Lok Sabha Question No. 1228 (UNSTARRED), answered on 2016-05-02
Subject: Online Retail Market
Ministry: COMMERCE AND INDUSTRY
Asked by: PREM SINGH CHANDUMAJRA

- (a) & (b):

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

## LOK SABHA

UNSTARRED QUESTION NO. 1228. TO BE ANSWERED ON MONDAY, THE 2 ND  MAY, 2016.

## ONLINE RETAIL MARKET

## 1228.  SHRI PREM SINGH CHANDUMAJRA:

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

## वाणिज् यवव द्यग ं ्री

- (a) whether online retail market is growing fast in the country;
- (b) if so, the details thereof along with the average annual growth of the said market;
- (c) whether the opportunities of assistance of foreign capital investment are available in this market; and
- (d) if  so,  the  details  thereof  indicating  the  percentage  of  foreign  investment  assistance approved so far?

## 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)

No such study has been conducted.

Foreign  Direct  Investment  (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

- (c) & (d): 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) on 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.

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## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PARTS  (c)  &  (d)  OF  THE  LOK  SABHA UNSTARRED QUESTION NO 1228 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:

## 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.

of

- ii) Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis. 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: 29.03.2016 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 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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