closely monitoring the shops on Instagram and Facebook and have detected evasion to the tune of about Rs 10,000 crore,” a senior official told ET.

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

“We have sent intimation notices to about 45 such e-tailers and will send notices to more in the coming months,” the official said, adding that none of these are large ecommerce companies.

The 45 include 17 that sell apparel, 11 that sell jewellery, six that sell footwear and bags, five that sell local fashions, and four that sell home décor and furnishings. The rest sell gifts and other items. The list includes some prominent retailers that use social media to reach a larger audience, said the official without disclosing names. Many of them were also sending their products abroad, the person added.

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High sales, low tax

India has over 330 million active Instagram users, the most in the world. The country also has the highest number of Facebook users at over 380 million.

After Covid, there was a surge in the number of retailers selling goods via these platforms that have high user engagement. Officials said these 45 entities have a robust turnover.

Citing an example, the official said that three Mumbai-based sari e-tailers came on the income tax department’s radar after they sponsored a star-studded fashion show.

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

The digital nature of the economy and payments via UPI or net banking are also helping the department track sales figures.

Despite the growing number of people using social media platforms to sell goods, such income is usually not declared and taxes are not paid.

In June, ET had reported that the income tax department had sent notices to many social media influencers, for paying zero or “substantially low” tax despite receiving hefty fees from companies whose products they promoted through their posts.

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