Ease of Doing Business for MSMEs: Traders’ body Confederation of All India Traders (CAIT) on Tuesday said it has written to Commerce Minister Piyush Goyal and Finance Minister Nirmala Sitharaman for ‘violation of laws’ pertaining to Foreign Direct Investment (FDI), Foreign Exchange Management Act (FEMA), and Goods and Services Tax (GST) by Lots Wholesale Solutions (Lots), a wholly-owned subsidiary of Siam Makro Public Company Limited (Siam Makro). Siam Makro is part of Charoen Pokphand Group (CP Group) based in Thailand.
CAIT said Lots, which is reportedly trying to buy business-to-business wholesaler Metro Cash & Carry in India, is operating a B2C business in the garb of cash & carry business violating FEMA and GST laws. The association urged the government for ‘immediate action’ against Lots.
“It is highly regretted that Siam Makro instead of taking the corrective action is planning to buy Metro AG who is looking to exit India by selling the business built on FDI policy/FEMA violations for past several years,” CAIT National President BC Bhartia and Secretary General Praveen Khandelwal said in a statement.
“This way Siam Makro, who itself is a big violator of the law will provide an exit path to another foreign company that has earned its valuation on the basis of its illegal business and at the cost of small merchants and Kirana stores,” the statement added. Lots was launched in January 2017 and currently serves retailers in hotels, restaurants, caterings (HoReCa) segment and service providers in Delhi NCR via three physical stores and a digital store catering to north India.
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“We do not comment on rumours and speculations and we hope for your kind understanding,” said Metro Cash & Carry in response to an email seeking comments on the alleged possible deal with Lots.
Lots violated the most fundamental FDI regulation — foreign companies can’t do B2C retail business in India — by issuing ‘bogus’ (membership) cards to consumers and selling directly to end customers, CAIT said.
According to details on Lots’ website, the company offers membership cards for its registered customers to make purchases at its stores. Retailers and business/institutional customers need to submit their business license/documents to register as a member and get the membership card, according to the company. Lots issue one primary card and four add-on cards per business establishment.
Email to Lots seeking comments for this story didn’t get an immediate reply.
“By the way of day card and add-on cards, Lots is recording the sale in the name of the person whose GST registration is used for billing while the actual purchase has been done by the end consumer and therefore is effectively promoting the fraudulent use of GST registration. The original primary cardholder will not even know that add-on cards have been issued against his primary card,” the statement by CAIT added. The association urged the government to fine Lots in accordance with FEMA’s section 13.
