Consumer Affairs Victoria has launched a probe into Let's Feed, a not-for-profit organisation set up by Labor candidate Jasvinder Sidhu???, which distributes donated food to needy people and to schools in Melbourne's west.

Let's Feed has co-ordinated charitable donations from Melbourne's Sikh and Hindu communities since 2010 but has not been registered as a charity, prompting the Coalition to target Mr Sidhu in parliament and allege donations have been used for branch stacking.

Liberal MP Tim Smith used parliamentary privilege on Tuesday to accuse Mr Sidhu of using Let's Feed as a front to pay for party memberships and called on the government to "fully investigate this new low in the pattern of rorting under the Andrews Labor government".

"Mr Sidhu has stacked hundreds of members from the Indian community into the Labor Party in an attempt to ensure his preselection for Tarneit," Mr Smith said.

"Mr Sidhu's so-called charity collects cash donations from cash boxes scattered across the western suburbs and solicits for donations into a mysterious bank account that pays for Labor party memberships," he said.

Liberal upper house MP Inga Peulich??? raised the matter in parliament two weeks ago.

When questioned on Tuesday, Consumer Affairs Minister Marlene Kairouz??? told Parliament the consumer regulator was investigating Let's Feed's fundraising activities.

"The matter is a serious one and I am aware of the allegations made by Ms Peulich and others," Ms Kairouz said.

"Consumer Affairs is currently investigating this matter and it would be inappropriate for me to provide any further commentary."

A spokesman for Consumer Affairs confirmed it will make inquiries into Let's Feed.

"Consumer Affairs Victoria is aware of concerns about possible fundraising activities of Let's Feed Inc, and is currently in the process of contacting Let's Feed Inc to notify the organisation about obligations under the Act, and to make inquiries into any fundraising activities," the spokesman said.

Mr Sidhu emphatically rejected the allegations and said Let's Feed was a community-based social movement that had provided tens of thousands of meals to school students and those in most need.

"It saddens me that people are using parliamentary privilege to smear me as I seek pre-selection for the Labor Party in the seat of Tarneit," Mr Sidhu said.

"I welcome the opportunity to open the books of Let's Feed to CAV to demonstrate I have acted ethically, morally and legally at all times and to repudiate this distressing, politically motivated attack."

Mr Sidhu is in a two-way preselection contest to be Labor's 2018 election candidate for the state seat of Tarneit, to be vacated by former speaker Telmo Languiller.

He has been endorsed by senior Labor figures including Treasurer Tim Pallas, Victorian lower house Speaker Colin Brooks and federal Labor MPs for Melbourne's west Joanne Ryan and Tim Watts.

He won more than half the vote among the local branch members in Tarneit against rival Sarah Connolly this month, and the vote will next go to Labor's Public Office Selection Committee to choose the winning candidate.

Mr Sidhu is aligned with the sub-faction of Labor's right that is run by former Rudd government minister Stephen Conroy, while Ms Connolly is backed by Labor state upper house MP and right sub-factional leader Adem Somyurek.