India: Significant Clarifications/Changes In FDI In e-commerce

Through Press Note no. 2 of 2018, the Department of Industrial Policy and Promotion has sent out huge ‘clarifications’ on the law regarding Foreign Direct Investment (FDI) in the e-commerce quarter.

To outline, there are two models of e-commerce activities viz:

Inventory primarily based model-wherein inventory of goods and services is owned by the e-commerce entity and offered immediately to the customers. FDI isn’t authorized in such an inventory-based totally version of e-commerce. Marketplace primarily based version-wherein the e-trade entity provides the simplest statistics generation platform on a digital and digital network to act as a facilitator among client and seller. A hundred% FDI is allowed under computerized direction underneath this model, concern to positive situations.

Such market e-commerce entities could interact best in Business to Business (B2B) e-trade and not in Business to Consumer (B2C) e-trade. Such an entity could be accepted to transactions with dealers registered on its platform on a B2B foundation. These e-trade entities can render help services to dealers like warehousing, logistics, order fulfillment, call center, price collection, and such related offerings.

It becomes supplied that if the e-trade entity physical games possession or manipulate over the inventory sought to be bought, it’d be deemed as ‘stock-primarily based model’. It is now clarified that if extra than 25% of purchases of the vendor are from marketplace entity or its organization companies, the stock can be deemed to had been controlled with the aid of the e-trade entity. In such situations, the version will be regarded as ‘stock-based version. There turned into the provision that an e-trade entity will no longer allow extra than 25% of the sale value effected via its platform, in an economic yr, from one supplier or its group agencies.

This restriction has been rightfully eliminated.

There was no restriction on equity participation through e-trade entity into the entity promoting items and offerings. It has now been supplied that any entity with any fairness participation by using the e-trade marketplace location entity or its institution groups will now not be approved to sell its products at the platform run by such a marketplace entity. There became a provision that e-trade marketplace entities will not directly impact the sale price of goods and offerings and shall preserve degree gambling area.

It has now been clarified and elaborated that Service provided through an e-commerce entity or its institution companies to the sellers on its platform should be at fingers’ length and in an honest and non-discriminatory manner. Provision of offerings to any supplier on such phrases which aren’t made to be had to every other seller in comparable instances shall be appeared as unfair and non-discriminatory.

It has been further clarified that an e-commerce entity will no longer mandate any vendor to promote any product solely on its platform most effectively. The above modifications are relevant with effect from 1st February 2019. These are sizeable clarifications/modifications for the groups engaged in imparting e-trade platforms and having Foreign equity participation. These companies will take a near look at their modern commercial enterprise version to make certain that they hold to stay within the parameters of rules framed underneath this coverage. The content material of this article is meant to provide a standard manual to the difficulty depend. Specialist advice has to be sought approximately your particular situations.


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