On 30, June 2021 the Department of Consumer Affairs has published a draft regarding Direct Selling Rules 2021.
Earlier in 2016, the Central government considered direct selling business and launched Indian Direct Selling Guidelines for the first time. And this year, the Indian Government is planning to launch Direct Selling Rules which will apply to all network marketing companies and their active members.
What exactly Direct Selling Rules 2021 is and its key highlights are shared in this post.
Direct Selling Rules 2021
Guidelines and Rules are two different things. 2016 Guidelines was Advisory for State Governments and Union Territories for better business practice. While upcoming Direct Selling Rules are mandatory to follow otherwise it will be a criminal offense.
The government has just released the draft and asked civilians for comments and suggestions on it. Interested people can give their suggestions by mailing on [email protected] before 21, July 2021.
The actual rules will be implemented later when the government will launch a gazette.
Moreover, Direct Selling Companies have 90 days after the launch of rules to make changes. If companies remain unable to obey rules after 90 days, they have to provide details formally to the department.
Compared to previous guidelines, Direct Selling Rules 2021 (Draft) have some major changes which will affect almost all direct selling companies and direct sellers.
Here we have shared some key highlights of Direct Selling Rules 2021.
For Direct Selling Entities
These are mandatory documents for every direct selling entity.
- Certificate of Incorporation
- MOA & AOA
- Copy of PAN & TAN
- Copy of GST
- GST Returns
- Income Tax Returns
- Copy Balance Sheet, Audit Report etc.
- Record of Customers and Direct Sellers
- Register of Direct Sellers
It is compulsory for every direct selling company to register under DPIIT (Department for Promotion of Industry and Internal Trade). 90 days of relaxation time is thereafter the issuance of rules.
Companies have to provide refunds if the direct seller or customer applies for a return within 30 days or whatever return policy the company decides. Products/Services should be in the condition of marketable or pack (exemption for defective items).
Direct Selling Entity should have at least one office in India. And a website that includes all necessary information regarding the company’s policy, business model, products information, contact details, etc.
The company has to maintain a record of all the direct sellers and customers.
It will be compulsory to issue Identity Card for every direct seller in accordance with KYC.
Direct selling entities have to appoint a nodal contact person available 24×7 to solve grievances of customer and direct seller via different contact media such as post, telephone, email, at branches or office.
Direct selling companies are not allowed to take any registration fees, material costs, or any other charge. Direct Selling Companies are allowed to sell only products.
The delivery charge, postage, handling, or other tax should be disclosed before purchase.
For Direct Sellers
It is compulsory to visit the consumer’s premises with the identity card only after taking an appointment.
Prior to the presentation, Direct sellers should clear the nature of goods and services to be sold.
Direct sellers should give accurate and complete explanations and demonstrations of goods and services, prices, credit terms, terms of payment, return policies, terms of the guarantee and after-sales service details to prospects unsolicitedly.
For direct selling companies as well as direct sellers, they can’t promote goods and services in misleading and unlawful manners. Doing unfulfillable claims are against rules and accurate information should be shared.
Direct sellers are not allowed to sell any material, equipment or anything on part of the company, other than products/services provided by the company.
Direct sellers have to maintain customer records in a register.
Selling products of direct selling companies on e-commerce or marketplace require consent from the company.
Direct selling companies and direct sellers are not supposed to be part of money circulation and pyramid schemes.
Bankrupted or convicted people are not allowed to be direct sellers.
Bottom Line
All these rules are important for the Indian direct selling industry to maintain a healthy business environment.
Scams in the direct selling industry are at their peak. Not only pyramid schemes, but even product-based companies and their direct sellers are following deceptive promotion tactics to scam people. So it is mandatory that, these rules should be followed in stricter ways after issuance.
I was personally expecting the ban of services-based MLM companies. Not all, but most services-based MLM companies are pyramid schemes and use dummy products to operate.
They pretend to be an MLM, however, they are money circulation schemes and sell worthless products. These schemes spread faster than genuine MLM companies as they give higher commissions on each sale.
Like Cryptocurrency, online courses, holiday packages, online vouchers, e-wallet and such services-based MLM companies can easily fool people and do money circulations.
You can read the complete draft of Direct Selling Rules 2021 by downloading the official PDF.
Source: consumeraffairs.nic.in
You can also share your thoughts on Direct Selling Rules 2021 in the comment section.
Many thanks for this article! I want to bring to your notice about this company, Global India Gold (Globally known as Global InterGold or EmGoldEx) is running in India under the name of Zelt India Pvt. Ltd. They have two websites, one as (zeltseller.in) and another as (globalindiagold.com). Also the parent company which they consider “Global” as (globalintergold.com) which is criticized by many people across the world, also warned against investing any money in it by many countries since 2015 but still it is running rapidly like you said about the service based mlm companies which are pyramid schemes and use dummy products to operate. Yes, in their online zoom meeting, they pretend to be an MLM, however, they are money circulation schemes and sell worthless products-(which they frankly said in the meeting). Their scheme is spreading faster than genuine MLM companies as they say they will give higher commissions on each breaking of table (sale) under them. They say their company is not investment company but is product based one “Gold” which is of course an investment physical product, therefore it should be regulated by Securities and exchange commission, but they totally try their best to avoid getting registered under it especially outside India when it was asked to do so. They offer dummy products “Success Framework Workbook” at Rs. 8,400/- including tax (Workbook lite), Rs.22,000/- excluding tax (Workbookset Smart – 3 books), Rs. 36,000/- excluding tax (WorkbookSet Pro – 5 books) and compensation plan such as after getting three recruits, they need to recruit their 3 new people under them, after each recruit brings 3 under him/her, one table breaks and payout of Rs.16,800/- is provided and from that Rs.2,000/- and TDS will be deducted, so if each three direct recruits under the sponsor get their three recruits then sponsor gets the payout of three tables break which is Rs.50,400/-. And the sponsor goes back to his immediate sponsor and again he has to either recruit another 3 persons or wait for his previous 3 recruits to break their tables and return to the sponsor who recruited them, and this cycle goes on unless the person doesn’t disable renewing table which requires reinvestment automatically deducted from the last payout amount (for ex. Rs.7,500 from Rs.16,800/-), So it is advised for a direct seller, if he has more than 3 recruits under him preferably 12+ then his table gets break very fast 2-3 times a month and will make him earn around Rs.1.5 lakhs per month! Therefore this company is seriously showing red flags like pyramid scheme, so I was doing research about this company after getting introduced by a group of people. And seriously even after reading so many negative reviews, criticizing articles about the company and also the positive reviews from the direct sellers of that company (though I tried contacting old promoters but not yet got any reply from them in fb and whatsapp), your article gave much clarity to my understanding about the direct selling companies, I appreciate it very much, so I hope I gave a brief idea about the companies to bring to your notice so that you can give your better opinions about it and help people get aware of the conclusion which will definitely help them make better informed decision before making investing their hard earned or borrowed money in it. I hope this comment of mine gets noticed by you as soon as possible and also I would request not to mention me as I don’t want any issue from the investors of that company like targeting me and all. As you are very well in your field, you can make better use of it if this thing hasn’t come to your notice before. Thanks.
Thanks, brother for sharing this..
Hey bro, any updates from you about global India gold or Zeltseller.in? Can I invest in it? Business – standard have an article about it encouraging us to do business with the company, what are your opinion on this? Also recently the central bank of russia has issued warnings about GIG – OS citing “signs of a pyramid scheme” but here in India, no sign of any update from Govt or Regulators. There is no way to paste the links here, if there is any way I can get in contact with you on messengers through which we can discuss, research and help each other find more details about this company and help people get clarity about the company, then pls do let me know. Thanks.