The Income Tax (I-T) department has uncovered a substantial case of tax evasion totaling around Rs 10,000 crore over a span of three years. The alleged evasion involves online retailers conducting business through popular social media platforms such as Instagram and Facebook.
Notices have been sent to 45 brands operating nationwide, indicating the potential expansion of the investigation to additional companies in the near future. According to The Economic Times, these identified companies are suspected of either completely evading tax payments or significantly understating their incomes. A senior official, commenting on the issue, revealed to the newspaper,
“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.” Notices from the Income Tax department were issued between the last week of October and November 15, addressing the assessment years from 2020 to 2022. The official further explained, “We have issued intimation notices to approximately 45 such e-tailers and plan to extend similar notices to more in the upcoming months.”
These companies, dealing in apparel, jewellery, footwear, bags, and gift items, include well-known retailers leveraging social media for consumer outreach. Some of these entities also partake in international product sales. An official provided additional insight into their sales activities, stating, “They are just selling via Instagram with just a small shop and warehouses and had turnovers over Rs. 110 crore, while they had filed income tax returns of Rs 2 crore.”
Significantly, a notable observation is that the predominant mode of transactions for these online retailers occurred via UPI, enabling the Income Tax department to effectively monitor these financial activities. This disclosure highlights the magnitude of the tax evasion and emphasizes the impact of social media platforms on shaping the business environment for these entities.