Lok Sabha Question No. 144 (UNSTARRED), answered on 2016-04-25
Subject: FDI in e-Commerce Retailing
Ministry: COMMERCE AND INDUSTRY
Asked by: ANTO  ANTONY, DHANANJAY BHIMRAO MAHADIK, JYOTIRADITYA MADHAVRAO SCINDIA, VIJAYSINH MOHITE PATIL, POONAMBEN HEMATBHAI MAADAM, GAURAV GOGOI, HEENA VIJAYKUMAR GAVIT, SRIRAM MALYADRI, T. RADHAKRISHNAN

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

## LOK SABHA

UNSTARRED QUESTION NO. 144. TO BE ANSWERED ON MONDAY, THE 25 TH    APRIL, 2016.

## FDI IN e-COMMERCE RETAILING

## 144.   SHRI ANTO ANTONY:

SHRI DHANANJAY MAHADIK:

SHRI JYOTIRADITYA M. SCINDIA:

SHRI MOHITE PATIL VIJAYSINH SHANKARRAO:

SHRIMATI POONAMBEN MAADAM:

SHRI GAURAV GOGOI:

DR. HEENA VIJAYKUMAR GAVIT:

SHRI MALYADRI SRIRAM:

SHRI T. RADHAKRISHNAN:

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

## वाणिज् यवव द्यग म त्री

- (a) whether  the  Government  has  recently  formulated  the  Foreign  Direct  Investment (FDI) guidelines on e-commerce and if so, the salient features of the guidelines;
- (b) whether the Government has decided to allow 100% FDI through automatic route in e-commerce retailing and if so, the details thereof and the reasons therefor;
- (c) whether this move is likely to impact small traders/retailers who are already facing the brunt of economic slowdown and if so, the details thereof;
- (d) whether  the  small  traders/retailers  have  protested  against  this  decision  of  the Government; and
- (e) if  so,  the  details  thereof  along  with  the  steps  taken/proposed  to  be taken  by  the Government to protect the interests of domestic retailers?

## ANSWER

## वाणिज् यवव द्यग ााज् यम त्रीस् वतं त्र्रभााा(स्ीमतंीिरममलााीीतंाामि( THE MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY OF COMMERCE & INDUSTRY (SHRIMATI NIRMALA SITHARAMAN)

- (a) & (b): The Government  vide Press Note 3 (2016) (Annexure) issued on 29.03.2016  introduced  Guidelines  for  Foreign  Direct  Investment  (FDI)  on e-commerce, in order to bring clarity to extant FDI policy on the sector.

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) to (e): FDI in retail sector including e-commerce has been opened in a calibrated manner to maintain level playing field between brick and mortar stores and e-commerce entities.  Further,  review  of  FDI  policy  is  an  ongoing  process and significant changes are made in the FDI policy on different sectors, from time  to  time,  to  ensure  that  India  remains  increasingly  attractive  and investor-friendly  investment  destination.  Changes  are  made  in  the  policy after  having  intensive  consultation  with  stakeholders  including  concerned Ministries/Departments, Apex Industries Chambers and other organizations.

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## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  &  (b)  OF  THE  LOK  SABHA UNSTARRED QUESTION NO 144 FOR 25.04.2016.

## 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.

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 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.
- ii) Marketplace  e-commerce  entity  will  be  permitted  to  enter  into  transactions  with sellers registered on its platform on B2B basis.

of

- iii) E-commerce  marketplace  may  provide  support  services  to  sellers  in  respect  of warehousing, logistics, order fulfillment, call centre, payment collection and other services.
- 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.
- 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.
- 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.
- viii) In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.
- 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.
- 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.
- 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.

3.

Joint  Secretary(I&C),  Department  of  Economic    Affairs,

North Block, New Delhi

## Reserve  Bank  of  India,  Foreign  Exchange  Department, Mumbai

For suitably

policy incorporating

changes

Exchange the

in

Foreign

Management

(Transfer or issue of security by a  person  resident  outside  India)

Regulations,

2000

and 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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