Club Factory under scanner for possible GST violations

Chinese e-commerce platform, Club Factory, now appears to be on the tax official's radar for possible violations of the Goods & Service Tax (GST). Two sources confirmed to Entrackr that sleuths from the Directorate General of Goods and Service Tax Intelligence (DGGI) carried out search and survey operations at Club Factory's office earlier this week. 

Subsequently, they also visited the offices of three NCR-based logistics companies who handle the delivery of shipments for Club Factory. These include Softbank-backed Delhivery, XpressBees & EComm Express.

“Officials of the GST department were looking for information relating to the shipments handled by these logistics players on behalf of Club Factory. Amongst other information, the details of select sellers active on the e-commerce platform has also been collected to examine possible non-payment of GST,” said one of the sources on condition of anonymity.

Post collation of data, senior officials from Club Factory, including its directors, Vincent Lou, CFO and other senior employees may be called by the agency for further probe in the matter. 

Club Factory is no stranger to controversy and is fighting multiple legal battles for sale of fake products, banned goods and possible under-invoicing of imports. Earlier this month, it was dragged to Court by French luxury giant, Louis Vuitton for the sale of fake Louis Vuitton luxury products on its platform including counterfeit face masks bearing its trademarks. Recent reports also mentioned possible FEMA violations by the Chinese e-commerce player, which have been brought to the attention of the Enforcement Directorate.

Entrackr queries sent to DGGI, Club Factory, Delhivery, Ecom Express and Xpressbee on Monday didn’t elicit any response. We will update the story as and when they respond.

Despite the Indian government's ban on it effective June 29, 2020, Club Factory has continued to run its operations. A recent report in the Economic Times had exposed that the firm continues to selectively accept and ship orders. 

The report cited user inputs and ET's own analysis to share that orders are being accepted even 10 days after the ban. The report also stated that Club Factory could be circumventing  the ban by offering customers alternative links to download their apps. The e-commerce marketplace continues to provide a link on its official Instagram handle for Android users to directly download its app. 

Post the ban announced last month, all logistics companies, except Delhivery have opted to stop working with Club Factory. Entrackr has verified Delhivery’s ongoing engagement with the Vincent Lou-led company by reviewing orders placed on the platform on 6th July ‘20 and which have been delivered to the buyers by Delhivery.