Ministry of Commerce clarifies on FDI rules in e-commerce

The Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce has clarified that the Foreign Direct Investment (FDI) rules for e-commerce have not allowed foreign investment in the inventory-based model or multi-brand retailing.

Key Highlights:-

1. DIPP further has clarified that through FDI in B2B e-commerce, an e-commerce entity providing marketplace will not, directly or indirectly, influence the sale price of goods or services. If it does so, such renders such business would be rendered as an inventory based model.
2. FDI is allowed only in the business-to-business (B2B) e-commerce segment and not in the business-to-consumer (B2C) segment which in effect is the multi-brand retail or the inventory-based e-commerce model.

The DIPP clarifies that an e-commerce platform operating an inventory based model does not only violate the FDI policy on e-commerce but also circumvents the FDI policy restrictions on multi-brand retail trading.

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