This
is in continuance of our
series on consolidated FDI policy of India 2012 by DIPP. The previous
articles
in this regard are:
(20)
FDI
in
telecom services, ISPs and telecom infrastructure providing sectors of
India
under consolidated FDI policy of India 2012 and FDI
in
telecom sector of India and national security issues,
In
this article Perry4Law
and Perry4Law
Techno Legal Base (PTLB) would discuss the FDI
limits in wholesale
trading and e-commerce sectors of India
(i) FDI in cash and carry
wholesale trading/ wholesale
trading (including sourcing from MSEs), would be allowed upto 100%
through
automatic route.
Cash
and Carry wholesale
trading/Wholesale trading would mean sale of goods/merchandise to
retailers,
industrial, commercial, institutional or other professional business
users or
to other wholesalers and related subordinated service providers.
Wholesale
trading would, accordingly, be sales for the purpose of trade, business
and
profession, as opposed to sales for the purpose of personal
consumption. The
yardstick to determine whether the sale is wholesale or not would be
the type
of customers to whom the sale is made and not the size and volume of
sales.
Wholesale trading would include resale, processing and thereafter sale,
bulk
imports with ex-port/ex-bonded warehouse business sales and B2B
e-Commerce.
The
following Guidelines for Cash
and Carry Wholesale Trading/Wholesale Trading (WT) would apply:
(a)
For undertaking WT, requisite
licenses/registration/ permits, as specified under the relevant
Acts/Regulations/Rules/Orders of the State Government/Government
Body/Government Authority/Local Self-Government Body under that State
Government should be obtained.
(b)
Except in case of sales to
Government, sales made by the wholesaler would be considered as cash
and carry
wholesale trading/wholesale trading with valid business customers, only
when WT
are made to the following entities:
(i) Entities holding sales tax/ VAT
registration/service
tax/excise duty registration; or
(ii)
Entities holding trade
licenses i.e. a license/registration certificate/membership
certificate/registration under Shops and Establishment Act, issued by a
Government Authority/ Government Body/ Local Self-Government Authority,
reflecting
that the entity/person holding the license/ registration certificate/
membership certificate, as the case may be, is itself/ himself/herself
engaged
in a business involving commercial activity; or
(iii)
Entities holding
permits/license etc. for undertaking retail trade (like tehbazari and
similar
license for hawkers) from Government Authorities/Local Self Government
Bodies;
or
(iv)
Institutions having
certificate of incorporation or registration as a society or
registration as
public trust for their self consumption.
An Entity, to whom WT is made, may
fulfill any one of the 4
conditions.
(c)
Full records indicating all
the details of such sales like name of entity, kind of entity,
registration/license/permit etc. number, amount of sale etc. should be
maintained on a day to day basis.
(d)
WT of goods would be
permitted among companies of the same group. However, such WT to group
companies taken together should not exceed 25% of the total turnover of
the
wholesale venture
(e)
WT can be undertaken as per
normal business practice, including extending credit facilities subject
to
applicable regulations.
(f)
A Wholesale/Cash and carry
trader cannot open retail shops to sell to the consumer directly.
FDI
in E-commerce activities is
allowed upto 100% through Automatic route. E-commerce activities refer
to the
activity of buying and selling by a company through the e-commerce
platform.
Such companies would engage only in Business to Business (B2B)
e-commerce and
not in retail trading, inter-alia implying that existing restrictions
on FDI in
domestic trading would be applicable to e-commerce as well.
FDI
in test marketing of such
items for which a company has approval for manufacture is allowed upto
100%
through government approval route, provided such test marketing
facility will
be for a period of two years, and investment in setting up
manufacturing
facility commences simultaneously with test marketing.
FDI
in Single Brand product
retail trading is allowed upto 100% through government approval route.
For this
purpose:
(1)
Foreign Investment in Single
Brand product retail trading is aimed at attracting investments in
production
and marketing, improving the availability of such goods for the
consumer,
encouraging increased sourcing of goods from India
(2)
FDI in Single Brand product
retail trading would be subject to the following conditions:
(a) Products to be sold should be of
a Single Brand only.
(b)
Products should be sold under
the same brand internationally i.e. products should be sold under the
same
brand in one or more countries other than India
(c)
Single Brand product-retail
trading would cover only products which are branded during
manufacturing.
(d) The foreign investor should be
the owner of the brand.
(e)
In respect of proposals
involving FDI beyond 51%, mandatory sourcing of at least 30% of the
value of
products sold would have to be done from Indian small industries/
village and
cottage industries, artisans and craftsmen‘. 'Small industries' would
be
defined as industries which have a total investment in plant and
machinery not
exceeding US $ 1.00 million. This valuation refers to the value at the
time of
installation, without providing for depreciation. Further, if at any
point in
time, this valuation is exceeded, the industry shall not qualify as a
'small
industry' for this purpose. The compliance of this condition will be
ensured
through self-certification by the company, to be subsequently checked,
by
statutory auditors, from the duly certified accounts, which the company
will be
required to maintain.
(3)
Application seeking
permission of the Government for FDI in retail trade of Single Brand
products
would be made to the Secretariat for Industrial Assistance (SIA) in the
Department of Industrial Policy and Promotion. The application would
specifically indicate the product/ product categories which are
proposed to be
sold under a Single Brand. Any addition to the product/ product
categories to
be sold under Single Brand would require a fresh approval of the
Government.
(4)
Applications would be
processed in the Department of Industrial Policy and Promotion, to
determine
whether the products proposed to be sold satisfy the notified
guidelines,
before being considered by the FIPB for Government approval.
