E-tail outfits under ED lens for FDI violations
Sep 01 2014 , New Delhi
The agency, according to sources, has received a communication from the Reserve Bank of India regarding a few firms, and took up the rest of the cases suo motu for probe under the provisions of the Foreign Exchange Management Act (FEMA).
A special team of the probe agency, sources said, is working to study the business operations of these firms which are thronging the online retail marketplace.
The sources declined to reveal the identity of the companies as the investigations are at a preliminary stage. According to an official note accessed by PTI, a dozen firms are under the scanner.
There are allegations that the companies have violated the foreign direct investment (FDI) norms of e-commerce sector.
FDI is not allowed in domestic e-commerce co-mpanies conducting B2C (business-to-consumer) transactions while 100 per cent foreign investment is permitted in B2B (business-to-business).
A slew of fund-raising and foray of foreign-based investors in these domestic companies has also prompted the enforcement wing of the finance ministry to look into their operations.
The agency, sources added, has gathered documents about the business incorporations, shareholders and business market models of these firms, which include big capital and small online retail firms which are based in major metropolises.
The probe period for investigating the FDI contributions of these firms under the scanner is before April 2013. Under FEMA rules, a firm or entity found in contravention of the law can be asked to pay a penalty three times of the detected violation.
The probe is expected to finish in a 'reasonable time period' and in few cases the ED could issue final showcause notices soon.