Finally, the government has given the green light to 100% FDI in the marketplace format of e-commerce retailing with a view to attract more foreign investments.
As per the guidelines issued by the Department of Industrial Policy and Promotion (DIPP) on FDI in e-commerce, foreign direct investment (FDI) has not been allowed in inventory-based model of e-commerce.
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.
(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 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.
Great to see the guidelines around 100% FDI in ecomm marketplaces. Glad the govt recognises and supports an industry transforming India! ??
— Kunal Bahl (@1kunalbahl) March 29, 2016
To bring clarity, the DIPP has also come out with the definition of ‘e-commerce’, ‘inventory-based model’ and ‘marketplace model’.
Marketplace model of e-commerce means providing of an IT platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.
The 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 consumers directly, according to the guidelines.
A marketplace entity will be permitted to enter into transactions with sellers registered on its platform on business-to-business basis, DIPP said.
It said that an e-commerce firm, however, will not be permitted to sell more than 25% of the sales affected through its marketplace from one vendor or their group companies.
