Govt. Permits 100% FDI In Only Marketplace Format Of E-Commerce

In order to attract more foreign investments, Department of Industrial Policy and Promotion on Tuesday has permitted 100 per cent Foreign Direct Investment in the market place format of e-commerce retailing.

DIPP has also come out with definitions of ‘e-commerce’, ‘inventory-based model’ and ’market place model’, to bring out more clarity on which companies will be able to benefit out of the new permits.

As per new definitions:

– Market place model of e-commerce means providing 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.

DIPP added that a market place entity will be permitted to enter into transactions with sellers registered on its platform on business-to-business basis.

However, e-commerce companies will not be permitted to sell more than 25 per cent of the sales affected through its market place from one vendor or their group companies.

As per the guidelines, e-commerce means buying and selling of goods and services, including digital products over digital and electronic network.Digital and electronic network will include computers, TV channels and other Internet application used in automated manner such as web pages and mobiles.

DIPP further added that e-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call center, payment collection and other services.

However, such entities will not exercise ownership over the inventory. Such an ownership over the inventory will render the business into inventory based model and hence not fall under the purview of new permits.

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