Lok Sabha Question No. 2460 (UNSTARRED), answered on 2016-05-09
Subject: Review of Online Business System
Ministry: COMMERCE AND INDUSTRY
Asked by: N.K. PREMACHANDRAN, BHAIRON PRASAD MISHRA

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

## LOK SABHA

UNSTARRED QUESTION NO. 2460. TO BE ANSWERED ON MONDAY, THE 9 TH  MAY, 2016.

## REVIEW OF ONLINE BUSINESS SYSTEM

## 2460.  SHRI N.K. PREMACHANDRAN: SHRI BHAIRON PRASAD MISHRA:

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

## वाणिज् यएवं उद्योग मंत्री

- (a) the details of the progress achieved in Online Business System during the last three years;
- (b) whether the Government has conducted any review of this system;
- (c) if  so,  the  details  thereof  along  with  the  remedial  measures  taken  by  the Government after the review;
- (d) whether the Government  proposes  to  introduce legislation for promotion, regulation and control of e-commerce; and
- (e) if  so,  the  details  thereof  along  with  the  steps  taken  by  the  Government  in  this regard?

## ANSWER

## वाणिज्य एवं उद्योग राज्यमंत्री ( स्वतंत्र प्रभार )( श्रीमती निममला सीतारमि ) THE MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF COMMERCE & INDUSTRY (SHRIMATI NIRMALA SITHARAMAN)

- (a): No such data is maintained by the Government regarding progress achieved in Online Business System.
- (b)& (c): The Government undertakes consultations with Industry, Industry-bodies and other  stakeholders  to  address  the  issues  concerning  e-commerce  industry. Recently,  with  the  objective  of  bringing  clarity  on  the  FDI  policy  on  ecommerce  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.
- (d): No Madam.
- (e): Does not arise.

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## ANNEXURE REFFERED TO IN REPLY TO PARTS (b)&(c) OF THE LOK SABHA UNSTARRED QUESTION NO. 2460 TO BE ANSWERD ON 09.05.2016.

## 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:

## 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 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.
4. 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.
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:  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 For  suitably  incorporating  the policy changes in Foreign
3. Reserve Bank of India, Foreign Exchange Department, Mumbai

Exchange

Management

(Transfer  or  issue  of  security by  a  person  resident  outside

India)  Regulations,  2000  and the

relevant 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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