FDI Guidelines For E-Commerce Entities

On December 26^th, 2018 the Department of Industrial Policy and Promotion under the Ministry of Commerce (the "DIPP"),introduced stricter guidelines that govern foreign direct investment ("FDI") in e-commerce firms. The Government through press note 2 (2018) ("Press Note"), provided for guidelines applicable to such e-commerce entities under the consolidated foreign direct investment policy of 2017 (the "FDI Policy").

CHANGES TO THE FDI POLICY

Setting forth the definitions of e-commerce, ecommerce entities, market place-based model and inventory-based model, the Press Note clarifies that 100% foreign direct investment is permitted, under the automatic route, in marketplace models of e-commerce and no FDI is permitted in inventory-based models of e-commerce. It thereafter sets forth other changes and conditions applicable to e-commerce entities. These changes will come into effect from February 1, 2019.