Restrictions On E-Retailers - Government Tightens Norms

The Ministry of Commerce & Industry has, by way of the Press Note 2 (2018 Series) dated 26th December 2018 (Press Note), issued revised norms vis-à-vis foreign direct investment in e-commerce entities. While the Press Note continues to allow 100% foreign direct investment into e-commerce activities, it prescribes certain additional conditions with respect to e-commerce entities which are owned or controlled by a person resident outside India and conducting e-commerce business in India.

The key additional conditions are summarised below:

1. The e-commerce entity will not be permitted to exercise ownership and control over the inventory of goods purported to be sold. In this regard, it is pertinent to note that the inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group entities;