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DPIIT asks e-commerce companies to upload FDI compliance certifications: report

The government has asked e-commerce companies Amazon and Flipkart to upload statutory audit reports certifying that they’re compliant with the FDI rules that came into effect in February 2019, reports the Economic Times. The reports should be uploaded on the company websites by September 30. This was communicated during a meeting ecommerce companies yesterday with DPIIT secretary Guruprasad Mohapatra.

While the FDI rules i.e. the Press Note 2 of 2018 had said that the FDI compliance certificates need to be submitted to the RBI, the FEMA notification in January 2019 regarding ecommerce marketplaces did not require this.

FDI in e-commerce rules kicked in February 2019

DPIIT revised its guidelines on FDI in e-commerce and set out new rules for marketplaces and vendors, with relation to inventory and FDI, in December 2018. The new guidelines came into effect on February 1, 2019. Here’s a look at what the Press Note 2 of 2018 changed:

  1. The updated policy does not allow marketplaces to exercise control or ownership over the inventory of vendors on their platforms. For example, if a marketplace such as Amazon or Flipkart exercises ownership of control over inventory, this platform would no longer be a marketplace, but an inventory-based e-commerce business.
  2. The new policy reiterates that if a vendor sells over 25% of goods (presumably of all the goods sold on the platform) on the e-commerce marketplace, the marketplace will become an inventory based model in which FDI in not allowed. To be clear, the earlier FDI in ecommerce policy from 2017 had the same 25% cap on vendor sales, but now it places the responsibility on the marketplaces to ensure this does not happen.
  3. If a marketplace has an equity stake in a vendor/seller, or if it controls its inventory, the vendor is not permitted to sell its products on the marketplace.
  4. Warranty and guarantee of goods and services sold on marketplaces is the responsibility of the seller/vendor, and not the platform.
  5. The marketplace cannot influence prices directly or indirectly and has to offer a level-playing field all vendors/players – those controlled by marketplaces, or other vendors. Platforms will provide the same services of cashbacks, fulfillment, logistics, warehousing, advertisements, marketing, payments, finance, etc across all vendors.
  6. The new norms dictate that marketplaces cannot mandate any seller to sell any product exclusively on the marketplace.

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