Government Tightens Guidelines For E-Commerce Companies


New Delhi: Aiming to make e-tailor trade for fair and unbiased, the government tightened guidelines for FDI in e-commerce companies.

According to guidance, e-commerce entities would engage only in Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce.

The notification states:

  1. i) E-commerce- E-commerce means buying and selling of goods and services including digital products over digital & electronic network.
  2. ii) E-commerce entity- E-commerce entity means a company incorporated under the Companies Act 1956 or the Companies Act 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in section 2 (v) (iii) of FEMA 1999, owned or controlled by a person resident outside India and conducting the e-commerce business.

iii)  Inventory based model of e-commerce- 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 the consumers directly.

  1. iv) Marketplace based model of e-commerce- Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.

Guidelines for Foreign Direct Investment on e-commerce sector

  1. i) 100% FDI under automatic route is permitted in marketplace model of e-commerce.
  2. ii) FDI is not permitted in inventory based model of e-commerce.

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