New FDI Policy For E-Commerce w.e.f 1st February, 2019

New FDI Policy For E-Commerce w.e.f 1st February, 2019
New FDI Policy For E-Commerce w.e.f 1st February, 2019

In what may bring cheers to many small retailers and offline vendors who were seeking level playing field, the DIPP issued New FDI Policy for Ecommerce that will get effective w.e.f 1st February, 2019. Below is Point by Point Details of the New Policy.

“Subject to provisions  of  FDI Policy, e-commerce  entities  would engage only in Business to Business (B2B) e-commerce  and not in Business to Consumer  (B2C) e-commerce. ( That’s  How  the  Press  Note Begins in a Stern Way)”

5.2.15.2.2  Definitions:

i)    E-commerce-  E-commerce   means   buying  and  selling  of  goods   and  services including digital  products over digital  & electronic network.

ii)   E-commerce entity–     E-commerce  entity  means  a  company  incorporated   under the Companies Act 1956  or the Companies Act 2013 or a foreign company covered under  section 2 (42)  of the Companies  Act,  2013  or an office,  branch or agency in India as provided in section 2 (v) (iii) of FEMA 1999, owned or controlled by a person resident outside  India and conducting the e-commerce  business.

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

iv)  Marketplace   based  model  of  e-commerce-   Marketplace   based   model  of  ecommerce   means   providing   of  an  information   technology   platform   by  an  ecommerce  entity  on a digital  & electronic  network  to  act  as a facilitator  between buyer and seller.

5.2.15.2.3 Guidelines for Foreign Direct Investment on e-commerce  sector

i)          100%   FDI  under   automatic   route  is   permitted   in   marketplace   model  of  e-commerce.

ii)         FDI is  not permitted  in  inventory based model of e-commerce.

5.2.15.2.4         Other Conditions

i)         Digital   &    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.

ii)        Marketplace e-commerce  entity will be  permitted to enter  into transactions  with sellers registered on its  platform on B2B  basis.

iii)       E-commerce  marketplace may provide support  services to sellers  in  respect of warehousing,  logistics, order fulfilment, call centre, payment collection and other services.

iv)       E-commerce entity providing a marketplace will not exercise ownership or control over the inventory  i.e.  goods purported  to be sold. Such an ownership  or control over the inventory will render the business  into  inventory  based model. Inventory of a vendor will be deemed to be controlled by e-commerce  marketplace  entity if more than 25% of purchases  of such vendor are from the marketplace  entity  or its group companies.

v)      An entity  having  equity  participation  by e-commerce   marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will  not be permitted to sell  its  products on the platform run by such marketplace entity.

vi)       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 responsibility of the seller.

vii)      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.

viii)      In  marketplace model, any warrantee/ guarantee of goods and services  sold will be responsibility of the seller.

ix)       E-commerce entities  providing  marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Services should  be provided  by e-commerce marketplace entity or other entities  in  which e-commerce  marketplace  entity  has  direct  or  indirect  equity  participation  or common control, to vendors on the platform at arm’s length and in a fair and non• discriminatory  manner. 

Such services will  include  but  not  limited  to fulfilment, logistics, warehousing, advertisement/ marketing, payments, financing etc. Cash back  provided  by group companies of marketplace entity  to buyers shall be fair and  non-discriminatory. 

For the purposes  of this clause,  provision  of services  to any vendor on such terms which are  not  made available  to other vendors in similar circumstances will  be deemed  unfair and discriminatory.

x)     Guidelines on cash and carry wholesale trading as given in  para  5.2.15.1.2  of Consolidated FDI Policy Circular 2017 will apply on 828 e-commerce.

xi)        e-commerce marketplace entity will not mandate any seller to sell  any  product exclusively on its platform only.

xii)      e-commerce  marketplace  entity will be required  to furnish a certificate  along with a report of statutory auditor to Reserve Bank of India, confirming compliance of above guidelines, by 30th of September of every year for the preceding financial year.

Subject  to  the  conditions   of   FDI  policy   on  services   sector  and  applicable laws/regulations,  security  and other conditionality’s,  sale of  services  through e-commerce will be under automatic route

The above decision will take effect from 01  February,  2019.

D/o DIPP File No.:  5/3/2015-FC-I dated: 26 December, 2018

CA Ankit Gulgulia (Jain)

CA Ankit Gulgulia (Jain) is Fellow Member of ICAI, Certified IFRS & Business Valuation from ACCA UK and is Practising Chartered Accountant with 8 Years plus of Rich Experience in Audit, GST, Income Tax, DGFT, Valuation, Strategic Advisory, Matters of FEMA, FDI, NCLT, RERA, ROC, SEBI, RBI, M&A, Fundraising, Startups etc as Founder of AGA, Chartered Accountants. AGA Works in wholesome business solutions right from scratch of Company Incorporation to Compliances all under One Roof. He also takes interest in being Virtual Chief Financial Officer (CFO) for Small and Medium Enterprises for Guiding them with All Business, Tax & Strategic Business Decision Making . To Know More, Learn here or contact us at ankitgulgulia@gmail.com

CA Ankit Gulgulia (Jain)
About CA Ankit Gulgulia (Jain) 1116 Articles
CA Ankit Gulgulia (Jain) is Fellow Member of ICAI, Certified IFRS & Business Valuation from ACCA UK and is Practising Chartered Accountant with 8 Years plus of Rich Experience in Audit, GST, Income Tax, DGFT, Valuation, Strategic Advisory, Matters of FEMA, FDI, NCLT, RERA, ROC, SEBI, RBI, M&A, Fundraising, Startups etc as Founder of AGA, Chartered Accountants. AGA Works in wholesome business solutions right from scratch of Company Incorporation to Compliances all under One Roof. He also takes interest in being Virtual Chief Financial Officer (CFO) for Small and Medium Enterprises for Guiding them with All Business, Tax & Strategic Business Decision Making . To Know More, Learn here or contact us at ankitgulgulia@gmail.com

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