Snapdeal lodges FIR against GoJavas’ ex-promoters; due diligence obstructing merger with Flipkart

In July 2016, IOS reported about how former Jabong executives are under scanner for corporate governance violations. At the centre of these violations was Jabong’s logistics arm GoJavas, in which Snapdeal had a majority stake of about 50%.

Snapdeal sold these shares to Pigeon Express that acquired GoJavas in August 2016. The online marketplace had hold on to the logistics company’s shares for a long time but sold it off in order to get rid of bad investments and clean its slate.

As per the latest news reports, Snapdeal has lodged a First Information Report (FIR) againstex-promoters of Quickdel Logistics, GoJavas’ parent company with the Economic Offences Wing (EOW).

The complainant is Krishna Mohan Chaudhary, the director of Snapdeal’s legal team. And the GoJavas promoters mentioned in the FIR are Abhijeet Singh, Praveen Sinha (co-founder of Jabong), Randhir Singh and Ashish Chaudhary.

What are the charges?

The FIR report dated 23rd June 2017 read as,

“The complainant was induced into buying shares of Quickdel from Quickdel and Randhir Singh and Praveen Sinha. The complainant acquired 49.99% shareholding in Quickdel by paying an amount of Rs 119.99 crore to Randhir Singh and Praveen Sinha and Rs 237.27 crore to Quickdel.”

Snapdeal has accused the ex-promoters of:

• Cheating
• Forgery
• Conspiracy
• Criminal breach of trust
• Criminal misappropriation of funds

Pigeon Express too has contributed to the list of complaints.

“We added our list of additional complaints to the one filed by Snapdeal in December 2016. We wanted to inform the government of the discrepancies we noticed during the due diligence of the company and after takeover. We are not sure why this was not done earlier by Snapdeal,” a senior manager from Pigeon Express disclosed.

Is this side-effect of the due diligence process related to Snapdeal-Flipkart merger?

Snapdeal is waiting for the acquisition deal with Flipkart to finalize. It was being speculatedthat the objections raised by minority shareholders is hindering the deal. But sources have revealed that it is the due diligence process that is causing the delay, not the investors.

An insider disclosed,

“Of course, the smaller shareholders are not happy since they want a larger exit payout—but they have no power to hold up the deal. The sale will go through irrespective of whether the smaller investors are on board or not.”

So it looks like that Snapdeal’s major concern at the moment is cleaning up its financial report, rather than appeasing small shareholders. It might explain the reason behind filing a FIR against former GoJavas executives after dilly-dallying it.

The diligence process is turning out to be difficult than expected for Flipkart, which is why the Flipkart-Snapdeal merger is taking so long to materialize.   

What’s interesting is that many had raised concerns over Snapdeal’s interest in buying GoJavas and Jabong last year as they were entities full of red flags. But out of nowhere Flipkart acquired Jabong, which was under scanner at the time of acquisition. Now both the Indian etailers are negotiating sales talks, for which Snapdeal’s books are being scanned by Flipkart, including GoJavas investments and FreeCharge.

Myntra records 56% growth during EOR sale

Online retailer Myntra today said 1.3 million customers placed orders for 4.2 million products during its three-day End of Reason (EOR) sale, helping sales register 56 per cent growth over last years edition.

The sale number includes those of Jabong, which was acquired by Myntra in July last year for USD 70 million. “The sixth edition of EOR sale has by far been the biggest along with Jabongs participation. EOR sale has enabled us to expand our base,” Ananth Narayanan, CEO of Myntra and Jabong, said in a statement.

During the sale (held between June 24-26), the company registered 183 per cent rise in traffic over base line and 1.3 million customers participating, he added.

Last year, the July sale saw participation from nine lakh customers.

Also, 3.5 lakh customers shopped on Myntra for the first time during the sale, and 4.2 million products were sold by the end of EOR sale, Narayanan said.

Source: India Today

Shopclues GST compliance services to register over 6lakh MSMEs under GST

GST (Goods and Services Tax) compliance is a top priority these days. Etailers are collaborating with experts to ease compliance and are asking sellers to recall stocks to avoid tax complications. To ensure a smooth transition into the new tax regime Shopclues has launched several initiatives and workshops for sellers across the country.

Since the etailer must file returns under GST, sellers on its ecommerce platform will also be affected. As a result, Shopclues it trying to get over five lakh sellers registered under the new tax.

Preparing MSMEs for GST

In an earlier report about GST hassles for smaller sellers, the Shopclues’ Arun Goel, mentioned that the company was ready for GST, but wasn’t sure if its sellers were. The ecommerce company has already migrated to a framework that supports GST requirements. Internal IT and billing systems have also been upgraded. It has tied up with third party logistic partners to allow efficient implementation of GST in logistical operations including first and last mile delivery.

But, most of the sellers on its platform are MSMEs from tier 2, 3 and 4 cities. And, these are not registered under GST. Without registration, sellers will face issues in selling with the marketplace. This has encouraged the etailer to launch a GST registration service for sellers to register and acquire GTIN number.

Utkarsh Birader, VP – Products Shopclues, said, “With more than half a million merchants, ShopClues has the largest merchant base in India. To educate SME’s (including non-Shopclues merchants) on GST compliance, we are organising seller summit in tier II, III and IV cities under our merchant empowerment initiative – Saarthi. In these camps, we have created special sessions on GST registrations and compliance and answering all doubts and queries of the merchant community.”

The company will enable sellers to use its merchant portal for –

• Eway bills
• Invoices
• Filing GST returns

This should enable merchants to continue their online businesses without any form of disruption.

Birader also mentioned that, “ShopClues is also organizing weekly webinars under Shopclues University programme where merchants can get their queries clarified from internal GST experts. Merchants can also contact on our merchant support hotline no 01244669777 to understand GST implications specific to their businesses.”

The GST compliance feature from Shopclues is also available to sellers using its Point of Sale (PoS) facility, ‘REACH’ in offline retail. ‘REACH’ is a GST ready PoS for offline stores which allow digital payments. Thereby, allowing the etailer to promote both cashless transactions and GST.

Flipkart revises Customer Invoice Number as per GST mandate

Besides getting sellers ready for GST through tie-ups with tax experts or pre-GST sales, marketplaces are also busy readying themselves to meet GST requirements. Flipkart has informed sellers on its platform via email (last week) that from 5.00 a.m. June 26, 2017, its customer invoice number format will change, as per GST mandate.

What’s different?

The company has generated a 16 character invoice number for all new orders. It will represent the following format –

<6 digit unique code><2 digit financial year><8 digit sequence>

In the new invoice number format:

• Only the first six digits will change
• The last eight digits will continue with the current sequence of invoice numbers
• Hyphen symbols will no longer be a part of the invoice number

(Obtained from Flipkart email to sellers)

The marketplace has also requested sellers to take note of the change and update their accounting systems as soon as possible to ensure compliance with these changes.

Etailers collaborate with experts to get sellers GST-ready

According to reports, marketplaces haven’t yet managed 100% Goods and Services Tax (GST) compliant seller bases. Amazon has only a small portion prepared and Paytm Mall about 70%. Etailers are doing everything they possibly can to ease things for sellers to register under the new tax. This way they can reduce seller base depletion.

Amazon rolled out ‘A-Z GST Guide’, Flipkart ‘GST Genie’ and Snapdeal ‘GST Guru’, to assist sellers understand the GST regime. Flipkart has also applied for GST Suvidha license to offer its sellers tax benefits. Shopclues, Amazon and Flipkart have partnered with taxation experts too to make sellers GST compliant before July 1.

But, could the negative effects of GST be graver than expected for online sellers?

1% TCS problematic for vendors

Under the new tax sellers will have to pay 1% TCS upfront. This will affect smaller sellers since their working capital will be blocked as input tax credit. This will make it tougher for small vendors to function online under GST, claims partner and national leader of indirect tax at PwC India, Pratik Jain. He also mentioned that,

“ Ideally, TCS should be at a very nominal rate. The 1% TCS puts pressure on players in the SME segment from a cash-flow standpoint.”

GST compliance will be much easier for big sellers like Amazon’s Cloudtail and Flipkart’s WS Retail, since they only need to shift from the VAT system to GST. Smaller players, on the other hand, will have to:

• Register under GST
• Learn the new tax system
• Engage in filing returns

Non-compliant small sellers to hurt ecommerce industry?

Industry estimates claim that the GMV (gross merchandise value) of the ecommerce industry is around $15-20 billion per year. And, around 20-30% of this amount is contributed by small vendors in the industry.  They specialise in categories like fashion, handicrafts and household supplies. So, their non-compliance with GST is expected to hit the online retail industry hard.

The CTO and co-founder of Instamojo, Aditya Sengupta said, “Sellers who drive the larger share of the volume have already registered but some sellers from the SME segment will pull back in immediate effect to the GST implementation, but the impact will not last too long.”

Collaboration with tax experts

Amazon India’s GM and director, Gopal Pillai said, “Through regular interactions with our sellers, we observed that a lot of them were concerned about nuances of GST. Thus, we partnered with ClearTax to help them file and reconcile their tax returns conveniently and transition seamlessly through GST.”

Snapdeal has also brought in professionals to train sellers on GST. The GST Network (GSTN) has also reopened GST registration a third time for non-registrants to join the GST regime.

But, is this enough to keep small players from leaving the ecommerce scene? What do you have to say online sellers?