“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.“