The Indian Income Tax Department has intensified its efforts to combat tax evasion and underreporting of earnings by online retailers, particularly those operating through social media platforms such as Instagram and Facebook (NASDAQ:META). A recent sweep by tax officials has revealed approximately ₹10,000 crore in undeclared revenue from e-tailers over a period spanning three years.
The crackdown targeted 45 brands across various sectors, including apparel and jewelry, for discrepancies in reported earnings during the assessment years from 2020 to 2022. The digital shift after the COVID-19 pandemic, which saw an increase in online shopping and global product shipping, is a significant factor behind the surge in tax evasion cases. Notably, one retailer reported a turnover of ₹110 crore (INR100 crore = approx. USD12 million) but filed only ₹2 crore in income.
The adoption of digital payment methods like UPI and net banking has given tax authorities more leverage to closely monitor these online sales activities. As a result of these findings, intimation notices have been dispatched to the brands involved.
In addition to the actions against individual retailers, the Income Tax Department's probes into transfer pricing practices at major tech companies such as Apple (NASDAQ:AAPL) India, Amazon (NASDAQ:AMZN) Seller Services India, and Google (NASDAQ:GOOGL) India Digital Services have uncovered potential tax demands exceeding ₹5,000 crore. Investigations indicated that justifications provided by these companies were rejected during the scrutiny process.
Concurrently, businesses are re-evaluating their Goods and Services Tax (GST) computations for past transactions. This comes in the wake of over 20,000 notices issued that have implications for mergers and acquisitions considerations since the prior year.
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