Modi government's stringent labelling norms for online shopping don't make sense

S Murlidharan
S MurlidharanJul 12, 2017 | 14:48

Modi government's stringent labelling norms for online shopping don't make sense

The government has served a notice on online trade - come 2018, the maximum retail price, date of manufacture, expiry date et al should be made available on web portals.

In other words, the labelling norms applicable to manufacturers selling through brick-and-mortar stores would also be applicable to online products. On the face of it, the insistence on parity of treatment looks commendable but the devil as always is in the details.


Flipkart, for example, is the marketplace where thousands of sellers offer their wares. Suppose a seller has made available one thousand pieces of a product through the platform, will it be possible for him to specify for each one of them all these meticulous details, especially if they emerged from the production line on ten different dates in various batches?

A physical product and its packaging can contain these details but a virtual one may have to make do with what is possible. Otherwise, both the portal and the manufacturer would go through enormous difficulties.

The portal simply would not have space and the manufacturer the patience and wherewithal to comply with the rules, item by item.

Even if one overcomes these innate difficulties, there would be the sheer impossibility of ensuring that the item shipped is the item ticked online given the homogenous nature of most of the products.

This would further compound the problem. Online labelling not only duplicates the product labelling but also throws up the challenge of the twain meeting at the time of delivery.

Of course the government's heart is in the right place - online buyers should not be shortchanged or given lesser protection than those buying the product manually from brick-and-mortar stores.


In that case it should mandate that the buyers will have to be shown the product by the delivery executive - if the product is past its use-by date, for example, he need not pay cash upon delivery.

And if he has already paid the amount online at the time of placing the order, a refund should be made mandatory.

Online buyers as it is suspend the watchword seeing is believing. They place implicit faith in the claims of the seller on the online portal thus taking a calculated risk. Often, size-based products such as innerwear and shoes do not on delivery conform to the promise and specifications made online.

Some portals entertain returns ungrudgingly while others do so grudgingly. Be that as it may.

The million-dollar question is who is responsible for legal compliances - the portal like Flipkart or the seller using its services? Under the marketplace model that is de rigueur, the portal washes its hands off legal liability on the smug plea that its role is only that of a facilitator accepting orders as well as collecting payments online.

daa_071217021934.jpgWould the online portals take kindly to this? They haven't to the less onerous role of the GST ad hoc tax collector. Photo: Reuters


In the event, the government may have to zero in on the defaulting anonymous seller lurking behind the façade of the portal. They run into thousands. It would be a challenging task for the government to keep a hawkish eye on all these anonymous, invisible sellers. However, they can surely be nabbed through an investigation on the basis of their addresses.

It is this factor that the government weighed in when mandating a one per cent tax collection at source by online portals from sellers so that the latter come under the GST pincer.

Implicit in this mandate, though temporarily suspended during the salad days of GST, is the realisation that portals are in the best position to hold the sellers by the scruffs of their collars.

While the portals may not be responsible for the GST liability of the sellers, they are accountable for supplying the dossiers about the sellers along with a small amount collected by way of tax collected at source (TCS). TCS and tax deducted at source (TDS) enable the tax chiefs to go for the jugular.

One wonders if the labelling requirement that is mandatory starting January 1, 2018 would be directed against the online portals or the sellers.

The government might be tempted to make the portals responsible because it is always easy to deal with a few hundred portals than lakhs of anonymous and invisible sellers.

Would the online portals take kindly to this? They haven't to the less onerous role of the GST ad hoc tax collector.

Last updated: July 12, 2017 | 14:48
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