The Indian government has announced that “gift” packages from abroad will no longer be allowed to come in without the collection of import duties, in a move that is likely to affect some cross-border e-commerce.

The move closes a loophole that Chinese shopping apps such as Club Factory, Shein, AliExpress, and a few others have allegedly exploited by dispatching e-commerce packages as gifts.

Previously, ‘gifts and samples’ valued under ₹5,000 (US$70.47) were exempt from import tax, but the revised Foreign Trade Policy 2015-20 now prohibits the import of such goods, including those purchased from e-commerce portals.

Following the notification issued by the Directorate General of Foreign Trade (DGFT), containers which sought customs clearance as gifts – except for life-saving drugs, medicines and Rakhi (a bracelet or talisman that sisters tie around their brothers’ wrist during the festival of Raksha Bandhan) – are now completely banned.

Minister of Commerce Piyush Goyal has said that all online shopping services will have to register locally by June 2020 to ensure legal accountability.

The move is considered a reaction to the outcry from Indian traders who claim the Chinese apps have taken away business thanks to lower prices that were only possible because of the (alleged) avoidance of import duties and other taxes and regulations.

“Chinese goods are coming into India at 50% to 60% below the price of Indian sellers,” said a spokesperson for the All India Online Vendors Association, which represents 3,500 local traders. “They are hurting small manufacturers and costing millions of jobs.”

Chinese retail brands have been aggressive in claiming a share of India’s online retail market over the last few years and are now entrenched in a list of options long dominated by homegrown Flipkart and its American rival Amazon. “India is one of the main markets of focus for China’s cross-border e-commerce players due to consumer demand for cheap products and the potential for high economic growth,” Anindya Ghose, Heinz Riehl professor of business at New York University, told Quartz India.

The current leader is Hangzhou-based fashion e-tailer Club Factory, which entered India in 2016 and has since grown rapidly – the market accounts for 60% of the company’s overall revenue. In the fashion e-commerce segment, the popularity of the Club Factory app was second only to Myntra, a homegrown fashion e-tailer owned by Flipkart, which has been around since 2007.

Sourced from Business Insider India, Quartz India, Nikkei Asian Review