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.
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.
You can also share your thoughts on Direct Selling Rules 2021 in the comment section.