Lok Sabha Question No. 1174 (UNSTARRED), answered on 2016-07-25
Subject: Foreign Ownership of e-Commerce
Ministry: COMMERCE AND INDUSTRY
Asked by: CHANDU LAL SAHU, OM BIRLA

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION

## LOK SABHA

## UNSTARRED QUESTION NO. 1174. TO BE ANSWERED ON MONDAY, THE 25 TH  JULY, 2016.

## FOREIGN OWNERSHIP OF E-COMMERCE

## 1174.  SHRI CHANDU LAL SAHU: SHRI OM BIRLA:

Will the Minister of COMMERCE AND INDUSTRY

be pleased to state: वाणिज् यवव द्यग ं ्री

- (a) whether the Government has introduced new regulations on foreign ownership of e-commerce in India and if so, the details thereof;
- (b) whether the Government has fixed any timeline for implementation of the new regulations and if so, the details thereof including the action proposed to be taken against the violators; and
- (c) the others steps which have been taken to ensure price parity in e-commerce as compared to offline stores and improving e-commerce market in India?

## ANSWER

## वाणिज् यवव द्यग ााज् यं ्रीस् वतं ््रभााा(स्रींतंरीिरंमलााीरीतंाांि( THE MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF COMMERCE & INDUSTRY (SHRIMATI NIRMALA SITHARAMAN)

- (a): With the objective of bringing clarity in the FDI policy on e-commerce sector, the Government vide Press Note 3 (2016) (Annexure) introduced Guidelines for Foreign Direct Investment (FDI) in e-commerce.
- (b): The  said  Guidelines  are  effective  from  date  of  issue  of  Press  Note  3  i.e. 29.03.2016. FDI policy is notified under Foreign Exchange Management Act (FEMA), 1999 and any violation of FDI regulations is covered  by the penal provision of FEMA. 1999. Enforcement Directorate conducts investigations in cases  of contravention of FDI policy as and when any credible information is received in this regard. Based on the outcome of the investigation, appropriate action under the provision of FEMA is taken in such cases.
- (c): With a view to ensure price parity in e-commerce, the policy specifies that ecommerce  entities  providing  market  place  will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.

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## ANNEXURE REFFERED TO IN REPLY TO PART (a)  OF THE LOK SABHA UNSTARRED QUESTION NO. 1174  FOR ANSWER ON 25.07.2016.

## Government of India Ministry of Commerce & Industry Department of Industrial Policy & Promotion (FC Section) Press Note No 3 (2016 Series)

## Subject: Guidelines for Foreign Direct Investment (FDI) on E-commerce

As per the FDI policy, contained in the 'Consolidated FDI Policy Circular 2015' (FDI Policy) as amended from time to time, FDI up to 100% under automatic route is permitted in Business  to  Business  (B2B)  e-commerce.  No  FDI  is  permitted  in  Business  to  Consumer (B2C) e-commerce. However, FDI in B2C e-commerce is permitted in following circumstances:

- i) A  manufacturer  is  permitted  to  sell  its  products  manufactured  in  India  through  ecommerce retail.
2. ii) A  single  brand  retail  trading  entity  operating  through  brick  and  mortar  stores,  is permitted to undertake retail trading through e-commerce.
3. iii) An  Indian  manufacturer  is  permitted  to  sell  its  own  single  brand  products  through  ecommerce  retail.  Indian  manufacturer  would  be  the  investee  company,  which  is  the owner of the Indian brand and which manufactures in India, in terms of value, at least 70% of its products in house, and sources, at most 30% from Indian manufacturers.
4. 2.0 In order to provide clarity to the extant policy, guidelines for foreign direct investment on e-commerce sector have been formulated and are enumerated below:

## 2.1 Definitions:

- i) E-commerceE-commerce means buying and selling of goods and services including digital products over digital & electronic network.
2. 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.
3. iii) Inventory  based  model  of  e-commerce -  Inventory  based  model  of  ecommerce  means  an  e-commerce  activity  where  inventory  of  goods  and services is owned by e-commerce entity and is sold to the consumers directly.
4. 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.

## 2.2 Guidelines for Foreign Direct Investment on e-commerce sector:

- i) 100%  FDI  under  automatic  route  is  permitted  in  marketplace  model  of  ecommerce.
2. ii) FDI is not permitted in inventory based model of e-commerce.

## 2.3 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.
2. ii) Marketplace  e-commerce  entity  will  be  permitted  to  enter  into  transactions with sellers registered on its platform on B2B basis.
3. iii) E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.
4. iv) E-commerce entity providing a marketplace will not exercise ownership over the  inventory  i.e.  goods  purported  to  be  sold.  Such  an  ownership  over  the inventory will render the business into inventory based model.
- v) An  e-commerce  entity  will  not  permit  more  than  25%  of  the  sales  affected through its marketplace from one vendor or their group companies.
6. 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.
7. 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.
8. viii) In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.
9. 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.
- x) Guidelines on cash and carry wholesale trading as given in para 6.2.16.1.2 of the FDI Policy will apply on B2B e-commerce.
11. 3.0 Subject to the conditions of FDI policy on services sector and applicable laws/regulations,  security  and  other  conditionalities,  sale  of  services  through  e-commerce will be under automatic route.
12. 4.0 The above decision will take immediate effect.

## (Atul Chaturvedi) Joint Secretary to the Government of India

D/o IPP File No.:  No. 5/3/2015-FC.I dated:    .03.2016 Copy forwarded to :

1. Press  Information  Officer,  Press  Information  Bureau -  for  giving  wide  publicity  to  the  above Press Note.
2. Joint  Secretary(I&C),  Department  of  Economic    Affairs, North Block, New Delhi
3. Reserve  Bank  of  India,  Foreign  Exchange  Department, Mumbai

For suitably incorporating the policy changes in Foreign Exchange Management (Transfer or issue of security by a  person  resident  outside  India) Regulations, 2000 and the relevant schedules thereof.

4. NIC Section in the Department of Industrial Policy and Promotion -  for  uploading  the  Press Note on DIPP's website.
5. Hindi Section, DIPP - for providing Hindi version.