FDI in e-commerce

Review of the FDI policy in e-commerce issued by the DIPP on 26th December, 2018

1.0       To provide clarity to FDI policy on e-commerce sector, Para 5.2.15.2 of the Consolidated FDI Policy Circular 2017 will now read as under:

5.2.15.2 E-commerce activities

Sector/Activity	% of Equity/FDI Cap	Entry Route
E-commerce activities	100%	Automatic

5.2.15.2.1 Subject to provisions of FDI Policy, e-commerce entities would engage only in Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce.

5.2.15.2.2 Definitions:

i)    E-commerce- E-commerce means buying and selling of goods and services including digital products over digital & electronic network.

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. 

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.

5.2.15.2.3 Guidelines for Foreign Direct Investment on e-commerce sector

i)          100% FDI under automatic route is permitted in marketplace model of e-commerce.

ii)         FDI is not permitted in inventory based model of e-commerce.

5.2.15.2.4          Other Conditions

i)          Digital & electronic network will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc.

ii)         Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.

iii)        E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.

iv)        E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory will render the business into inventory based model. 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 companies. 

 v)        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.

vi)        In marketplace model goods/services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be responsibility of the seller.

vii)       In marketplace model, payments for sale may be facilitated by the e-commerce entity in conformity with the guidelines of the Reserve Bank of India.

viii)      In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.

ix)        E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm’s length and in a fair and non-discriminatory manner. Such services will include but not limited to fulfilment, logistics, warehousing, advertisement/ marketing, payments, financing etc. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.

  x)       Guidelines on cash and carry wholesale trading as given in para 5.2.15.1.2 of Consolidated FDI Policy Circular 2017 will apply on B2B e-commerce.

xi)        e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only.

xii)       e-commerce marketplace entity will be required to furnish a certificate along with a report of statutory auditor to Reserve Bank of India, confirming compliance of above guidelines, by 30th of September of every year for the preceding financial year.

            Subject to the conditions of FDI policy on services sector and applicable laws/regulations, security and other conditionalities, sale of services through e-commerce will be under automatic route.

3.0       The above decision will take effect from 01 February, 2019.

CIPAM-DIPP Launches Logo and Tagline Contest for Geographical Indications of India

PIB Press Release dated 18th October, 2017

The Cell for IPR Promotions & Management (CIPAM) under the aegis of the Department of Industrial Policy Promotion (DIPP), Ministry of Commerce and Industry, has launched a logo and tagline/slogan contest for Geographical Indications (GIs) of India on MyGov.in website.

            A Geographical Indication (GI) is primarily an agricultural, natural or a manufactured product (handicrafts and industrial goods) originating from a definite geographical territory. Typically, such a name conveys an assurance of quality and distinctiveness, which is essentially attributable to the place of its origin. Some of the examples of registered Indian GIs are Darjeeling Tea, Tirupathi Laddu, Kangra Paintings, Nagpur Orange, Kashmir Pashmina etc.

            GIs are not only part of our rich culture and collective intellectual heritage, but they also supplement the incomes of our rural farmers, weavers, artisans and craftsmen across the country. The promotion of GIs is in line with the Government of India’s ‘Make in India’ campaign and therefore, it is our responsibility to preserve and protect them.

            Taking forward its ongoing social media campaign #LetsTalkIP to promote Indian GIs, DIPP aims to launch a certifying GI mark/logo that can be used to identify all registered GIs irrespective of the categories, and a suitable tagline/slogan for promotion of GIs. This will also help in engaging more people on the subject of GIs and making them aware about the benefits of a GI tag.

            DIPP has taken several initiatives for promoting awareness and outreach on GIs. One of the ways to promote GIs could be to present them as gifts. In this context, CIPAM has also launched “Gift a GI” campaign to enhance the visibility and thus help in branding and promotion of registered GI products. DIPP is also working with State governments to spread awareness on GIs.

            This contest is an opportunity for creators who aspire to see their creation recognized on a national platform. The last date for receiving entries is 17th November, 2017. The winning entry will receive a cash award of Rs. 50,000/- each, for logo design and slogan for GIs of India.

            The details of the logo competition for ‘Design a Logo and Suggest a Tagline Competition’ can be obtained from MyGov.in online platform.

            The complete list of all registered GIs in India can be viewed here. http://www.ipindia.nic.in/registered-gls.htm

Indian intellectual property panorama

A single window interface for information on Intellectual Property and guidance on leveraging it for competitive advantage. That is what the Indian IP Panorama, released by the Government of India today, offers. The portal seeks to increase awareness and build sensitivity towards IP, among stakeholders in the SME sector, academia and researchers. The Indian IP Panorama can be accessed here: http://ict-ipr.in/index.php/ip-panorama

The Indian IP Panorama is a customized version of IP Panorama Multimedia toolkit, developed by World Intellectual Property Organization, Korean Intellectual Property Office and Korea Invention Promotion Association. The toolkit has been adapted to cater to SMEs and start-ups, especially in the ICTE sector of India, based on an agreement signed between WIPO and DeitY. The Indian IP Panorama is thus a customized version of WIPO’s original product and is in accordance with Indian IP laws, standards, challenges and needs of the Indian ICTE sector.

The following five modules of the Indian IP Panorama have been released today:

1.   “Importance of IP for SMEs”,

2.   “Trademark”,

3.   “Industrial design”,

4.   “Invention and Patent” and

5.   “Patent Information”

The Indian IP Panorama has been developed under the aegis of Department of Electronics and Information Technology (DeitY) and Department of Industrial Policy and Promotion (DIPP), Government of India by Centre for Development of Advanced Computing (C-DAC), in close coordination with the Indian IP office.

Besides Secretary, DIPP Mr. Ramesh Abhishek who released the Panorama, Mr. Francis Gurry, Director General, World Intellectual Property Organisation (WIPO) was also present on the occasion.

A survey of the Madrid Protocol usage by the Indian industry and a report on “Marketing Campaign in India for International Registration of Trade Marks”, was also released today. The survey was conducted and the report prepared by IIM Bangalore, in cooperation with DIPP, as part of a study funded by WIPO. The study will help the Indian industry to take advantage of the Madrid system.

Background

India is a member of WIPO and party to several treaties administered by WIPO. Recognizing that the strategic use of intellectual property could contribute significantly to the national development objectives of India, DIPP entered into an MoU with WIPO on 13^th November 2009. The Indian IP office has been recognised as an International Searching Authority and International Preliminary Examining Authority under the Patent Cooperation Treaty (as in force from October 15, 2013). It may be recalled that a leading Indian consumer electronics company, Micromax Informatics Limited was recognized with the 1.25 millionth international trademark under WIPO’s Madrid System for the International Registration of Marks.

India acceded to Madrid Protocol for the International Registration of Marks at WIPO on July 8, 2013. The Madrid System for the International Registration of Marks (Madrid system) offers trademark owners a cost effective, user friendly and streamlined means of protecting and managing their trademark portfolio internationally.

PIB press release dated 31st March, 2016

Industrial Licence

The Ministry of Commerce and Industry vide its Department of Industrial Policy and Promotion has issued a Press Note no. 9 dated 20th October, 2014 wherein

1) the validity period of an industrial licence has been increased to 7 years;
2) annual capacity requirement in the Industrial Licence for defence items is being done away with; and
3) the licencee is allowed to sell defence items to govenment entities under the Ministry of Home Affairs without need of a prior approval from the Ministry of Defence. However for sale of such defence items to other entities shall require prior approval.

The Press Note can be found here

FDI in defence sector

FDI in defence sector has been allowed upto 49% of the equity of the investee, up from 26% as at present. Government of India vide Department of Industrial Policy & Promotion has issued Press Note no. 7/2014 dated 26th August, 2014 to this effect. This 49% is approval route from the Government.


Further this FDI limit of 49% will include all kinds of foreign investment i.e. FDI, FII, FPI, NRI, FVCI & QFIs.

Portfolio investment upto 24% is however allowed on automatic route.

The Government will consider FDI above 49% on a case by case basis.

There are other conditions such as

(a) the sector is subject to license and therefore licensing will be done by DIPP in liaison with Ministry of Defence;
(b) Applicant should be an Indian company owned and controlled by resident Indian citizens;
(c) Management of the company should be in Indian hands including the Managing Director/ CEO should be Indians;
(d) Chief Security Officer should be an Indian citizen;
(e) Full particulars of Directors/ CEO should be furnished alongwith the application;
(f) Preference will be given to OEMs or design establishments and companies having good track record in the past with the Armed Forces;
(g) There is no minimum capitalization requirement for the FDI;
(h) No purchase guarantee will be given by the Ministry of Defence;
(i) The company should also have maintenance and life cycle support facility for the product being manufactured in India along with the manufacturing facility;
(j) Import of equipment for pre-production activity including prototype will be permitted;
(k) Adequate safety and security procedures need to be put in place by the licensee;
(l) Standards and testing procedures for the equipment will have to be provided to the Government under appropriate confidentiality clause. The nominated quality assurance agency will do the inspection and audit of the Quality assurance procedures of the licensee. Self certification would be allowed on a case to case basis;
(m) Purchase preference and price preference might be given to the public sector enterprises in the sector;
(n) Arms and ammunition manufactured under license will be sold only to the Ministry of Defence or units under the ministry of home affairs. It cannot be sold in the private market. Export would be permitted subject to the guidelines.
(o) Non lethal weapons would be permitted to sold to persons other the MOD or MOHA subject to obtaining necessary permissions;
(p) The company would need to set up a verifiable system of removal of items from out of their factory. Violation of these provisions may lead to cancellation of the licence.
(q) All application to be made to the Foreign Investment Promotion Board (FIPB). Proposals upto 49% involving investment in excess of Rs.1200 crores (Rs.12,000 million) will be sent to the Cabinet Committee on Economic Affairs (CCEA) for clearance.
(r) For proposals beyond 49% approval will be sought from the Cabinet Committee on Security (CCS). Proposals beyond 49% and involving investment exceeding above limits will not require CCEA clearance if it has been cleared by the CCS.
(s) Government decision on the FDI will be communicated normally within a period of 10 weeks from the date of acknowledgement of the application.
(t) For proposals beyond 49% the application should be made by Indian company or foreign investor but the management need not be in Indian hands and it is not necessary to have Managing Director or CEO as Indian.

A copy of the press release can be found here



 

FDI in Railway sector

The Government of India has opened up railway infrastructure for domestic as well as foreign investors. Department of Industrial Policy & Promotion (DIPP) press note no. 8 dated 27th August, 2014 has been issued by the government opening up the rail infrastructure for investment by the private sector. The following activities has been opened up for FDI.

Construction, operation, maintenance of

(i) Suburban corridor projects through PPP;
(ii) High speed train projects;
(iii) Dedicated freight lines;
(iv) Rolling stock including train sets, and locomotives/ coaches manufacturing and maintenance facilities
(v) Railway electrification;
(vi) Signalling systems;
(vii) Freight terminals
(viii) Passenger terminals
(ix) Infrastructure in industrial park pertaining to railway line/ sidings including electrified railway lines and connectivities to main railway lines, and
(x) mass rapid transit systems.

100% FDI is allowed automatic basis but FDI beyond 49% of the equity of the investee company in sensitive areas will be put forth to the Cabinet Committee on Security for consideration on a case by case basis.

They have not allowed FDI or private investment in maintenance of railway stations or platforms and that is much needed because the existing infrastructure for maintenance and upkeep of the railway stations and platforms is not at all adequate, especially from the point of view of facilities to the passengers. I thought they should have allowed private investment in online and offline bookings as well because the IRCTC site as we know is totally unreliable.


A copy of the DIPP press note can be found here



 

Checklist for SBRT FDI applicants

The department of industrial policy & promotion, government of India has created a checklist of documents/ data required by investors flocking into the Single Brand Retail Trade (SBRT) in India. There are about 21 sets of documents/ information / data required and each in turn require multiple documentation to be processed. For eg. main application should be in 18 copies enclosing memorandum & articles of association and certificate of incorporation of the foreign investor, the Indian party and Indian JV partners. Copies of shareholders agreement/ technology transfer agreement/ trademark/ brand assignment agreement. Pre and post shareholding structure. There are some compliance documents in respect of FDI into NBFC sector,

The same set of documents can be used in NRI/ EOU/ Multi brand retail trade also.

The details of the requirements are given in this link, here