Ministry of Commerce and Industry, DIPP has clarified the FDI policy on e-commerce activities in a press note dated 26th December, 2018, which will come to effect from 2nd February, 2019.
100% FDI is allowed in e-commerce. E-commerce entities are allowed only to engage in Business to business (B2B) e-commerce and not Business to Consumer (B2E) e-commerce. E-commerce entities are not allowed to carry out business on inventory based model i.e. entities cannot exercise ownership over the inventory as per FDI Policy, 2017.
In the new circular, following important changes have been brought in FDI Policy, 2017 regarding e-commerce marketplaces:
i) It has been clarified that if 25% of the purchase of vendor are from the marketplace entity or its group companies, inventory will be deemed to be controlled by e-commerce marketplace entity.
ii) An entity having an equity participation or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its product on the platform.
iii) The circular also clarifies that Services to vendors including fulfillment, logistics, warehousing, advertisement, payment, financing etc. must be provided in a non-discriminatory manner. Cash back provided to buyers must be fair and non-discriminatory. Services to any vendor at different terms will not be provided if the same terms are not made available to other vendors in similar circumstances.
iv) The e-commerce marketplace cannot mandate a seller to sell any product exclusively on their platform.
v) The e-commerce marketplace entities are required to furnish a certificate along with report of statutory auditor to RBI, stating compliance to these guidelines on 30th September of every year for the preceding year.
Click here for the press note.
