[India] FDI in E-Commerce

Author: Sanjana Tripathy Edited by Bob Tseng

100% foreign investment is allowed for e-commerce activities and it is allowed to go through an automatic route unless the laws require otherwise. This is subject to the condition that e-commerce entities would engage only in Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce. This investment is permitted in the marketplace model of e-commerce and not in the inventory-based model of e-commerce. The following are the other conditions for this investment:-

A. Digital & electronic networks will include a network of computers, television channels, and any other internet application used in an automated manner such as web pages, extranets, mobiles etc.

B. Marketplace e-commerce entities will be permitted to enter into transactions with sellers registered on its platform on a B2B basis.

C. E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection, and other services.

D. E-commerce entities providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold.

E. An entity having equity participation by an e-commerce marketplace entity or having control of its inventory by an e-commerce marketplace entity, will not be permitted to sell its products on the platform run by such marketplace entity.

F. In the marketplace model goods/services made available for sale electronically on a website should clearly provide the name, address, and other contact details of the seller. Post-sales, and delivery of goods to the customers will be the responsibility of the seller.

G. In the marketplace model, payments for sale may be facilitated by the e-commerce entity in conformity with the guidelines of the Reserve Bank of India.

H. In the marketplace model, any warranty / guarantee of goods and services sold will be the responsibility of the seller.

I. E-commerce entities providing a marketplace will not influence the sale price of goods or services and shall maintain a level playing field. Services should be provided by e-commerce marketplace entities or other entities in which e-commerce marketplace entities have equity participation or common control, to vendors on the platform at arm's length and in a fair and non-discriminatory manner.

J. Guidelines on cash and carry wholesale trading will apply to B2B e-commerce.

K. E-commerce marketplace entities will not authorize any seller to sell any product exclusively on its platform only.

L. E-commerce marketplace entities with FDI should have a report of a statutory auditor by the 30th of September every year for the preceding financial year confirming compliance with the e-commerce guidelines.