Govt permits 100% FDI in e-commerce market places

The Department of Industrial Policy and Promotion (DIPP) on 29 March 2016 notified Guidelines for 100 percent Foreign Direct Investment (FDI) in Business to Business (B2B) e-commerce.
•    The guidelines were issued under the Consolidated FDI Policy Circular 2015 that was notified by the DIPP of the Ministry of Commerce and Industry.
•    E-commerce means buying and selling of goods and services including digital products over digital and electronic network.
•    100 percent FDI under automatic route is permitted in marketplace model of e-commerce.
•    FDI is not permitted in inventory based model of e-commerce.
•    Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.
•    E-commerce marketplaces may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.
•    E-commerce entity providing marketplace will not exercise ownership over the inventory. Such an ownership over the inventory will render the business into inventory based model.
•    An e-commerce entity will not permit more than 25 percent of the sales affected through its marketplace from one vendor to their group companies.
•    Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital and electronic network to act a facilitator between buyer and seller.
•    Inventory based model of e-commerce means e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.
•    Indian Scenario: In India, 100 percent FDI under automatic route is permitted in marketplace model, while no FDI is permitted in inventory based model of e-commerce.
•    In marketplace model, any warrantee or guarantee of goods and services sold will be responsible of the seller.
•    E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall remain level playing field.
•    As per the Consolidated FDI Policy Circular 2015, FDI up to 100 percent under automatic route is permitted in B2B e-commerce, while no FDI is permitted in Business to Consumer (B2C) e-commerce.
•    Though this consolidated policy was issued in May 2015 and led to large scale foreign investments in this sector there had been considerable vacuum with respect to operational guidelines of e-commerce platforms. This present guidelines fill that critical gap.