The ministry of commerce and industry has started consultations with other departments and ministries on allowing e-commerce companies with majority foreign shareholding to build their own inventory of goods for exports from India.
Under the existing rules the foreign e-commerce companies can only operate as marketplaces in the domestic market and are not allowed to hold their own inventory and sell it on their own account.
The move will help increase e-commerce exports from India without impacting the business of small retailers, which the current policy seeks to protect. It is felt in some circles that e-commerce companies with their deep pockets and discounting can push local retailers out of business if they are allowed to sell their own products.
However, exports through e-commerce are a rapidly expanding segment in world trade and the government wants India to grab a significant portion of that pie.
According to reports the global cross border e-commerce market size is expected to rise to $ 551.23 billion in 2025 and by 2034 it could be $ 2 trillion. In comparison India’s e-commerce exports range from $ 4-5 billion a year and the aim of the government is to take it to $200 to$300 billion by 2030. Currently China dominates the e-commerce export space with exports of $ 250 billion.
The recent clampdown on the US by imposition of duties on even low value e-commerce exports have cast a shadow on the projections. The global presence of e-commerce companies operating from India can be leveraged to increase exports through this route. Taxation of e-commerce and the digital economy is also something the country has been grappling with, and in this regard, the virtual standstill on OECD’s two-pillar solution has made the challenge tougher.
The Commerce and Industry Minister had said recently that if such e-commerce firms want to keep inventory for exports, then “I think we have no objection to that”. The policy change would not require a long process, the clarification to the existing rules will be enough, the minister had said.
The products that are most suitable for exports through e-commerce are handicrafts, art, books, ready-made garments, imitation jewellery, gems and jewellery, home decor, ayurveda products and sports goods.
To support e-commerce exports the government has already come out with a policy for setting up e-commerce export hubs. Some companies have been selected to set up these hubs around airports of Delhi, Mumbai and Bangalore.
The ECEH will have facilities for expedited customs and security clearance in house. Provision for quality and certifying agency will happen with the hub which will also have the provision of easy reimport policy. Reimport policy will enable the return of e-commerce consignments and rejects without payment of import duty.
The government has also extended the benefits of Remission of Duties and Taxes on Exported Products (RoDTEP) and duty drawback to exports through e-commerce.