Answer By law4u team
Online marketplaces act as intermediaries between buyers and third-party sellers. To ensure transparency, consumer protection, and tax compliance, Indian law imposes several obligations on these platforms regarding seller information and verification. These rules are designed to help consumers make informed decisions, reduce fraud, and ensure that tax authorities can track compliant sellers.
Legal Requirements for Seller KYC and GST Display on Marketplaces
1. Marketplace Must Verify Seller KYC Before Onboarding
E-commerce platforms operating a marketplace model are required to verify the seller’s identity and credentials (KYC) before allowing them to list products. This verification includes collecting valid identity documents and business details to reduce fraud and ensure accountability.
2. GST Registration is Mandatory for Marketplace Sellers
Under the GST law in India, any seller using a marketplace to sell goods must register for GST regardless of their turnover threshold. Marketplaces must collect this information from sellers during onboarding and ensure compliance.
3. Display of GSTIN on the Marketplace
Consumer Protection (E-Commerce) Rules, 2020 require marketplaces to display the seller’s GSTIN on the product listing or seller information section. This allows consumers to verify that the seller is GST-registered and tax compliant, promoting transparency and trust.
4. Display of Seller Identity and Contact Details
These rules also mandate that marketplaces provide clear seller information, including legal name and contact details (such as address, email, and phone number), so consumers know who they are transacting with and can reach the seller if needed.
Purpose of These Rules
1. Consumer Protection
Consumers can make informed choices when they know the seller’s identity, tax status, and how to contact them in case of issues like returns, refunds, or disputes.
2. Tax Compliance and Transparency
Displaying GST registration details helps ensure that sellers fulfill tax obligations and that marketplaces are not facilitating transactions by unregistered or non-compliant sellers, which could lead to tax evasion.
3. Accountability and Fraud Reduction
KYC verification and visible registration information hold sellers accountable for their listings and reduce the incidence of fake or fraudulent sellers operating on the platform.
Consequences of Non-Compliance
1. Penalties Under Consumer Protection and GST Laws
Marketplaces that fail to display required seller details can face penalties under the Consumer Protection (E-Commerce) Rules and may be investigated for violating GST compliance obligations. fines or other enforcement actions may follow.
2. Consumer Complaints and Legal Action
Consumers can file complaints with regulatory bodies if seller information is missing, potentially resulting in enforcement actions or orders for compensation.
3. Marketplace Liability
If a marketplace enables sales by unregistered or undocumented sellers, it may be held liable for facilitating non-compliant transactions, leading to regulatory scrutiny or penalties.
Example:
Suppose an online shopping platform lists electronic accessories from a third-party seller but does not show the seller’s GSTIN and verified KYC details on the product page.
Issues:
1. A customer buys an item but is unable to check if the seller is GST-registered.
2. The product is defective and the customer cannot easily contact the seller due to missing information.
Actions the marketplace should take:
1. Display the seller’s legal name and contact details on the listing page.
2. Ensure the seller’s GSTIN is visible and matches tax records.
3. Confirm the seller’s KYC is complete before allowing listings.
4. Provide grievance contact information for consumer protection.
5. Comply with the Consumer Protection (E-Commerce) Rules and GST obligations to avoid penalties.
Conclusion:
Yes — under Indian e-commerce regulations and GST laws, marketplaces are required to verify seller KYC details and ensure that the seller’s GST registration (GSTIN) and key identity/contact details are displayed on the platform. This transparency supports consumer protection, tax compliance, and marketplace accountability.
