Online Sellers On Social Media Under The IT Department’s Scrutiny Uncovers Rs 10,000 Crore Tax Evasion

The income tax department has reportedly uncovered tax evasion amounting to nearly Rs 10,000 crore over a span of three years by retailers selling products through social media channels like Instagram and Facebook. 

These entities were found to either not pay taxes or under report them. A senior official said, “In addition to scrutinising large e-commerce firms, we are closely monitoring businesses on Instagram and Facebook, uncovering evasions totalling about Rs 10,000 crore.”

Notices of intimation have been dispatched to 45 pan-India brands, and additional notices are expected to be issued in the coming months. These notices were dispatched from the last week of October to November 15 and pertain to assessment years from 2020 to 2022. 

The official stated, “We have issued intimation notices to approximately 45 e-tailers and plan to extend this to more in the upcoming months,” emphasising that none of them are significant e-commerce corporations.

Among the 45 entities, 17 are engaged in apparel sales, 11 in jewellery, six in footwear and bags, five in local fashions, and four in home décor and furnishings; the remainder focus on gifts and various items. 

The official highlighted that the list comprises well-known retailers utilising social media for broader outreach, although specific names were not disclosed; additionally, several were noted to export their products internationally.

The Social Media Reach In India

India currently boasts more than 330 million active Instagram users, the highest globally and also registers over 380 million Facebook users. 

There was a notable increase in retailers leveraging these platforms with substantial user engagements following the COVID-19 pandemic; officials pointed out that these 45 entities exhibit a robust turnover.

Giving an example, the official mentioned the case of three Mumbai-based saree e-tailers who attracted the attention of the income tax department by sponsoring a high-profile fashion show. 

The official revealed, “They operate through Instagram with a small shop and warehouses, reporting a turnover of Rs 110 crore, while their income tax return declared income of only Rs 2 crore.”

However, further details were withheld, but the digitalisation of the economy and transactions through UPI or net banking are said to be aiding the department in monitoring sales figures. 

IT Department Cracking The Whip

It has been noted that despite the increasing use of social media platforms for selling goods, such income is frequently undeclared, and taxes go unpaid; in June, it was reported that the income tax department had issued notices to numerous social media influencers, noting their payment of either zero or “substantially low” taxes despite receiving substantial fees from companies whose products they endorsed in their posts.

How Social Media Has Given Birth To Numerous Success Stories

Social media has revolutionised communication, information access, and business interaction. 

Social media – online platforms and websites facilitate the creation, exchange, and interaction of information and content. These platforms typically support user-generated content, allowing individuals and organisations to share their views, opinions, images, videos, and various forms of media. 

Today, it has become a crucial component of modern communication, connecting individuals globally and fostering engagement in diverse activities. Some of the widely utilised platforms include LinkedIn, Facebook, Twitter, Instagram, YouTube, and Snapchat.

The societal impact of social media is undoubtedly deep, altering how we communicate, access information and business interaction. Social media has opened new avenues for businesses to connect with their target audience, enhance visibility, and engage with consumers. 

Some of the important aspects of social media are Brand awareness, Customer engagement, Brand identity and image, Content distribution, and Influencer marketing – Influencer marketing has garnered substantial momentum on social media. Brands collaborate with influential individuals on platforms like Instagram, YouTube, or TikTok to endorse their products or services.

Here are the top five brands that have been performing well recently and have leveraged the reach of social media –

1. Zomato – Zomato, popular food delivery and restaurant discovery platform, has implemented a successful social media strategy to engage with its audience. It has a substantial following of 829k on Instagram. Zomato has stepped up its game with engaging, catchy, and trending advertisements and campaigns across all social media platforms; here are some key elements of Zomato‘s social media strategy-

• Customer engagement
• Promotional campaigns
• Brand advocacy and influencer collaborations
• Trendy and engaging content

By implementing these strategies, Zomato effectively engages with its audience, builds brand loyalty, and establishes itself as a trusted and entertaining source for food-related content.

2. Mamaearth – Mamaearth, with a whopping following of 1.2 million, is a popular personal care and beauty brand and has employed a successful social media strategy to connect with its audience. 

Mamaearth emphasises authenticity and transparency in its social media communication; they share behind-the-scenes content, provide insights into their manufacturing process, and highlight their natural and toxin-free product formulations. Here are some critical elements of Mamaearth’s social media strategy –

• Authentic and transparent communication
• Contests and product giveaways
• Social listening and responsiveness
• Social impact and sustainability
• Influencer promotional content

Through these strategies, Mamaearth engages with its audience, positions itself as a trusted natural skincare brand, and builds a community of loyal customers who resonate with its values and product offerings.

3. Amul – Amul, the well-known dairy cooperative brand, has implemented a successful social media strategy to engage with its audience and has gained a following of up to 411 k. 

Amul is famous for its creative and witty advertisements, and this extends to its social media presence as well; it creates visually appealing and humorous content that resonates with its audience; some key elements of Amul’s social media strategy-

• Creative and humorous content
• Social commentary
• Engaging contests and campaigns
• Visual storytelling

Their creative and humorous approach, combined with social commentary and visual storytelling, has contributed to their success in leveraging social media as a powerful marketing tool.

4. Lenskart – Lenskart, a popular eyewear brand with a following of 693k followers, has implemented an effective social media strategy to engage with its audience. 

Lenskart‘s social media strategy revolves around showcasing eyewear as a fashion and lifestyle accessory; here are some critical elements of Lenskart’s social media strategy:

• Lifestyle-focused content
• Seasonal and trendy campaigns
• Interactive and engaging content
• Customer reviews and Testimonials

Through these strategies, Lenskart effectively engages with its audience, positions itself as a fashionable eyewear brand, and creates a community of eyewear enthusiasts.

5. Sabyasachi – Sabyasachi, renowned Indian fashion designer, has implemented a distinctive social media strategy to engage with its audience. 

Sabyasachi’s social media strategy revolves around showcasing its signature designs, including intricate bridal wear, traditional Indian ensembles, and luxury fashion; some key strategies:

• Showcasing signature designs
• Story-telling through captions
• Collaborations with celebrities
• Exclusive previews and launches

Sabyasachi effectively connects with its audience, establishes itself as a leading luxury fashion brand, and nurtures a community of loyal customers and brand advocates through social media.