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Indian Government approves 100% FDI under automatic route in marketplace model of e-commerce

Marketplace e-commerce is the place where company only provides platform for buyer and seller to connect. The decision will help domestic players in attracting more FDI, while also opening doors for foreign e-tailers to easily set shop in India. However, FDI is not permitted in inventory based model of e-commerce.

Marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfilment, call center, payment collection and other services. However, such entities will not exercise ownership over the inventory. An ownership over the inventory will render the business into inventory based model.

Few Norms:

  • Firms will not be permitted to sell more than 25% of total sales from one vendor or its group companies. This 25% cap is termed as “restrictive”.
  • E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field

It is a comprehensive announcement which will pave the way for accelerated growth of the sector in India.

E-commerce companies will have to rework their already complex corporate structures, adding that there was little clarity on the impact of new laws on Internet companies.

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