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Definitions Direct Selling Business

Direct Selling: Means promoting or sales of products onto the top user client mistreatment word of mouth promotional material, show and/or demonstrations of the goods/products, and/or distribution of pamphlets. Explanation: firms will open develop points and delivery points for maintaining effective delivery system

Direct Selling Entity : This means a business entity as recognized by law for the nowadays good together with however not restricted to a corporation punctually incorporated underneath the Indian corporations Act, a registered Partnership Firm grooved underneath the Indian Partnership Act.

Direct Seller : This means someone UN agency is permitted by the Direct commerce Entity to interact with the business of Direct commerce.

Consumer : An an individual who buys merchandise, or service for private use and not for manufacture or marketing and shall have constant that means as provided below the buyer Protection Act 1986.

Goods/products : Goods/Products shall have constant that means as outlined within the Sale of products Act and section 3(26) of the final Clauses Act, 1897, that is, it shall embrace all types of movable property apart from unjust claims and cash.

Sales Incentive: Sale incentive suggests that share of profit collectible to the Direct marketer for effecting a sale of goods/products as stipulated within a contract between the Direct marketer and also the Direct merchandising Entity.

Conditions for Permissible Direct Selling

Should be a Direct Selling Entity, having sales tax/Vat, Income Tax, TDS and other license as may be required as per the law/regulations of its principle place of business.

Should have bank account with at least one nationalised bank.

Partnership Deed or Memorandum of Association should clearly state their nature of business. (Those who do not have such specific clauses should get their memorandum of Association or Partnership Deed, as the case may be, amended within 2 months from the date of publication of these Guidelines).

Pay sales incentive at the agreed rate within the agreed period.

Shall display names and Identification numbers of their authorized Direct Sellers in the official websites.

Should have a consumer grievance cell that should ensure redressal of consumer grievances within 7 days from the date of making such complaints.

Website should provide space for registering consumer complaints hassle free.


Direct Selling Entity shall appoint/authorise Direct Sellers upon receipt and scrutiny of application in a prescribed format. An agreement recording terms of such appointment should be executed between the Direct Selling Entity and Direct Seller. No application should be considered unless such applicant is eligible to enter into a contract under the Indian Contract Act. Each Direct Seller shall be allotted Unique Identification Numbers before granting license/permission to start Direct selling. Direct Selling Entity should not give incentive to any persons for joining of Direct Sellers.


Payment of incentive by whatever name it is called unrelated to their respective sales volume.
Supply/Distribution of goods with the knowledge that such goods/products are inferior or exceeded its validity period as per the manufacturer.
Direct Selling Entity/Direct Seller will not indulge in money circulation scheme or any act barred by the Prize Chits and Money Circulation Scheme (Banning) Act, I978.

General Conditions

MRP of the goods should be visibly displayed on the package.
Accounts of individual Direct Sellers shall be maintained properly and should be made available through World Wide Web.
Sales incentive should be distributed to the respective Seller on or before the agreed due dates.
Goods sold by the Direct Selling entity should carry guarantee/warranty of the manufacturer. However consumer should be given opportunity to exchange/return the goods if he finds any manufacturing defect or the product purchased is not useful for the purpose it was meant, within 30 days from the date of purchase, provided any seal/protection on the product is kept unbroken.

Information Readiness

Every Direct Selling Company should maintain a file with all relevant documents that include:
Certificate issued by Registrar of Companies, MOA and MOM.
Xerox copies of TIN, DIN of Directors, TAN, PAN.
Certificate of Sales Tax, Service Tax, CST Registrations.
Copies of all Sales Tax Returns filed with the authorities.
Copies of Service Tax Returns filed with the authorities.
Copies of Service Tax Returns filed with the authorities.
TDS Statements of Distributors and respective challans paid.
Every Direct Selling Company should maintain KYC/KYDS (Know Your Customer/Know Your Direct Sellers) as a mandatory process. Specific formats are to be provided on their websites to be available for all at any time.

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