100% e-Commerce FDI by Indian Government

On March 29th 2016 Indian government has issued guidelines for FDI i.e foreign domestic investment in e-commerce permitting 100% FDI marketplace-based model with the view to attract more foreign investments and where e-commerce companies will provide an online platform to vendors to sell their products.

The standards on FDI in the sectors of e-commerce, and IT and ITeS are expected to be part of guidelines, which would be taken off soon by the government, sources said.

In the discussion of senior officials from departments of DIPP, corporate affairs and economic affairs, among others, DIPP (Department of Industrial Policy and Promotion) in a press note said that “100 per cent FDI is allowed in marketplace model of e-commerce. FDI is not allowed in inventory-based model of e-commerce”.

At present, worldwide e-tailer, like Amazon and Ebay are working online marketplaces in India while homegrown players, like Flipkart and Snapdeal have foreign speculations even as there are no FDI guidelines on different online retail models.

e-commerce companies carry their business only through marketplace model or inventory model i.e a company owns and keeps the goods in warehouses. FDI doesn’t allow inventory based model foreign investment in business-to-consumer operations.

The authorities deliberated upon the meaning of “e-business”. It might comprehensively cover transactions between buyer and seller through electronic mode like web, mobiles and TVs.

An e-commerce entity won’t allow more than 25 per cent of the sales undertaken through its marketplace from one merchant or their group companies.

E-commerce companies will not directly influence the sale price of products and will maintain level playing field and warrantee and guarantee of goods will be seller’s responsility.

e-commerce entities providing a marketplace won’t exercise ownership over the products sold. “Such an ownership… will render the business into inventory-based model,” it said.

The Department of Industrial Policy and Promotion (DIPP) is working on guidelines for e-business part in the backdrop of ongoing tussle between online and offline retailers. The department has already carried out stakeholders consultations with states, e-commerce companies and other departments.

100% FDI is allowed only in business-to-business e-commerce and not in the retail segment- said DIPP.

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