100% FDI in Indian ecommerce now a reality

The government today permitted 100 per cent foreign direct investment (FDI) in the market place format of e-commerce retailing with a view to attract more foreign investments.

As per the guidelines issued by the Department of Industrial Policy and Promotion (DIPP) on FDI in e-commerce, FDI has not been allowed in inventory-based model of e-commerce.

At present, global e-tailer giants like Amazon and Ebay are operating online marketplaces in India while homegrown players like Flipkart and Snapdeal have foreign investments even as there were no clear FDI guidelines on various online retail models.

To bring clarity, the DIPP has also come out with the definition of ‘e-commerce’, ‘inventory-based model’ and ’market place model’.

• Market place model of e-commerce means providing of an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.

• The 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 consumers directly, according to the guidelines.

• A market place entity will be permitted to enter into transactions with sellers registered on its platform on business-to-business basis, DIPP said.

It said that an e-commerce firm, however, will not be permitted to sell more than 25 per cent of the sales affected through its market place from one vendor or their group companies.

“In order to provide clarity to the extant policy, guidelines for FDI on e-commerce sector have been formulated,” DIPP said.

The government has already allowed 100 per cent FDI in business-to-business (B2B) e-commerce.

As per the guidelines, e-commerce means buying and selling of goods and services, including digital products over digital and electronic network.

Digital and electronic network will include computers, TV channels and other Internet application used in automated manner such as web pages, extranets and mobiles.

DIPP said that e-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfilment, call centre, payment collection and other services.

However, such entities will not exercise ownership over the inventory. “Such an ownership over the inventory will render the business into inventory based model.”

DIPP said that 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 customers satisfaction will be responsibility of the seller,” it said adding in marketplace model, payments for sale may be facilitated by the e-commerce entity in conformity with the RBI rules.

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

“E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field,” it said.

Further the guideline said “subject to the conditions of FDI policy on services sector and applicable laws/regulations and other conditonalities, sale of services through e-commerce will be under automatic route”.