The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry has released Press Note No. 3 (2016 series) dated 29th March, 2016 wherein it has released guidelines for Foreign Direct Investment on E-commerce .
In order to provide clarity to the FDI policy, following guidelines were provided:
1. Definitions have been provided for 'E-commerce', 'E-commerce entity', 'Inventory based model of E-commerce' and 'Market place based model of E-commerce'.
E-commerce now includes buying and selling of goods and services over any digital or electronic network. E-commerce entity would include any company conducting E-commerce business in India.
Inventory based model of E-commerce is defined as an inventory based model where inventory is owned by the E-commerce entity and is sold directly to the consumers (B2C).
Market place based model of E-commerce is defined as providing of an IT platform and acting as a facilitator between the buyer and seller.
2. It has been clarified that 100 % FDI under automatic route is permitted in market place model of E-commerce and FDI is not permitted in inventory based model of E-commerce.
3. Digital and electronic network will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc.
4. Market place E-commerce entities can enter into B2B transactions with the sellers registered on its platform.
5. E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.
6. E-commerce entity providing a marketplace will not exercise ownership over the inventory i.e. goods purported to be sold. Such an ownership over the inventory will render the business into inventory based model.
7. An E-commerce entity will not be permitted to undertake more than 25% of the sales through its marketplace from one vendor or their group companies.
8. In marketplace model goods/services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be the responsibility of the seller.
9. In marketplace model, payments for sale may be facilitated by the E-commerce entity in conformity with the guidelines of the Reserve Bank of India.
10. In market place model, any warrantee or guarantee of goods and services sold will be responsibility of the seller.
11. E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.
12. Guidelines on cash and carry wholesale trading as given under FDI policy will apply on B2B E-commerce.
13. Sale of services through E-commerce will be under automatic route subject to the conditions of FDI policy on service sector and applicable laws/ regulations, security and other such conditions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.