Is MLM Legal in India? – MLM Requirements In India

Multi-level marketing or Network Marketing is a worldwide accepted powerful business trend. So many Celebrities and business experts and so many people around the globe had embraced this network marketing profession as a life-changing tool. Alike any other nations, India has also observed some changes in multilevel marketing.

Network Marketing Business has been a popular form of business in India for so many years. With MLM companies like Avon, Amway, Oriflame, etc. providing an uncomplicated way of income to the housewives. But, when it comes to MLM frauds and scams, a preponderance of people in India are still uninformed of whether MLM is legal in India or not, and what an MLM means. This article lays down the idea of Multi-Level Marketing, the legality of MLM or Direct selling in India and what sorts of MLM businesses are illegal in India.

It’s a general doubt among people in India, whether MLM is Legal in India Or not?

So let’s dive into it for depth.

What Is Multi-Level Marketing?

Network Marketing ( Multi-Level Marketing ) or commonly known as MLM is a promotional business strategy wherein a seller of a company markets a product or service for the Network Marketing business and hires a new salesperson below them to branch out the deals of the MLM business’s products or services.

MLM follows a hierarchical structure where the purpose of the person on a high level is not just to market the products or services, but to extend the hierarchy by hiring more people under him/her. To make the MLM business smoother, MLM companies depend on MLM Software to enhance their MLM Business. So that everything like sales and commissions earned is handled smoother with an MLM Software

So read more to know whether this MLM approach is practiced in India or is multi level marketing legal in India?

Read more on What is Network Marketing?

Network Marketing in India – Network Marketing Stats

India is a country which has a tremendous human resource and people growth. So the MLM Entrepreneurs always keep their eyes to find MLM Business opportunities. So Many MLM companies consider that India is a great market for doing Network Marketing business. Being the most populated country in the world, India is a great market for product sale.
However MLM business is not new in India, It has been there in India decades. In the starting stages, the idea and the word ‘multilevel marketing’ or ‘direct selling industry “was not so much accustomed to people. Today it is pretty popular and a growing trend in Indian business.

Read more on Growth of Network Marketing in India

Is MLM Legal in India?

Multi-Level Marketing or Network Marketing is a legitimate form of business in India. However, several illegal and fraud MLM companies work in India that runs a pyramid scheme to entice more people to buy their MLM products and scam them for their hard-earned bucks. A legitimate Network Marketing company is the one which works under the proper procedure laid down by the government.
However, in a popular country like India, it is difficult to identify legal MLMs from unauthorized MLM. Therefore, it is necessary to identify a legal MLM company by its characteristics and methods of promoting.

Key Characteristics of Legal MLM Company

Some of the key points of a legal MLM company in India are:

  • Legal MLM company gives a fixed time to its members to attain financial benefit. Illegal MLM businesses normally offer quick, easy, and dubious money.
  • A legal MLM company gives high-quality MLM products to its customers supported by a certificate of quality, whereas an unauthorized MLM company does not provide any support to the quality of products it gives.
  • A legal MLM Company grants its members with a well-defined MLM compensation plan to market their product, but no such MLM plan or strategy is granted by an illegal MLM.
  • A legal Network Marketing company gives a fixed amount of MLM commission or incentive to its members based on their sales achievement. However, an Illegal MLM follows no bonus practices and offers lucrative and immediate incentives to pull more people.

What are the Requirements for Lawful Direct Selling in India?

However, there have remarkable conditions for lawful direct selling in India. Let’s have a look at what it is.

  • The MLM organization should be a direct selling entity in manner. It should have a GST certification, Income tax registration TDS and other license’s as per the guidance of the government.
  • In a memorandum of association, it should explicitly state the kind of business
  • The MLM company should require a bank account in any nationalized Indian bank.
  • There must need an effective website and a place to register the consumer complaint.
  • The website must include names and identification numbers of the MLM organizations authorized sellers.
  • The commission, bonus and all sales incentives should be pay in accepted rate and granted time>
  • There should need a consumer cell in regulation for the queries and complaints of consumers.

Indian Law’s and guidelines for Multilevel Marketing

When it comes to laws associating to MLM companies in India, before, Multi-Level Marketing businesses were treated under the Prize Chits and Money Circulation Schemes’ (Banning) Act 1978. But, due to the growing number of MLM frauds in India, on 12 September 2016, the Indian government proposed Model Guidelines for Multi-Level Marketing/ Direct Selling. The latest guidelines include the following terms:

  • All direct selling companies or MLM companies in India shall submit an undertaking within 90 days from 12 September 2016 to the Department of Consumer Affairs.
  • The MLM company cannot force the consumer to buy goods and services more than what they can manage to market or consume.
  • The participation must be rigorously free. The MLM company cannot ask for any participation fee like admission fee, registration fee, etc.
  • A signed contract must be presented to every participant in the business ‘regarding the material terms’ of the participation, composed by section 10 of the Indian Contract Act, 1872.
  • The MLM company must lay down a return policy and cancellation of membership.
  • An MLM company must provide comprehensive information about direct selling operations and policies to its direct sellers.
  • The company must have a physical office space for its operations.
  • The MLM company must reveal the method of calculation of the profits/commissions.
  • The MLM company must keep a CIN with PAN and present an identity card to the participant.

Wrapping Up

MLM/ network marketing is now gaining popularity in India. It is also a part of the Indian economy and entrepreneurship. Many Multi-level marketing companies had obtained attention in the market with their unique MLM product and services.
The new guidelines and laws from the Indian government made network marketing business systematic and notable. So Many people came into this network marketing business and some accomplished great financial benefit from MLM with their hard work.

Read More : Top MLM Companies in india 2021 ( updated )

Notify of
Inline Feedbacks
View all comments
Share via
Copy link