"Apart from predatory pricing the online retail companies take undue advantage of the wide variation in sales tax and local taxes by operating from low tax geographical regions," Consumer Electronics and Appliances Manufacturers Association (CEAMA) said in a statement.
This will result in lower sales tax collection in several states. This can be corrected by introduction of GST, till then the leakages will remain, it added.
On allowing FDI into e-commerce, CEAMA said: "On the one hand the government is rightly against FDI in multi-brand retail whereas allowing FDI in e-commerce industry can only cause lasting damage to the entire traditional channel fabric of the country."
Traditional channels employ a huge number of people and is also a very successful self-employed model for the youth, it added.
Unlike the western countries where traditional channel does not have strong presence, India is very much dependent on the neighbourhood stores, CEAMA said.
On October 8, Commerce and Industry Minister Nirmala Sitharaman had said that the government will look into the concerns and take a call on whether more clarity is required on e-commerce retail business.
E-retailing firm Flipkart in its 'Big Billion Day' on October 6 had offered steep discounts on various products. It has raised concerns among small and big traders that such campaigns would badly affect players in the traditional retail market.