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Confederation of All India Traders (CAIT) has requested  Minister of Commerce and Industry, Shri Piyush Goyal for strict action against LOTS Whole Solutions owned by SIAM Makro Public Company Limited for blatantly violating the FDI Policy.

Confederation of All India Traders
“Vyapar Bhawan
925/1, Naiwala, Karol Bagh, New Delhi- 110005.
phone: +91-11-45032664, Telefax: +91-11-45032664′
Email: teamcait@gmail.com Website: www.cait.in

Ref. No.: 3454/1/50

Shri Piyush Goyal Ji,
Hon’ble Minister for Commerce & Industry,
Udyog Bhawan,
New Delhi

Subject: Request for Strict Action against Siam Makro Public Company Limited owned LOTS wholesale solutions (https://www.lotswholesale.com) for blatantly flouting the FDI Policy.

Dear Sir,

1. This is to bring to your kind attention the flagrant violations of the FDI Policy being resorted to by the LOTS wholesale solution (hereinafter referred as “LOTS”) a wholly-owned subsidiary of Siam Makro Public Company Limited, Thailand’s leading Cash & Carry operator part of CP Group, which started its B2B operations in India since January 2017. Since beginning, LOTS, has been violating provisions of the FDI policy for Cash and Carry Trading, by engaging in B2C Retail Trade/Multi-brand retail trading (MRBT) and selling directly to customers for their personal consumption, which is prohibited for foreign entities like LOTS. This is being done blatantly across the various store at present located in Delhi. [The video evidence showing the actual nature of their business as 82C instead of wholesale/cash and carry is contained in the enclosed USB drive. (In USB drive- files with name starting with ‘AAA”)]

2. The FDI Policy, in Clause 5.2.15, permits 100% FDI via Automatic Route in “Cash and Carry Trade/Wholesale Trading (WT)”. According to the FDI policy, WT means the sale of goods to retailers, other wholesalers, industrial, commercial, institutional, or other professional business users and related subordinated service providers. The FDI Policy clearly states that the yardstick to determine whether the sale is wholesale or not is the type of customer to whom the sale is made. The policy additionally makes it clear that wholesale trading would imply sale only for the purpose of trade, business and profession and not for personal consumption. The policy further stipulates that wholesale trading would include resale, processing and subsequent sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B E-Commerce.

3. Clause of the FDI Policy lays down guidelines/conditions for wholesale trading. First, for undertaking wholesale trading, requisite permits/licenses are required under relevant Acts/Rules/Orders. Second, and more importantly, the clause mandates that only such a sale would be termed WT which is done with valid business customers. Further, valid business customers have been defined to include entities with applicable tax registration (and not simply “tax registration“) directly, entities holding trade licenses under Shops & Establishments Act reflecting that the person holding the license is himself engaged in a business involving commercial activity, entities holding permits/ licenses for undertaking retail trade and institutes incorporated and registered as a society or public trust for their self-consumption.

4. LOTS has blatantly violated these conditions as has been showcased in the following paragraphs.

5. Violating the FDI policy by selling goods to end customers who do not have any Tax Registration by making invoices using some fabricated GST numbers that LOTS has access to or by issuing Supplementary Registration Cards:

a. LOTS has been regularly violating the FDI Policy by making sales to persons who do not (i) hold trade licenses under Shops & Establishments Act or permits to undertake retail trade; (ii) engage in a business involving commercial activity, as envisioned in Clause (b) (II) and (III); (iii) even hold a non-applicable GST number. Such violation is carried out by LOTS by issuing 4 (four) registration cards/ add-on cards/ supplementary cards along with Primary Registered Card to people who are not related to the business activities prescribed in the FDI policy.

b. Notwithstanding our submission in point (a) above, about registering customers on the basis of non-applicable tax registration, even if one assumes that LOTS is registering all customers with applicable tax registration, the issuance of 4 (four) add-on/ supplementary cards would mean that at least 80% of their customers are not qualified to procure the goods from them as they do not hold the applicable tax registration and/ or do not hold other registrations as prescribed in the FDI policy. LOTS encourages B2C customers to use this route (using one of the four cards issued to someone else) to make purchases, while knowing that the cardholder is not a bonified purchaser. LOTS is encouraging such behavior to enhance its sales.

c. LOTS’s business practice of issuing add-on/ supplementary cards to non-qualified customers, who are actually end consumers, is itself a sufficient ground to hold them in violation of the FDI policy/ FEMA and take punitive action against them.

d. The video evidence showing their practice of issuing add-on cards is captured in the multiple ..Videos contained in the enclosed. (In USB drive- files with name starting with “CCC”).

e. It may also be noted that while this is a blatant case of violation of the FDI policy/ FEMA, it is also a serious offence under the GST Act. Based on LOTS’s modus operandi, it is apparent that it is recording sale of goods to merchants under a GST registration of some other business entity and therefore is effectively promoting the fraudulent use of GST registration.

6. Violating the FDI policy by selling goods to retail/end customers who do not have the “Applicable Tax Registration”:

a. The FDI policy clearly stipulates that foreign companies engaged in the business of ‘Cash and Carry” trade can only sell goods to certain types of business users who are engaged in wholesale or retail trade. The policy has made it crystal clear that a company engaged in “Cash & Carry” trade must verify and ensure that it sells goods to valid business customers (and not to the end consumer). Therefore, the policy has mandated “Cash and Carry” wholesale traders like LOTS to verify the “Applicable Tax Registration” of its customers who are supposed to be wholesalers or retailers. This very clearly means that a “Cash & Carry” trader would have to check and ensure that its customer presents the appropriate tax registration to establish that it is a genuine wholesaler or retailer. By mandating the “Cash & Carry” entities to verify the applicable tax registration, FDI policy has put the onus of such verification on the “Cash and Carry” companies and any non-compliance of such verification would be tantamount to non-compliance of the FDI policy.

b. LOTS has been registering customers only on the basis of GST number, without verifying if it is an applicable GST number or not and without verifying whether such GST number holders are procuring goods for their personal consumption or for resale to permitted business activities like wholesale, retail or institutional consumption.

c. LOTS registers professional/ service providers/ business unrelated to retail/ wholesale trading just because they are GST holders for the purpose of their own business. Such business/ individuals who are not engaged in wholesale/ retail trading activities are able to register with LOTS and procure the goods purely for their personal consumption. For example, a doctor or a lawyer would have GST number but will not be connected with wholesale/ retail trading by any stretch of imagination. There are a large number of such example where the customer would have a “Tax Registration” but not “Applicable Tax Registration”. The test of such applicable tax registration would lie when LOTS carries out KYC of the customers to ensure that their tax registration is for , the purpose defined in the FDI policy i.e. (i) wholesale trade, (ii) retail trade and (iii) institutional

d. An evidence to establish such non-compliance in which LOTS’s Sales staff is caught providing the LOTS Card to non-wholesale, non-retail GST holders is enclosed. (In USB drive files with name starting with “CCC”)

7. Violating the FDI policy by selling goods to walk-in end consumers who do not have any tax registration by issuing them temporary registration:

a. LOTS also issues temporary pass/ registration to walk in customers who do not have any kind of tax registration/ applicable tax registration or registration of their shop/ retail point/ institution etc.

b. Such practice is not only a blatant violation of the FDI Policy but also a business practice that is arbitrary and wholly erroneous in law. To put it mildly, LOTS enables walk-in end consumers to procure goods from a “Cash & Carry” wholesale store and gives such B2C (MRBT) transactions the color of wholesale trading.

c. The video evidence showing their practice of issuing temporary cards is captured in the videos contained is enclosed. (In USB drive files with name starting with “CCC’)

d. Once again, apart from being a serious FEMA violation, this is also a serious violation of the GST Act as these temporary passes carry the GST number of some other entity, which is not at all involved in the transaction.

e. This is a prevalent violation across multiple stores where LOTS operates and is not a one-off instance at all. LOTS has implemented these processes systematically wherein there are no controls or checks over these violations. We have obtained multiple evidence of these violations and from across the country.

8. By carrying out the above mentioned business practices, LOTS has opened up an opportunity prejudicially for itself at the cost of Kirana stores and created a backdoor channel for indulging in Multi Brand Retail Trading (MRBT), an activity expressly prohibited by the FDI Policy. It is our submission that strong punitive action must be taken against LOTS for such illegal, fraudulent, and unethical business practices.

9. Sir it is our prayer to your good office to prohibit foreign entities from ruthlessly destroying the indigenous retail industry comprising majorly of small and medium Kirana stores that are languishing in the aftermath of the COVID-19 pandemic but also in the wake of predatory pricing and deep discounting by these such foreign players. (A copy of comparison of price of some items, procured on sample basis, between LOTS and other retailers is enclosed as Annexure-1). We request your good office to penalize LOTS for its wrongdoings before it causes further damage to our over 8 Crore traders and their families. To verify our complaint and evidence, we would suggest you to seek the records and books of accounts of LOTS that are mandated to be maintained under Clause (f).

10. We request you to pass strict directions to prohibit LOTS from carrying on MRBT/ B2C Retail Trade in the garb of B2B Wholesale Trade. We would also like to suggest that a penalty to the tune of t 3,000 Crore be imposed on LOTS which is three times its investment in India (investment as of 2018 is Rs. 1,000 Crore as reported in Economic Times “Thailand’s Siam Makro to invest Rs. 1,000 crore in India”, January 19, 2018). This penalty is in accordance with Section 13 of the Foreign Exchange Management Act (FEMA), 1999.

11. Sir, we would like to regretfully submit that India is being treated by large global companies such as LOTS as “Poor person wife”, and they are taking full liberty without having any respect for the Indian rules and regulations such as FEMA, Indian FDI laws, Competition laws, enforcement authorities etc. They openly and fearlessly violate Indian laws with confidence that their big size will ensure that the Government of India cannot take any action against these companies. It is important that the strictest of actions is taken against these large global companies so that they all become accountable for their actions and take compliances with laws much more seriously. We look forward to strict and prompt action against LOTS and all the other companies who are indulging in such blatant violation of Indian laws.

Thank you. With kind regards
Yours truly

Praveen Khandelwal
National Secretary General
Contact Cell : +91- 9891015165

Copy to,

1) Sh. Anuraag Jain, Secretary, Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry, Udyog Bhawan, New Delhi — 110011.

2) Sh. Rohit Kumar Singh, Secretary, Department of Consumer Affairs, Krishi Bhawan, New Delhi – 110001.


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July 2024