Lok Sabha Question No. 118 (STARRED), answered on 2016-05-02
Subject: e-Commerce
Ministry: COMMERCE AND INDUSTRY
Asked by: C. MAHENDRAN

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

## LOK SABHA

STARRED QUESTION NO. 118. TO BE ANSWERED ON MONDAY, THE 2 ND  MAY, 2016.

## e-COMMERCE

## *118.  SHRI C. MAHENDRAN:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज् यवव द्यग म त्री

- (a) whether the Government is encouraging e-commerce in the country;
- (b) if  so,  the  details  thereof  along  with  the  steps  taken  by  the  Government  in  this regard;
- (c) whether  the  e-commerce  industry  is  currently  facing  many  challenges/issues such  as  infrastructural  problems,  absence  of  cyber  laws,  privacy  and  security concern, payment and tax related issues, digital illiteracy and consumer psyche and virus problem; and
- (d) if  so, the details thereof along with the remedial action taken or proposed to be taken by the Government in this regard?

## ANSWER

वाणिज् यवव द्यग ााज् यम त्री(स् वतं त्र्रभााा (श्रीमतंीनिममलासीतंाामि THE MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF COMMERCE & INDUSTRY (SHRIMATI NIRMALA SITHARAMAN)

- (a) to (d): A Statement is laid on the Table of the House.

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## STATEMENT  REFERRED  TO  IN  THE  REPLY  TO  LOK  SABHA  STARRED QUESTION NO. 118 FOR ANSWER ON 02.05.2016.

- (a) & (b): To encourage investment in e-commerce sector, FDI policy permits 100% foreign  investment  under  the  automatic  route  in  companies  engaged  in e-commerce  provided that such companies would engage only in Business to Business (B2B) e-commerce. Further, an entity is permitted to undertake retail trading through e-commerce under the following circumstances:
- i) A manufacturer is permitted to sell its products manufactured in India through e-commerce retail.
- ii) A single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.
- iii) An  Indian  manufacturer  is  permitted  to  sell  its  own  single  brand products  through  e-commerce  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.

Recently,  with  the  objective  of  bringing  clarity  on  the  FDI  policy  on e-commerce sector, the Government vide Press Note 3 (2016) (Annexure) issued  on  29.03.2016  introduced  Guidelines  for  Foreign Direct Investment (FDI) in e-commerce and clarified that 100% FDI under automatic route is permitted in marketplace model of e-commerce and FDI is not permitted in inventory based model of e-commerce.

- (c) & (d): The Government undertakes consultations with Industry, Industry-bodies and  other  stakeholders  to  address  the  issues  concerning  e-commerce industry. However, no specific study has been conducted by the Government  regarding  challenges/issues  being  faced  by  e-commerce industry. Development of infrastructure in the country is the priority of the Government. The Information Technology Act, 2000 (21 of 2000) including amendments  in  2008,  deal  inter  alia  with  the  issues  relating  to  Cyber Security, privacy  and  security  concerns.  Payments  for  e-commerce activities are regulated by Reserve Bank of India. Tax related issues are governed  by  relevant  Central  and  State  statutes.  The  Government  has launched Digital India programme with a vision to transform India into a digitally empowered society and knowledge economy.

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## ANNEXURE

## ANNEXURE REFERRED TO IN REPLY TO PARTS (a) & (b) OF THE LOK SABHA STARRED QUESTION NO 118 FOR ANSWER ON 02.05.2016.

## 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 e-commerce 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          e-commerce  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:
5. 2.1 Definitions:
- i) E-commerceE-commerce means buying and selling of goods and services including digital products over digital & electronic network.
7. 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.

of

- iii) Inventory based  model  of  e-commerce -Inventory based model 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 e-commerce  means  providing  of  an  information  technology  platform  by  an e-commerce  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 e-commerce.
- 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: 29.03.2016 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.

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