Indian Ecomm Cos Wary of Govt Move to Review Foreign Investment in Sector

New Delhi:
Our Bureau
Indian online retailers Flipkart and Snapdeal expressed their apprehension at a government meeting called on Thursday to review if foreign investment in ecommerce should be allowed.

“The government must tread this issue with caution to ensure that there is no adverse impact on the growth of (micro, small and medium enterprises) in the country as a result of any policy change,“ said a spokeswoman for electronic marketplace Snapdeal.

US-based Amazon, on the other hand, urged for allowing foreign invesmetns. “Allowing FDI will positively impact infrastructure development, and small and medium manufacturers,“ Amazon said in a statement.

India does not allow foreign investment in online retail companies that own inventory and sell directly to consumers, a policy that forced firms such as Flipkart to abandon their earlier inventory-based model to become electronic marketplaces. Amazon, too, follows the marketplace model in India.

The BJP government is examining whether allowing FDI in e-commerce will give a backdoor entry to foreign multi-brand retailers. The present administration is against the previous UPA government’s decision to allow 51% FDI in multibrand retail, but is yet to come out with a notification to revoke that. It retained 51% FDI in multi-brand retail in the FDI consolidated circular issued on Tuesday.

A few months earlier, the government said it was committed to allowing FDI only for Indian-owned e-commerce enterprises.

The government invited online retailers and industry bodies to the meeting held on Thursday, to reassess its investment policy for In dia’s $12-billion e-commerce sector.

Companies at the meeting also raised taxation-related issues that they face in some states and sought amendment to the existing value added tax law, which does not recognise them as a service provider and requires them to pay taxes on products sold from their warehouses.

“It was the first meeting…We are not taking any position this way or that way from the ministry,“ said Nirmala Sitharaman, the minister of state for commerce and industry, who chaired the meeting.

“Many players have some issue or the other with different state governments related to tax, definition of e-commerce and so on,“ she said.“So I may in fact have a lot of meetings with state governments and understand their position.“

Source: The Economic Times

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Author:

Neeraj; an entrepreneur & a visionary in the field of Railway, Defense & Automobiles, is a graduate in commerce and a Harvard Business School Alumni. He’s an expert in govt. liasoning & contracting and has an exceptional network & connections at both local as well as global level. He’s an expert in Market Strategy & Planning and has served number of overseas companies as an advisor/consultant. He takes a profound interest in upcoming startups & is very receptive towards ground-breaking ideas & innovations. He likes to brainstorm those ideas and if the values & philosophies matches; he is even ready to invest his resources, serve as a mentor or act as an incubator to futuristic businesses.

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