B TO C E-COMMERCE ALLOWED UNDER FDI *SUBJECT TO CONDITIONS

As per press note 12 of 2015 issued by DIPP, B2C e commerce is permitted in the following circumstances:

i) A manufacturer is permitted to sell its products manufactured in India through e commerce retail.

ii) A single brand retail entity is operating through brick and mortar stores, is permitted to undertake retail trade through e commerce

iii) An Indian manufacturer would be the investee company where it is the owner of the Indian brand. The rules also add that the manufacturer must create 70% of the goods in-house and 30% may be sourced from Indian manufacturers.

Now, in order to provide clarity on extant policy DIPP has released press note no. 3 of 2016 dated 29 March 2016  wherein 100% FDI under automatic route is permitted in marketplace model of e-commerce which is defined as below:

• 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.
• Further it also clarifies that FDI is not permitted in inventory based model of e-commerce which is defined as under:
• 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.
• Further definition of E-Commerce and E-Commerce entity is also introduce 
• E-Commerce means buying and selling of goods and services including digital products over digital & electronic network.
• 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.

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.

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.

• 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.

• The above decision will take effect from 29 March 2016.