The government wants to bring goods sold over the Internet to customers in India under the purview of domestic retail trade guidelines. The move would impact a burgeoning business that has clocked a turnover of around Rs 2,500 crore in 2006-07 and is growing by over 30% annually.
The proposal aims to block backdoor entry into the domestic retail market by international retail companies. Overseas companies account for most of the retail business on the Net.
Government sources said it was currently possible for a company to sell products in India over the Internet without confirming to existing retail norms. For example, a global retail company could set up warehouses across India and sell its products online, which is a violation of existing norms.
?The goods can be sourced and shipped from India. A retailer can set up a neighbourhood warehouse like it would in the case of a normal retail venture, and sell on the Internet to circumvent retail norms,? said the official.
Present retail norms allow single-brand retailers with 51% foreign investment. In the case of e-commerce, 100% foreign investment is permitted in business-to-business e-commerce, while no foreign equity is allowed in business-to-customer e-commerce ventures. In the case of wholesale trade, 100% FDI is permitted.
Once implemented, Internet companies will not be able to sell goods in India unless they are single-brand products and the firm is 49% Indian-owned. The government is of the view that selling products on the Net, although billed and tax paid abroad, violates domestic retail guidelines. This would also mean that an Indian company selling goods in India over the Internet would not be allowed foreign investments.
