1. Summary
  2. FDI
  3. FDI Policy
  4. Indian company law
  5. FDI On E-commerce Activities


India’s e-commerce market has matured considerably in recent years and remains flourishing. E-commerce start-ups are incorporated within the recent past. E-commerce start-ups square measure firms incorporated below the businesses Act, 2013, conducting the e-commerce business or having associate e-commerce marketplace. E-commerce business means commerce and shopping for services and products, together with digital merchandise, over a digital network. Let’s see regarding FDI in Ecommerce


A foreign direct investment (FDI) may be a purchase of interest in very company by a corporation or a capitalist settled outside its borders. Generally, the term is employed to explain a business call to amass a considerable stake in an exceedingly foreign business or to shop for it outright to expand its operations to a replacement region.

FDI Policy

Under the FDI Policy in India, the Equity/FDI cap on e-commerce activities is ready at 100% through the automated route. However, e-commerce start-ups and entities ought to have interaction solely within the Business to Business (B2B) e-commerce and not within the Business to client (B2C) e-commerce. The FDI Policy permits 100% FDI below the automated route for the marketplace model of e-commerce activities. However, FDI isn’t allowable for the inventory-based model of e-commerce activities.

The marketplace primarily based model of e-commerce means providing associate info technology platform by associate e-commerce start-ups or entity on a digital and network, acting as an assistant between the client and also the merchant.  The inventory-based model of e-commerce means that e-commerce activities wherever the inventory of products associated services is closely held by an e-commerce start-ups or entity and is sold out to the customers directly.

Indian company law

The Indian government has been an endeavour to effectively regulate India’s e-commerce retail market, since its initial try in 2000. The rules are a by-product of the concern of unionized world retail with deep pockets adversely moving uncountable unorganized “mom-and-pop shops” and retailers. The Indian foreign direct investment policy on e-commerce retail has been amended many times, and also the e-commerce business homes operational in India have restructured themselves to fall in line with each such amendment in policy while not considerably sterilization their operations.

In the latest episode of this in-progress adventure story, the govt of India issued a Press Note No. two (2018 Series) on Gregorian calendar month twenty-eight, 2018, to effectively pass against e-commerce entities that disguise their inventory-based business models as marketplaces. Walmart-backed Flipkart and Amazon India square measure undergoing complicated structuring and restructuring to align themselves with the amended policy. This to and between the government and e-commerce players has not solely been unproductive for the country’s economy, however is additionally against this Government’s expressed objective of certainty and simple Doing Business in India. whereas the effective implementation of the rules governing e-commerce retail continues to be a big issue, there square measure sure alternative basic considerations about the approach of the Indian government towards e-commerce retail, that needs immediate thought.    

FDI On E-commerce Activities

The FDI policy permits e-commerce activities below automatic route with 100% equity/FDI cap for the marketplace primarily based model of e-commerce, subject to the subsequent conditions:

  • Digital and electronic networks within the e-commerce business embrace a network of tv channels, computers, and any web applications employed automatically like extranets, web pages, mobiles, etc.
  • The marketplace e-commerce entities are allowable for moving into transactions with the sellers registered on their platform on a B2B basis.
  • E-commerce marketplace will provide support services to sellers relating to supply, storage, payment assortment, call center, order fulfillment, and alternative services.
  • E-commerce entities providing marketplace cannot exercise management or possession over the inventory, i.e. the products professed to be sold-out. Such management or possession over the inventory renders the e-commerce business into the inventory-based model.
  • Any entity having equity participation by e-commerce marketplace entities or their cluster firms or having management on its inventory by e-commerce marketplace entities or their cluster firms don’t seem to be allowable to sell its merchandise on such marketplace entity-run platforms.
  • The services/goods on the market within the marketplace primarily based model purchasable electronically on its web site should give the sellers’ name, address, and alternative contact details. when the goods/products square measure sold-out, the delivery of products to the shoppers and their satisfaction is the seller’s responsibility.

In the marketplace model, the payments purchasable will be expedited by the e-commerce entities in conformity with the depository financial institution of India (RBI) tips.  Any guarantee/warranty of services and product sold-out is the sellers’ responsibility within the marketplace model.

The e-commerce entities providing a marketplace shouldn’t directly or indirectly influence the sale worth of the services and product, and it ought to maintain grade taking part in the field.

Services should be provided to vendors on the e-commerce platform at arm’s length associated in an exceedingly non-discriminatory and truthful manner by an e-commerce marketplace entity or alternative entity within which the e-commerce marketplace entity has indirect or direct equity participation or common management.

The cashback given by the cluster firms of marketplace entities to the patrons ought to be non-discriminatory and truthful. Providing services to any merchant on specific terms that don’t seem to be on the market to alternative vendors in similar circumstances shall be deemed unfair and discriminatory.  An e-commerce marketplace entity shouldn’t mandate a merchant to sell any product solely on its platform completely.