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NEW E-COMMERCE POLICY, WHERE INDIA COMES FIRST.

The governments new e-commerce policy makes a strong case for India comes first. And may have major implications for foreign-owned e-commerce majors operating in India like Flipkart and Amazon. Its good news for millions of small retailers fighting for there survival with the e-commerce giant. The major recommendations include barring group companies of e-commerce players from “directly or indirectly manipulate” the sale prices. This will regulate the retail strategies of e-commerce majors with subsidiaries. In the draft, it was clearly mentioned that bulk purchases of branded goods like mobile phones, white goods, fashion items “by related party sellers which lead to price manipulation in a marketplace” will be prohibited. If it is accepted in the final policy, then it will seriously affect sale strategies of big e-commerce players. The policy also suggests Indian-owned and Indian-controlled online marketplaces are allowed to hold inventory as long as products are 100% domestically produced. This is not applicable to marketplace e-commerce firms or entities controlled by foreign companies. For Indian founders with minority stakes in the company, the draft suggests there should be differential voting rights giving founders more control in the company. It defines an Indian e-commerce firm as that where foreign investment doesn’t exceed 49%, where the founder/promoter is a resident of India, and the platform company is controlled by Indian management.  The draft suggests a separate wing be set up under the Enforcement Directorate to handle grievances related to Press Note 3, which details guidelines for foreign which details guidelines for foreign investment in e-commerce. Greater regulatory scrutiny has been recommended for mergers and acquisitions that may “manipulate the competition in the market’ and a relook has been suggested on what constitutes entry barriers and anti-competitive practices. The Competition Commission of India has been ordered to undertake such exercises. This assumes to be very significant in the light of the recent acquisition of Flipkart by US retail major Walmart. The new e-commerce policy draft suggests a sunset clause for deep discounting, suggesting a “maximum duration” be set for “differential pricing strategies”. CCI and the department of industrial policy and promotion (DIPP) have been asked to wipe out this aspect. No Inventory- Based Model For Foreign Companies India allows 100% foreign direct investment (FDI) in the marketplace model but forbid foreign investment in the inventory-based model in India. this move will boost the morale of Indian entrepreneurs. Marketplace operators cannot hold large amount inventory and sell products on their platform –they can only facilitate the process for other vendors. Also, an e-commerce entity cannot allow more than 25% of the sales transacted on its marketplace from one vendor or their group companies. New Regulatory Authority  The draft policy also proposes single legislation ( regulatory authority) to address all aspects of the digital economy and a single regulator for issues related to FDI implementation and consumer protection. It says legal fragmentation seen across various laws governing the commerce sector should be corrected and unified. Focus on data localization On data localization, the draft says only personal data or community data collected by “internet of things” devices in “public space” will need to be stored in India. And the data, which have no personal or community implications, can be stored anywhere. However, the draft suggests a two-year sunset period before making data localization mandatory means that the government is giving them a stipulated to fill full all guidelines and regulation. The sole aim of the policy is to create an equal opportunity for foreign and domestic players in the Indian e-commerce market. On taxation front, it has suggested fast-tracking flexible use of the concept of ‘significant economic presence’ as the basis for determining ‘Permanent Establishment’ for the purposes allocating profits of multi-national enterprises between ‘resident’ and ‘source’ countries ( means from where money is invested). It has also favored simplified GST procedures for e-commerce by allowing centralized registration instead of local registration and displaying requirement for each place of business. what will be the effect on e-commerce companies? The new changes e-commerce policy may force Amazon and Flipkart to nullify several sellers from their platforms. Rating agency CRISIL had projected that Amazon and Flipkart may lose up to 40% in revenue—between Rs35,000 crore ($5 billion) by 2020 due to the new FDI norms introduced by the government from 1st Feb 2019.

   
 


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