If you ordered a ‘gift’ from Club Factory, Shein or Ali Express — it might not make it through customs in India

• A new amendment to India’s foreign trade policy restricts companies from importing ‘gifts and samples’ duty-free into the country.
• The move is aimed to keep companies like Shein, Club Factory and Ali Express from using the provision to evade tax.
• They have reportedly been underbilling items to get them past customs without having to pay the import duty.

The Indian government is cracking down on Chinese e-commerce companies like Ali Express, Club Factory and Shein. They will no longer be able to avoid paying customs duty, even on ‘gifts and samples’ valued under ₹5,000.

Until today, such items were exempted from scrutiny. Not anymore. “Import of goods, including those purchased from e-commerce portals, through post or courier, where Customs clearance is sought as gifts, is prohibited,” said the notification by the Department of Commerce.

“Import of goods as gifts with payment of full applicable duties is allowed,” it said, amending the Foreign Trade Policy 2015-20.

Rakhis, but not the gifts related to it, will still be allowed under Section 25(6) of the Customs Act 1962 which states, “..no duty shall be collected if the amount of duty leviable is equal to or less than ₹100. ”

How does it affect online shopping?

While the new regulations apply to all e-commerce companies, the move is angled as curbing the tax evasive practices of Chinese e-commerce platforms. Shein, Club Factory and other companies have previously come under scrutiny for misusing the duty-free provision.

Since there was no limit on the number of gifts an individual can receive, the companies were reportedly underbilling their shipments to get them through customs without having to pay any import duty.

In June, the Mumbai courier terminal seized 500 parcels addressed to Shein and Club Factory customers as per an ET report. A move that led to Shein partially shutting down its India operations.

The companies shifted airports in order to keep receiving consignments but a month later, customs officials in Bengaluru and Delhi followed suit — refusing to let any ‘gifts and samples’ into the country.

The amendment was originally proposed as a part of the draft e-commerce policy back in February. Now that it’s an official part of the foreign trade policy, items ordered online from foreign platforms are about to get more expensive.

The Indian government is also mulling over introducing a 50% tax and customs duty on products bought from Chinese e-commerce platforms — but has yet to finalise the exact rates.

See also:
Amazon may have found a way around India’s new e-commerce rules

The Indian government may revisit plans to curb e-commerce discounts: Report