As policymakers consider future regulatory steps, the ongoing ED investigation may serve as a pivotal moment in clarifying the regulatory framework for e-commerce operations in India Reportedly, on October 7, 2024, the Enforcement Directorate (ED) raided the offices of half a dozen sellers operating on the e-commerce platforms of Amazon and Walmart-owned Flipkart for alleged violations of Foreign Investment norms and Prevention of Money Laundering Act (PMLA). The intent behind the searches was to gather evidence on complaints that these sellers have been importing products from China but routing them through other locations to avoid paying higher import duties and longer time in getting the consignment cleared at the ports (that would be the case if the products were imported...
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Category: Foreign investment & other inflows
E-commerce giants versus mom-and-pop stores
Amazon’s aggressive pricing strategies could lead to a massive e-commerce expansion, capturing half of India’s retail market within the next decade At the launch of the Pahle India Foundation’s report ‘Net Impact of E-Commerce on Employment and Consumer Welfare in India’ on August 21, 2024, Union Commerce and Industry Minister Piyush Goyal took pot shot at the world’s biggest e-tailer Amazon, for selling products directly to consumers and indulging in “predatory pricing” that could lead to massive growth of e-commerce capturing half of Indian retail market ten years from now. This would adversely impact an estimated 100 million small retailers across the country and in turn, lead to “social disruption”. E-commerce, put simply, is the practice of buying and selling...
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Rationalise regulations for e-commerce
When the Government expects foreign companies to do almost everything that a retailer does, how can it deny these firms the right to sell? Way back in 2019, Delhi Vyapar Mahasangh (DVM) an organisation of retail traders in the national capital had lodged a complaint with the Competition Commission of India (CCI) alleging anti-competitive behaviour by Amazon Seller Services (ASS) and Flipkart Internet Private Limited (FIPL). The CCI is an authority established under the Competition Act, of 2002. The Act prohibits anti-competitive agreements and abuse of dominant position by enterprises and regulates mergers, amalgamations acquisitions etc to ensure that there is no adverse effect on competition. Amazon and Flipkart are global giants operating e-commerce marketplaces in India through their subsidiaries,...
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FDI in export–linked e-tailing is a bad idea
When the government expects the foreign companies to do almost everything that a retailer do, how can the former deny the latter the right to sell The government is considering allowing foreign direct investment (FDI) in inventory-based models of e-commerce, subject to the rider that these will be solely aimed at export markets. A comprehensive policy on FDI in e-commerce has been under deliberation since 2018. In fact, during discussions with representatives of e-commerce firms and a domestic traders’ body viz. Confederation of All India Traders (CAIT) held on August 2, 2023, the Department for Promotion of Industry and Internal Trade (DPIIT) in the Ministry of Commerce and Industry made a presentation on the ‘fundamentals’ of the proposed e-commerce policy....
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Giving a safe passage to delinquent SEZs
Development of Enterprise and Service Hubs (DESH) bill, gives a ‘safe passage’ to all those SEZ units that haven’t been able to fulfil their export commitments The government is planning to make a few amendments to the Special Economic Zones (SEZ) Act 2005 in the winter session of Parliament, with a view to giving more operational flexibility to units in these tax-free enclaves, especially when it comes to sales in the domestic tariff area (DTA). It had intended to overhaul the SEZ regime by bringing in the Development of Enterprise and Service Hubs Bill (DESH) announced in the budget for 2022-23. Since DESH is facing delays, the government is keen to address some of the concerns under the extant regime...
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Time for 100 per cent FDI in retail sector
One hundred per cent Foreign Direct Investment should be permitted to all retailers, online or offline, big or small, for the growth of this sector During discussions with representatives of e-commerce firms and a domestic traders’ body viz. Confederation of All India Traders (CAIT) held on August 2, 2023, the Department for Promotion of Industry and Internal Trade (DPIIT) in the Ministry of Commerce and Industry made a presentation on the ‘fundamentals’ of the proposed e-commerce policy. The policy is being deliberated since 2018. The DPIIT highlighted seven salient features of the proposed policy: unambiguous demarcation between the marketplace model where foreign direct investment (FDI) is allowed and inventory model where FDI is prohibited; making the policy congruent with the...
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E-commerce policy conundrum
The government must provide a level playing field to all. It should legitimize 100 per cent FDI in retail, online and offline, big and small Referring to the national e-commerce policy, the Secretary Department for the Promotion of Industry and internal trade (DPIIT) in the Ministry of Commerce Rajesh Kumar Singh has said it will “put in place a streamlined regulatory framework for the ease of doing business, adoption of modern technologies and the integration of supply chains”. It will seek to create “a conducive environment for the overall development of the sector and boost exports”. According to the foreign trade policy, the Union government is aiming at an e-commerce export potential of $200 billion to $300 billion annually by...
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Let FDI in retail come from the front door
Allowing FDI in retail would be in the best interest of consumers as this will enable all retailers to compete with one another on equal terms Following complaints from consumers and traders against “widespread cheating and unfair trade practices” by e-commerce marketplaces such as Amazon and Flipkart, the Union government intends to amend consumer protection rules to bar these firms from (i) selling their private labels on their platforms; (ii) make them liable for frauds committed by a seller; (iii) prohibit them from having their logistics chain for supply-chain management. The marketplace is a platform where vendors sell their products to consumers even as its owner merely acts as a facilitator by providing services such as booking orders, raising invoices,...
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India must tax MNCs for revenues here
Ideally, the source country from where an offshore firm is deriving its income should have sole right to collect tax Over the years, an increasing share of the income generated globally has gone towards boosting the profits. The proportion of corporate profit in global GDP (gross domestic product) went up from 14.5 per cent during 1975 to 16.2 per cent in 2000 and further to 20 per cent during 2019. The growth in profit, in turn, was driven largely by multinational companies (MNCs) – companies which operate in several jurisdictions. Their share in corporate profit increased from four per cent during 1975 to 18 per cent during 2019. Even more disconcerting is the fact that such companies didn’t pay taxes...
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Govt faces a dilemma over e-commerce
Any tweak in policy will upset foreign investors, while the status quo will hurt small traders Ever since Indian retail was opened to foreign direct investment (FDI)—albeit through the so-called marketplace model in 2016—foreign giants like Amazon and Walmart-owned-Flipkart have been embroiled in protracted legal battles. In a public interest litigation (PIL) filed in early 2018, the Retailers Association of India (RAI) had alleged violation of FDI norms in e-commerce. On October 31, 2018, the Enforcement Directorate (ED) had informed the Delhi High Court (DHC) that it was investigating violation of the Foreign Exchange Management Act (Fema) against Amazon, et al, but the proceedings are stuck. In another petition filed before the Competition Commission of India (CCI), the All-India Online...
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