Rules 1 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rules 1 and 2 say when the Direct Selling Rules began and what they apply to: all goods and services sold through direct selling, all models of direct selling, all direct selling entities offering goods and services to consumers in India, and all forms of unfair trade practice in direct selling. A direct selling entity not established in India is covered too.
This article takes the rules as amended up to G.S.R. 454(E) dated 21 June 2023. That amendment changes rule 3 (definitions) only and does not touch rules 1 and 2. Later amendments should be checked on the website of the Department of Consumer Affairs.
The Consumer Protection (Direct Selling) Rules, 2021 were notified as G.S.R. 889(E) on 28 December 2021 and came into force on the date of publication in the Official Gazette. Rule 2 applies them to all goods and services sold through direct selling, all models of direct selling, all direct selling entities offering goods or services to consumers in India and all forms of unfair trade practice. Existing direct selling entities had ninety days from publication to comply, and an entity not established in India is covered if it offers goods or services to consumers in India.
Rule 1: title and commencement
Rule 1(1) gives the short title, the Consumer Protection (Direct Selling) Rules, 2021. Rule 1(2) provides that they "shall come into force on the date of their publication in the Official Gazette". The notification is dated New Delhi, 28 December 2021, issued by the Department of Consumer Affairs in the Ministry of Consumer Affairs, Food and Public Distribution.
The rules are made under clause (zg) of sub-section (2) of section 101 read with section 94 of the Consumer Protection Act, 2019. Section 94 deals with measures to prevent unfair trade practices in e-commerce and direct selling; see our article on section 94. The rule-making power is in section 101. The Act's definition of "direct selling" is in section 2.
Rule 2(1): the four things covered
Rule 2(1) opens with "Save as otherwise expressly provided". Subject to that, the rules apply to:
- (a) all goods and services bought or sold through direct selling;
- (b) all models of direct selling;
- (c) all direct selling entities offering goods and services to consumers in India; and
- (d) all forms of unfair trade practices across all models of direct selling.
The proviso adds a transition: "existing direct selling entities shall comply with the provisions of these rules within ninety days from the date of publication of these rules in the Official Gazette". The proviso ties the period to the date of publication; the rules do not extend it for any other reason. Entities that existed before the rules should therefore have been in compliance by the end of that period, and our compliance advisory team can review whether an existing network meets the rules today.
The rules print no definition of "all models of direct selling"; clause (b) reaches every model, subject to the later rules, in particular the ban on pyramid and money circulation schemes in rule 10. The definitions themselves are in rule 3.
Rule 2(2): entities outside India
Rule 2(2) begins "Notwithstanding anything contained in sub-rule (1)" and says the rules "shall also apply to a direct selling entity which is not established in India, but offers goods or services to consumers in India". Compare the E-Commerce Rules, where rule 2(2) requires the entity to "systematically" offer goods or services; the Direct Selling Rules use the plainer test of "offers goods or services to consumers in India". See rules 1 and 2 of the E-Commerce Rules.
An invented example: Aurora Wellness Ltd is a company based abroad with no office in India. It recruits sellers through an app and sends products to buyers in Indian cities. Rule 2(2) brings it within the rules, so it must meet duties such as those in rule 5.
Who is covered, at a glance
| Question | Answer under rule 2 |
|---|---|
| Goods and services sold through direct selling | Covered (2(1)(a)) |
| Every model of direct selling | Covered (2(1)(b)) |
| Direct selling entities offering goods and services to consumers in India | Covered (2(1)(c)) |
| Unfair trade practices in any direct selling model | Covered (2(1)(d)) |
| Entity with no establishment in India that offers goods or services to consumers in India | Covered (2(2)) |
| Entities existing when the rules were published | Compliance within ninety days from publication (proviso) |
The 2023 amendment in brief
G.S.R. 454(E) dated 21 June 2023 amended rule 3(1): clause (d) now reads "directly through a network of sellers" in place of "through direct sellers", and a new clause (ga) defines "network of sellers". The amendment is explained in our article on rule 3 and the definitions. Rules 1 and 2 are not amended.
How the rules fit together
Rule 2 is the entry point; the later rules do the work. Rule 4 requires records at the registered office, rule 5 sets the entity's obligations, rule 6 the direct seller's, rule 7 the duties to consumers, rule 8 bars certain persons, rule 9 applies the E-Commerce Rules to online sales, rule 10 bans pyramid and money circulation schemes, rule 11 asks each State Government to monitor, rule 12 gives RBI regulations priority in case of inconsistency and rule 13 applies the Act to any contravention.
Need help with direct selling compliance?
If you run or are joining a direct selling network and want to know whether the rules apply, our compliance advisory team can map the business to rule 2 and list the duties that follow.
Key takeaways
- The rules took effect on publication of G.S.R. 889(E), 28 December 2021.
- They cover goods, services, all direct selling models, all direct selling entities offering to Indian consumers and unfair trade practices.
- Existing entities had ninety days from publication to comply.
- A direct selling entity not established in India is covered if it offers goods or services to consumers in India.
- The 2023 amendment changes rule 3 only.
Read next
- Rule 3: definitions including network of sellers and pyramid scheme
- Rules 8-13: barred persons, pyramid schemes, State monitoring and RBI regulations
- Rules 1 and 2 of the E-Commerce Rules, 2020
- Section 94: unfair trade practices in e-commerce and direct selling
Disclaimer: Based on the rules, regulations and guidelines named above as published in the Gazette of India or on the CCPA website, with the amending notifications the article names (consulted on 3 October 2026). Later amendments, the Consumer Protection Act, 2019 provisions referred to, State rules and CCPA advisories should be checked. This article is general information, not legal advice; check the official text before acting.