As the deadline for e-commerce marketplaces to submit their reports proving compliance with the latest FDI guidelines approaches, the Reserve Bank of India is soon expected to come up with a mechanism for submission of such reports in line with the norms announced by the Industry Department in December last year, a senior government official said.
According to the FDI norms announced in the Press Note 2 of 2018 by the Department for Promotion of Industry and Internal Trade (DPIIT), e-commerce marketplace entities are required to furnish a certificate along with a report of statutory auditor to the RBI, confirming compliance of the guidelines by September 30 every year for the preceding financial year.
The norms kicked into effect February 1 onwards, after a slew of representations by the industry for a delay in implementation. This would mean that by September 30 this year, the country’s foreign funded e-commerce firms like Amazon India, Walmart-owned Flipkart, Snapdeal will need to submit reports showing compliance with the norms for two months of February and March 2019.
An e-mail query sent to the RBI did not elicit any response.
The new rules prohibited group companies of a particular platform or controlled sellers from selling on that platform. The circular issued by the DPIIT said: “An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity”.
Currently, India allows 100 per cent foreign direct investment (FDI) in e-commerce but has disallowed inventory model for the same.
Move key to ensure that firms comply with rules.
Submission of compliance reports was pegged to be key in implementation of the new foreign direct investment (FDI) policy for e-commerce marketplaces. Small online sellers and traditional retailers had alleged circumvention of the prior rules by e-commerce companies through which they operated the inventory-led model in an indirect manner.
The department had explained the need for an intervention by saying that the government continued to receive complaints that certain marketplace platforms were violating the existing FDI norms by influencing the price of products and indirectly engaging in an inventory-based model.