CYBER CRIME AND THE E-COMMERCE WORLD

Posted on May 17, 2013 by Runjhun

With the Internet becoming available at the touch of a button and wannabe computer whiz kids dabbling in hacking for sport, cyber crime has seen an unprecedented upsurge. What makes it infinitely more dangerous than any other crime is the comparative lack of awareness and identification. How could you be expected to know that behind the innocent looking website lurks a compulsive hacker, or worse, consummate identity thief?

In India, the law on commission of cyber crimes is highly restricted. The Information Technology Act, 2000 is the extent of all there is with respect to cyber law in India. Generally, cyber complaints may be filed for hacking, phishing, identity theft, child pornography, piracy, cyber stalking, credit card fraud and the like.

Cyber crime complaints, when taken in a more liberal sense, are commonly accepted to mean any crime committed with the use of or against a computer or a group of computers. And that, right there, is where the Information Technology Act, 2000, starts to look like a damsel in distress. With the initiation into the marvelous world of smart phones and tablets becoming a rite of passage of sorts for adolescents, restricting cyber crimes to only denote crimes committed with the help of computers is utter ignorance. Again, another one of the many the gaping lacunae the Information Technology Act, 2000 suffers from is that it makes a number of the offences, such as hacking, violation of privacy and tampering with computer source documents, bailable, which puts a big question mark upon its effectiveness.

Cyber Crime Complaints and the modus operandi of the Cyber Crime Cells

A complaint for the commission of a cyber crime may be filed with the in-charge of the cyber crime cells which is present in a number of cities. Even if such a cell is not present in your city, you may file a complaint with the nearest cyber crime cell, provided you brave the dilly-dallying over jurisdiction, which is the hallmark of the Indian Police.

To file a complaint regarding the commission of a cyber crime, it is absolutely imperative that you have certain documents like the server logs, the receipt (if any, and if there is none, that should probably have been your first clue) or any other communication that you may have received from the website, along with a list of the people you suspect may have been involved with the commission of the crime. Alternatively, you could also shoot the cell an email at their respective email addresses. Although the Information Technology Act, 2000 does not expressly provide for a set procedure for the filing of a cyber complaint, the websites of a majority of the cyber crime cells in the country have provisions for the registering of such e-FIR.

The registration of cyber complaint on the website of the cyber cells itself counts as an FIR. Therefore, it is not required that another one be lodged again. After the filing of an FIR for a cyber crime, the police are required to do the usual investigation (or the lack of it) and present the case before a Magistrate. However, one must regularly follow up with the police officer or the Station concerned so as to ensure that their complaint is actually taken seriously.

Consumer Protection Act, 1986: Knight in Shining Armour?

In case a consumer wishes to evade the apathy of the Indian Police, there is another way out. Enter Consumer Courts. Complaints for issues that are related to e-commerce may also be filed under the Consumer Protection Act, 1986. The procedure is obviously similar to that which would be followed in case of a regular Consumer Complaint before the District Courts.

The major edge that the Consumer Protection Act, 1986 has over the Information Technology Act, 2000 is that it deals with the economic loss suffered by the victim and compensates him/her accordingly. Also, one does not need a lawyer to defend oneself in front of the District Forum, which again makes the Consumer fora the weapon of choice for consumers against cyber crimes.

The proverbial can of worms that is E-Commerce

In an age where the Wikipedia is the ultimate authority for anything and everything, the demand for e-commerce portals and the resulting complaints for online fraud should hardly be a shock. According to Ankur Singla, CEO, Akosha, out of the 11980 complaints received by Akosha for e-commerce in the first quarter of 2013, almost 58 percent related to deficiency in delivery (such as delivery of damaged goods, delivery of a different product or non-delivery of goods, even after the payment has been made), 29 percent were for refund of money for non-satisfactory products, while the rest had different concerns.

The Internet is rife with companies looking to make quick money and the reluctance on the part of the customers to step outside the comfort of their homes for shopping (blame it on the sweltering mess of a weather that is the Indian summer) acts as encouragement to completely phony enterprises to set up their own versions of online shopping. Timtara, the brainchild of Arindam Bose, who was recently arrested on charges of Internet fraud of over twelve lakh rupees, is a perfect example. One would think that with the stringent requirements for starting a lawful e-commerce venture would act as a discouragement, but even so, cyber crime continues to increase at an astonishing rate.

The Consumer Protection Act, 1986, only covers that spectrum of cyber crimes, which result in economic losses to the Complainant or in cases where there is ‘deficiency in services’ or ‘defect in goods’ or ‘unfair trade practices’ have been employed by the trader/seller or where goods and services that are not genuine (spurious goods and services) are marketed as such. In the event that any of this is done with the help of a computer or a laptop, it would come under the definition of a cyber crime. More often than not, cases that fall within the ambit of the Consumer Courts involve some sort of pecuniary loss to the Complainant, which is required to be made good by the Opposite Party. The Courts do not concern themselves with the mode of commission of the crime, but only with the final outcome vis-a-vis the customer, therefore providing a more effective structure for consumer protection.

Shortcomings under the Consumer Protection Act, 1986

One of the few roadblocks the 1986 legislation suffers from, on the way to providing justice, is that the consumer generally is required to file the complaint where the company has its registered office or branch office or service centre or even marketing office. For many of the customers, such a procedure is not practically feasible if they live in separate states or even different cities. Though such a complaint may also be filed at the place where the ‘cause of action’ arises, in case of e-commerce transactions, it makes for a very difficult thing to justify in Court.

The Act is also defenseless against companies that have ceased to exist or that have been shut down, unless and until the whereabouts of their erstwhile owners may be found. If an online enterprise vanishes into thin air after the consumer has suffered his loss, the latter will be required to bear the loss so suffered. In such a case, he has no remedy but to take the matter up with the local police or the cyber crime cell.

Desperate times, stringent measures

In view of the recent scams that have taken place online, in the form of fake online retailers, travel companies, etc., it is high time that the government takes cognizance of the fact that cyber crime is here to stay and provide for efficient measures to curb the same. Where the perpetrators of crime are a step ahead of the law enforcement agencies, the consumer will always be at the receiving end. Judges or Court officials must be provided special training to deal with technology related matters, so as to better their understanding of the cases they deal with. Since traditional litigation is apparently insufficient to combat high tech crime, there is all the more need for bringing in newer approaches through Electronic Courts (E-Courts) and Online Dispute Resolution (ODR). These are already in vogue abroad and need to be incorporated into the Indian system to prevent E-Commerce experiences from turning into nightmares for the customer.

- Vasudha Misra, IInd Year, RMLNLU

Picture from here.

Lost In A Click, Lost Forever! Banking Ombudsman And Banks Refuse To Grant Relief In Internet Banking Frauds

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Posted on February 7, 2013 by Runjhun

Complaint About Internet Banking Frauds, Banking Ombudsman And Bankers Refuse To Grant Relief (Picture Credit :commerce.idaho.gov)

Two disturbing pieces of news unsettled our inbox today. Disturbing not because they concerned a national crisis; but simply because they implied that all of us avid internet users were under a dire threat..of losing money!

The first piece of news is from Mumbai where within 12 hours and 20 overseas transactions, a businessman lost over Rs. 2 lakhs in an instance of massive internet banking fraud of horrifying proportions. This Tardeo based businessman’s wife’s credit card was used for overseas transactions at the time when the family was in the city. What makes his situation worst is the fact that the issuing bank was way less than helpful and the police made him run around for 21 days before filing an FIR. Finally, the BKC cyber police registered a case on January 4, but the bank is yet to get back to him. He doesn’t even know if the transactions were made online or with a fake card.

Even though the bank has claimed that pending resolution, they have given temporary credit of Rs 2,05,023 for the 9 disputed transactions in customer’s credit card account, the incident is still a haunting highlight of the fate of internet banking and credit card frauds in the country.

Adding to the gloom, is another piece of news, again from Maharashtra.

The Maharashtra State Banking Ombudsman has refused to intervene in a dispute between a Kolhapur-based businessman, R. Unnithan, and his bank claiming that the case involves ‘elaborate documentary and oral evidence.’, which as per Banking Ombudsman Scheme is valid ground for rejecting a complaint.

Unnithan’s net banking account was hacked and an amount of Rs.9.65 lakh was withdrawn in 24 transactions across the country between April 12 and 13, 2012.

This decision opens floodgates of troubles for the consumers caught in internet banking frauds because in most such cases bankers too refuse to take responsibility claiming that most such cases happen due to customer’s negligence and that banks take sufficient precautions and advice customers against such frauds.

While Banking Ombudsman does have a point to the extent that they are not an investigative forum, equipped to handle such cases; it does not in any way mitigate the fact that the consumers are regularly losing money in such internet banking frauds and are forced to suffer in the absence of a dedicated redressal mechanism. The liability needs to be set off for the aggrieved consumers and cyber cells in the country should be better prepared to handle such cases and ensure that money lost at a single click of a mouse is not lost forever!

In 12 hours, Mumbai woman’s credit card used in 4 continents (Times of India)

Ombudsman washes hands of internet banking frauds (Hindu)

Misselling No More! IRDA Comes Out With A Framework To Curb Insurance Frauds.

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Posted on January 23, 2013 by Runjhun

IRDA To Curb The Insurance Frauds, Cheating Agents Menace, Comes Out With A Framework.(Picture Credit: topcontentcenter.com)

Just because you are not paranoid, doesn’t mean your insurance agent is not out there to cheat you!

For the longest period of time, we have been resonating with this sentiment, urging our readers to be on guard against the misselling tactics of the insurance agents. For a glimpse of our concerns and take on this issue, see 5 Shocking Misselling Tactics Of Insurance Agents.

Our paranoia hasn’t been without a reason and the statistics emerging from within the insurance industry with respect to the cheating insurance agents has done nothing to quell our fears. However, the regulator IRDA seems to have been bothered by these concerns as much as the ‘aam junta‘ and after a long long while, decided to do something concrete about it.

IRDA has come out with a framework for monitoring frauds in the insurance sector and asked insurers to carry out due diligence on their staff, including agents. The circular issued by IRDA to the insurers directs them to lay down procedures to carry out the due diligence on the personnel (management/staff)/ insurance agent/ corporate agent/ intermediary/ TPAs before appointment with them. It is required that insurers understand the nature of fraud and take steps to minimise the vulnerability of their operations to fraud.

The insurers are required to submit a compliance report with the regulator by June 30, 2013.

A rigorous due dilligence of the employees, especially agents, if done right, is one of the most effective methods to curb fraudulent practices and to that extent IRDA’s has taken a step in the right direction.

IRDA has classified frauds in the insurance sector under three heads — claim fraud or policyholder fraud, intermediary fraud and internal fraud. It has also asked the insurance companies to frame anti-fraud policy and said that the company’s board would review the policy on an annual basis.

Insurer have been directed to inform both potential and existing clients about their anti-fraud policies and highlight the consequences of submitting false statement for the benefit of policyholder in the insurance contract.

We really hope that the move doesn’t turn out be another damp squid and does succeed in actually curbing this menace at least to some extent.

IRDA comes out with framework for monitoring insurance frauds (Business Standard)

Warning: Don’t Fall In The Country Club Trap! Harassed Consumer’s Story Of Country Club Vacations’ Fraudulent Scheme.

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Posted on October 8, 2012 by Runjhun

Complaint Against Country Club Vacations, Stop That Scam!

Important: We are running this story because we were contacted by several people who claimed to have been victimized by Country Club Vacations fraudulent scheme. Comparing notes, these consumers had figured that they had been victimized in more or less similar manner, concluding that this was not a one off incident. One of these consumers, Firoz Ahmad,sent to us his detailed story and we decided to put it up here, as much to create a buzz around the issue as to warn other consumers against falling in a similar trap.

Tadka Take

Seen that guy with a thumbs up, promising you a dream holiday?

If you have, RUN!

Confused! Read on.

All of us have come across those pesky, over enthusiastic salespersons in malls, markets and theaters, urging; no begging you to sign some form and participate in some random lucky draw that has ‘lucrative prizes’. We all know it is a waste of time at best and a scam at worst. A few of us humor the sales guys, who apparently have no larger interest than hitting their daily target and sign, to forget all about it till the calls from the so called ‘contest organizers’ start making a hell out our lives. We swear never ever to end up signing these forms again, no matter how sympathetic or irritated we are with the pesky guy holding the pen and the form. And that for most of us is the end of the story.

Ever wondered what would happen if you ever followed through with that call? If you ever actually believed what those telemarketers said?

We can assure you that this is probably one of the only dreadful areas in life where absence of action actually yields better results.

Read on the experience of Firoz Ahmad, a consumer who actually followed through with the call and was rewarded with a horror story he would recount for ages to come.

Consumer Story

A few days back I had gone to PVR Cinema in Central Shopping Mall in Hyderabad where one nicely tucked boy asked me to fill up a lucky coupon which I did without knowing what it is for, I filled it and give them back (This is what they told me as I can’t recollect as I keep getting coupon from various shopping malls against shopping).

After couple of days later I got a call the same day I came back from holidays in North India informing that I won the lucky draw and three prizes were waiting for me – kitchen set, free vacation for a week for couple and some free entry in a resort in India and Abroad and I was the one of the first one to get this gift as per raffle draw from 500,000 peoples those participated in this draw.

I was not willing to go as I was tired and don’t trust in these offers but they kept calling me again and again to collect the gift and finally my wife requested me to visit them.

They asked me to come to Hotel Amritha Castle, Opposite Old Secretariat Building, Hyderabad near Tank Bund. All way round going to them I kept on getting phone calls whether I was coming or not. I counter questioned them whether this was about converting me into some paid membership at country vacation club which they flatly denied and offer me these mentioned 3 offers free against visiting them.

Anyways out of curiosity & wife insisting, I decided to go there and found that there were about 20-30 people just like me who were asked to come into a room. Inside that there were plenty of tables with one sales guy/girl trying to convert us into membership of Country Vacations. Right from the start, we were provided with the drinking water, juice and coffee given by them! There was some time pass survey taken by the sales guy and then a briefing from the so-called manager.

Well after sitting for more than 3 hours I said I had enough of the crap and wanted to walk away but they kept on holding me by one or other way providing sometimes juice, soft drinks and coffee too at various instance whenever we want to leave their office. I guess I was one of the few people who got caught on their trap as the offer was lucrative offer as per my wife. However finally we signed the deal for Rs 225,000/- for life time membership for vacation in India and abroad with various other lucrative offers that are provided in another attachment for your review and consideration but we didn’t received yet??

Finally at last, they sent me away after giving some bowls gift and some voucher which asks us to pay 4000 taxes while enjoying a free 25,000 worth stay for 7 days in some hotel in Kerala, Goa or Manali. The set was damaged as I found after removing the packing at home. The trap from this Country Club is they sell some membership for 2.25 lakhs for life time.

However while coming back we got call again on my wife mobile number with the same message of winning and later after reaching home the same to my brother in law that created doubt in my mind towards the company and I decided to check their site. As soon as I type their site I found lots of complaint about their fraud with several peoples who provided and logged complaint and finally I came to know that I was trapped in their net (see the attached link for their fraud with several people all over India).

I immediately call RAK Bank to stopped the payment as I was caught in scam company, but the customer care informed me to wait until the transaction is done that reflected today in my statement and immediately as I was advised I asked for this dispute form to get refund of my amount through RAK credit card I paid them and I didn’t use their any services yet not received anything except giving them money. I called them also to cancel my policy and refund as I doubt their company but they refused and the reason I need to contact RAK direct several times for the refund of my money that seems to be with fraud company.

Kindly go through the link for their frauds and issues:

http://www.google.co.in/search?hl=en&biw=1259&bih=631&q=country+vacations+fraud&oq=country+vacations+fr&aq=0&aqi=g2g-j2g-b1&aql=undefined&gs_sm=c&gs_upl=103273l103883l0l3l3l0l0l0l0l1001l1001l7-1l1

Reading all these reviews above as it was same as I was offered I got sure that it is a fraud company. Also when I tried to call their head office next day to clarify the issues on net about their company they talked with me rudely and asked me to contact the same executive who dealt with me?? I called the head office and instead of providing assistance and clarification they asked me to talk with the lowest level for clarification?? Also they didn’t reply to my emails that I send to head office and was informed that I sent the email on wrong emails ID?? I checked and found that the email was correct as it was printed on, confirming my doubt about the company status as fraud company trapping innocent people.

You can notice that there isn’t a single reply from Country Club/Vacations, they don’t even defend themselves! So overall this seems to be a white collar scam and someone is becoming filthy rich by looting money on all such bogus things.

Tadka Take 2

We have reproduced Firoz’s experience in his own words without any alteration, retaining all the details so that any other similarly placed consumer can quickly identify with it.

We know that a whole majority of us would be put this experience down to the fact that this consumer followed through a call which common wisdom suggests should have been ignored,

But our only issue here is that whether or not a consumer exercises enough caution is a secondary concern. What is primary issue here is the fact that a company, a Brand is actually coaxing people into schemes they never want to buy, making promises they never fulfill and use improper if not entirely illegal means to influence people into believing them.

Intrusive telemarketing is anyways problematic and huge nuisance. But, it takes a way more serious turn when such telemarketing tactics are used to sell off schemes and products that are not entirely genuine or fair.

Country Club should pay heed to the concerns and issues being raised by these consumers and respond to clear their stance.

Till then, Country Club, that is actually a huge thumbs down!

(Picture credit: Fractionaltrade.com)

Do you have a similar story? Have you been defrauded? Share your stories with us at editor@akosha.com and we will make sure you are heard loud and clear!

5 Shocking Misselling Tactics Of Insurance Agents That Everybody Ought To Know About!

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Posted on August 7, 2012 by Runjhun

5 Shocking Misselling Tactics Of Insurance Agents That Everybody Ought To Know About

A scary looking man grins at the camera, benignly shaking his head with utmost sincerity. An animated devil like creature, although way less scary than his grinning human counterpart, disappears with a poof behind the grinning face. One of the prominent insurance companies in the country flashes its logo with an attractive jingle and some tagline about honesty.

Once I get past my mortification at the aesthetics (or lack of it) of this advertisement, I realize that this ad may well have been an unintended satire on the perceived ugliness (literal and figurative) of all the insurance agents in the country combined. The underlying message is well meaning-that the agents of ‘X’ company are honest. But, the ad is also representative of a very disturbing reality of the insurance industry-the unruffled acceptance of dishonest, misselling tactics. So much so that a particular company deemed it fit to project the absence of these tactics as its USP.

I may not have gone so far. Every week, hundreds of misselling and dishonest insurance agents’ related complaints land on our desks at Akosha. The sheer number and magnitude of these complaints in itself is a proof of the extent to which this racket is flourishing in the country.

IRDA or the insurance regulator has been constantly trying to curb these practices with all sorts of measures and regulations and is all set to come up with revised guidelines for life insurance industry. The efforts have met with reasonable success. And yet, an industry that thrives on innovation in ways to cheat continues to do what it does the best-cheat.

Misguiding about terms and conditions of a policy, unrealistic prediction of returns are the sort of tactics that most of us are aware of of-whether or not that awareness saves us from being cheated is a different story. So, leveraging on our benefit of being exposed to the widest variety of insurance related complaints possible, we decided to compile 5 such unique misselling tactics employed by insurance agents that shocked and impressed us, although in a perverse manner:

1. Fraudsters claiming to be IRDA representatives- When a consumer called Mishrilal first came to us with a complaint about fraudulent calls from people claiming to be IRDA representatives, we could hardly estimate the extent of this ongoing scam. These so called IRDA representatives claim that some ‘bonus’ has accumulated with respect to their policies and which is being allegedly polished off by their agents. All they are required to do is deposit some amount with these ‘representatives’ and they will ensure that the bonus is transferred to the policy holder. What happens after the amount is given is anybody’s guess. Authorities having realized the gravity of the scam have been trying to warn the consumers against such fraudsters. We understand that this is hardly a matter involving the agents directly but what really stumps us is the accuracy of the information that these so called representatives usually have with respect to the policy holdings of their victims, an obvious indication of insider involvement. A simple way to address this issue is always checking the credentials and insisting on identity proof of whichever individual the consumer is dealing with.

2. Selling Policies Without Consumer Consent- Another spin to the very same IRDA representative fraud is when these so called representatives take the money from the policy holders and then instead of vanishing with the money, very ‘honestly’ invest it in buying another policy for the consumer, albeit without his consent. These agents then conveniently vanish, leaving a hassled consumer in their wake, with his hard earned money stuck in a policy he never actually intended to buy. In most circumstances, it is next to impossible to get such policies cancelled. This fraud redefines misspelling by agents, dragging it into the territory of pure fraud.

3. Selling The Wrong Policy- Ok. So you were very clear what plan you wanted and with what company. Everything was in order. But what if your agent, without your consent goes ahead and invests your money in a completely different plan? Horrifying thought, especially when huge sum of money is involved. This is what precisely happened with a consumer we came across while doing a story on ULIP( For pros and cons of Unit Linked Plans or ULIP, read this story To ULIP Or Not To ULIP). Amit Jamwal never intended to buy a ULIP. All he wanted was a simple term plan. But his agent, nevertheless, went ahead and invested his money in a ULIP. To make situation worst, disappeared without giving him proper documents. Jamwal is now stuck with a policy he never wanted, with hefty charges and two premiums paid. “I hate all agents”, he says before slamming the phone down. Understandable emotions. We empathize, barring the fact that the poor kid who was talking to him was a harmless budding lawyer-journalist. He neither was nor intends to be an agent-ever!

4. Skirting The Free Look Period- For the uninitiated, free look period is a 15 day period starting from the date of issue of your policy within which you can opt out of the policy without any charges and with full refund (barring cuts for medical tests, stamp duty charges etc.) if you are not in agreement with the terms and conditions of the policy. This period is stipulated by IRDA during which the holder can cancel the policy or switch to another. However, agents have been increasingly coming up with ways to ensure that the policy holders are not able to use this period for what it is intended. The most common way to get past this period is non-delivery of policy documents within the free-look period, denying the holder an opportunity to examine his policy and its terms and conditions. Our only advice in all such circumstances is vigilance- cancel your policy the moment your agent even remotely tries to stall or unnecessarily delay the delivery of documents during the free-look period.

5. Selling Policies That Are Not Needed Or That Are Not In Accordance With The Financial Goals/Condition Of The Holder- This is probably the most complicated aspect of misselling and usually happens with individuals who are relatively new to the field of investment. The result is a policy holder who is stuck with a life insurance policy that protects him only till the age of 35 years and consumes 15% of his salary as premium. To address this issue, IRDA has proposed that the company should assess the needs of the holder in detail before issuing him a policy and have for this purpose, have a detailed form that covers all aspects like income, goals and risk appetite of the holder.

As we had stated earlier and as is evident from the proposals, IRDA is constantly trying to curb this menace of misselling at a macro lever. However, no such attempts can be entirely successful without awareness and vigilance at the micro level. Consumers opting for insurance must abide by a certain thumb rules like-check for credentials, identity proof of the agents, always take second opinions, never rely on one agent completely and most importantly, be very paranoid, almost clinically-in this case, that is the only thing that can save you.

Sale! Sale! Sale! Decoding The Tax Maze Behind That Discount On Your Shirt.

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Posted on July 26, 2012 by Runjhun

Twitter Query On Sale And Taxes

Twitter Query Extra Taxes On Sale Price Allowed

Sale! That is one word that always catches our eye. More so if you belong to that proud section of the population called ‘girls’. There goes our allegiance to the cliche–yes of course, that cliche which demands that we always make a reference to squealing girls whenever the word ‘sale’ is uttered.

Much as the feminist in me pleads to open a debate on how wrong that cliche is, I will steer clear of the issue and concentrate on the query at hand. (Which by the way is an extremely logical question that comes from a girl-who evidently thinks not squeals when she sees a ‘sale’ sign. See-there I made my point!)

So one of our readers, asked us that when they say sale and then taxes extra, is it allowed?

The question, honestly, made us do a double take. The number of times we had gone to a sale and still never noticed this!

A primary research indicated that there are no clear answers to the question. So with a little help from our legal expert, Himani Subramanian, we got down to decoding this tax maze.

Under the Consumer Goods (Mandatory Printing of Cost of Production and Maximum Retail Price) Act, 2006, the consumer cannot be charged over the maximum price printed on the goods by the manufacturer. These guidelines are as follows:

1. Consumer goods mean all goods and items brought in the market for sale and are meant for the use and consumption of the consumers;

2. Cost of production means cost incurred directly or indirectly by the manufacturer in the production of goods;

3.Printing means printing of the cost of production and retail price at a visible place on the product in Hindi and English and the local language of the place it is sold; and

4. Maximum retail price means such price at which the product shall be sold in retail and such price shall include all taxes levied on the product.

The VAT is calculated over and above the Sell Price.

So the calculation is:

Sell Price +	VAT =	MRP
Rs. 95/-	Rs. 5/-	Rs. 100/-

VAT is governed by the State VAT legislation (VAT Acts of the particular State). The percentage of VAT varies from State to State within India.

In other words, MRP includes all taxes including VAT and no retailer can charge a consumer over and above MRP. Below MRP, however, is permissible and fairly common.

We will look at two scenarios

Where flat percentage of discount is offered on the MRP.
Where the cost of goods is reduced to particular amount, that is, the sell price is discounted.

In the first scenario the taxes including the VAT forms part of the MRP and discount is offered on the total MRP. The consumers must note that the ‘Sale’ here should specify that the discount is on MRP. If this is the case, then no extra taxes can be charged and if the retailer does so, he will be liable under the Consumer Protection Act.

For example: If 40% discount on MRP of Rs. 100/- is offered, then the total cost of the item will be Rs. 60/-. No extra taxes can be charged.

We would also like to add that this is not a normal practice and rarely (never!?) do brands offer a discount/sale on MRP.

The second more likely and common scenario is when the discount or sale is offered on the cost of goods which does not include the taxes and consequently, taxes are added on the discounted price.

A possibility here is that of the dealer misrepresenting the MRP as sell price in the advertisement and then charging taxes over and above the price.

For example: There is a sale going at Arrow where the cost of shirts/T Shirts is reduced from Rs. 799/- to Rs. 499/- and additional VAT is charged on Rs. 499/-. The dealer can argue that Rs. 499/- is the sell price and hence VAT is applicable.

If the dealer has misrepresented the discount by making false advertisement, he can be held liable under the Consumer Protection Act, 1986 in addition to relief under the Central Excise Act or the State VAT legislation.

The practice of sale or discount is an industry/market practice and does not really have a legal background and/or regulations.

The only precaution that we can suggest for the consumers here is to ask the right questions and carefully understand the terms of the discount being offered. The consumer has to be sure that the price list does not mention the condition ‘separate taxes applicable’ and if it does, (which is usually the case), take care that the price being discounted is the sell price not the MRP.