A consolidated policy on Foreign Direct Investment in India released today (pdf) finally addresses one of the key questions around investment in e-commerce ventures in India, and also clarifies on the distinction between wholesale and retail ventures. The policy allows 100% FDI in business to business e-commerce ventures, but not in retail trading ventures. B2B ventures are those which fulfill any one of the following four conditions: (a) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis. (b) Wholesale Trading of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture (c) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations. (d) A Wholesale/Cash & carry trader cannot open retail shops to sell to the consumer directly. For wholesale ventures, "requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be obtained." Important: The key element of this policy is the definition of what constitutes wholesale trading: that for wholesale trading to group companies may only take place if it does not exceed 25% of the total turnover of the wholesale venture. This is a clarification policy that might put many e-commerce ventures which have raised venture…
