The Department of Industrial Policy and Promotion (DIPP),
Ministry of Commerce and Industry has released Press Note No. 3
(2016 series) dated 29th March, 2016 wherein it has released
guidelines for Foreign Direct Investment on E-commerce .
In order to provide clarity to the FDI policy, following
guidelines were provided:
1. Definitions have been provided for 'E-commerce',
'E-commerce entity', 'Inventory based model of
E-commerce' and 'Market place based model of
E-commerce now includes buying and selling of goods and services
over any digital or electronic network. E-commerce entity would
include any company conducting E-commerce business in India.
Inventory based model of E-commerce is defined as an inventory
based model where inventory is owned by the E-commerce entity and
is sold directly to the consumers (B2C).
Market place based model of E-commerce is defined as providing
of an IT platform and acting as a facilitator between the buyer and
2. It has been clarified that 100 % FDI under automatic route is
permitted in market place model of E-commerce and FDI is not
permitted in inventory based model of E-commerce.
3. Digital and electronic network will include network of
computers, television channels and any other internet application
used in automated manner such as web pages, extranets, mobiles
4. Market place E-commerce entities can enter into B2B
transactions with the sellers registered on its platform.
5. E-commerce marketplace may provide support services to
sellers in respect of warehousing, logistics, order fulfillment,
call centre, payment collection and other services.
6. E-commerce entity providing a marketplace will not exercise
ownership over the inventory i.e. goods purported to be sold. Such
an ownership over the inventory will render the business into
inventory based model.
7. An E-commerce entity will not be permitted to undertake more
than 25% of the sales through its marketplace from one vendor or
their group companies.
8. 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 the
responsibility of the seller.
9. 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.
10. In market place model, any warrantee or guarantee of goods
and services sold will be responsibility of the seller.
11. E-commerce entities providing marketplace will not directly
or indirectly influence the sale price of goods or services and
shall maintain level playing field.
12. Guidelines on cash and carry wholesale trading as given
under FDI policy will apply on B2B E-commerce.
13. Sale of services through E-commerce will be under automatic
route subject to the conditions of FDI policy on service sector and
applicable laws/ regulations, security and other such
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The MDO Guidelines further state that the intent of the MCA was for the purpose of achieving a standard contractual arrangement that may be entered into across the country for procurement of such services.
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