April 2016 Issue 43
Intuit Management Consultancy
» India » Middle East » Africa
   Our Services
» Market Entry Services India, Middle East & Africa
» Company Formation
» Private Client & Family Advisory Services
» International Tax
» Corporate Finance
» Intellectual Property
» Feasibility Study
» Recruitment
» Outsourcing Solutions
» Business Advisory
» Mergers & Acquisitions
» Immigration Services
» Procurement & Trading Solutions
» Corporate Relocation Services.
Connect with us
New Guidelines for Foreign Direct Investment on e-commerce in India
E-commerce in recent times has been growing rapidly in India. By 2020, the e-commerce market size is expected to reach USD80 billion1, showing year on year growth in the range of 30 to 35 per cent2. This growth is likely to sustain for the next few years as e-commerce continues to reach new geographies, encompass new markets and provide greater benefits to e-tailers, consumers in terms of providing a large number of traders an additional source of sales, providing consumer greater convenience and access to a large number of products, etc. The absence of an express foreign investment policy pertaining to e-commerce was limiting the flow of foreign capital in this sector. In order to address the concern of various stakeholders and facilitate further investment, the government has provided with awaited guidelines on foreign investment in e-commerce vide Press Note No. 3 (2016 series) dated 29 March 2016. The key features of the press note issued by Department of Industrial Policy and Promotion in this regard are enumerated below:

  • Impact of e-commerce on SMEs in India: KPMG-Snapdeal Report
Introduction of definitions
  • E-commerce: It means buying and selling ofgoods and services including digital products over the digital and electronic network which include a network of computers, television channels and any other internet application used in an automated manner such as web pages, extranets, mobiles, etc.

  • E-commerce entity: An entity (i.e. Indian orforeign company including its office/branch in India) conducting e-commerce business.

  • Inventory based model of e-commerce: An e-commerce activity where the inventory of goods and services is owned by an e-commerce entity and is sold to the consumers directly.

  • Marketplace based model of e-commerce: An e-commerce activity where an information technology platform will be provided by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.
Guidelines for foreign investment in the e-commerce sector
Foreign investment will not be allowed in the inventory based model of e-commerce. 100 per cent foreign investment will be allowed under the automatic route in an entity undertaking sale of service through e-commerce.100 per cent foreign investment will be allowed under the automatic route in market place-based model subject to the following conditions.
  • Permission to marketplace e-commerce entity to enter into B2B transactions with sellers registered on its platform.

  • The marketplace may provide support services to a seller in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.

  • Sales from one vendor or its group companies should not exceed 25 per cent of the sales affected through the marketplace.

  • Website should clearly provide name, address and other contact details of the seller.

  • Post sale, delivery of goods to the customer, customer satisfaction, warranty/guarantee of goods and services sold will be the responsibility of the seller.

  • The marketplace will not exercise ownership over the inventory.

  • Payment for sale may be facilitated in conformity with the guidelines of the Reserve Bank of India.

  • E-commerce entities will not directly/indirectly influence the sale price of goods or services and shall maintain a level playing field.
Intuit Research Team

Intuit Management Consultancy
Dubai Tel: +971 4 3709963 Fax: +971 4 3709307
India Tel: +91 9840708181 Fax: +91 44 42034149
Email: communications@intuitconsultancy.com
If you wish to unsubscribe please email us

Disclaimer: The content of this news alert should not be constructed as legal opinion. This newsletter provides general information at the time of preparation. This is intended as a news update and Intuit neither assumes nor responsible for any loss. This is not a spam mail. You have received this, because you have either requested for it or may be in our Network Partner group.