The think-tank on e-commerce policy, in its meeting on Monday, recommended allowing the micro, small and medium enterprises (MSMEs) to follow inventory-based models for selling locally produced goods through an online platform.
Several working groups were made by the Commerce Ministry to make recommend representations to a task-force on e-commerce policy which further made recommendations to the think-tank.
The second meeting of the think-tank which has representation from industry association and e-commerce companies, was held in the national capital. The think tank, set up by the Commerce Department, includes companies like Ola, Snapdeal, Makemytrip, Urban Clap and Justdial and industry bodies like FICCI, FISME, CUTS, CAIT etc. It was headed by Commerce Minister Suresh Prabhu.
The draft presented in the meeting will be further fine-tuned before it is sent for inter-ministerial consultations.
The think-tank recommended that MSMEs following inventory based models may also be allowed up to 49% foreign investment.
Currently, e-commerce platforms are allowed only to follow marketplace model where 100% FDI is allowed. However, the government has so far not permitted any FDI in inventory-based models.
Presently, the MSMEs with revenue of less than Rs 20 lakh a year are not subject to GST if they sale offline. However, they have to pay GST if they sell goods on online platforms.
In the meeting it was suggested that the GST procedures for e-commerce should be simplified by allowing centralized registration instead of local registration.
There was recommendation that relevant GST provisions should be modified in order to create a level-playing field between online and offline delivery of goods and services for the purpose of GST.
Meanwhile, Commerce Secretary-Designate Anup Wadhawan said “The task force has given its recommendations. The government will continue to hold discussions based on it.”
Wadhawan added that the draft policy on e-commerce would be finalised soon. “We don’t want to continue with the vacuum in the e-commerce policy space.”
He added that the draft e-commerce policy will be in keeping with the recommendations of the Justice Srikrishna Committee report on data privacy. Wadhawan will take over as Commerce Secretary on August 1.
The draft personal data protection Bill 2018, submitted by the Justice B.N. Srikrishna-headed expert panel on Friday proposed that critical personal data of Indian citizens be processed in centres located within the country.
Addressing a press conference after the meeting, Wadhawan said, “We will come up with a policy that will promote the free flow of business as well as address security and privacy concerns. The policy will be in line with the Srikrishna Committee recommendations.”
In the meeting, the members recommended a national regulator for e-commerce to regulate the e-commerce sector, including the alleged abuse of FDI rules through hefty discounts by e-tailers like Amazon and Flipkart, among others.
Foreign e-commerce firms operating in India could even be asked to store consumer data locally within two years.
As per suggestions of the working groups, a separate wing in the Directorate of Enforcement will be set up to handle grievances related to implementation of FDI rules.
While the extant FDI policy bars e-tailers from giving discounts themselves, the traders have been raising issues of these e-commerce players of flouting the rules.
The working groups on e-commerce sought to make this restriction even more explicit.
It suggested restriction be imposed on e-commerce marketplaces to not directly or indirectly influence the price of sale of goods and services and that this curb will be extended to group companies of the e-commerce marketplace.
The working groups have suggested that bulk purchase of branded goods such as electronic products (especially mobile phones), white goods and branded fashion products by related-party sellers which lead to price distortions in a market place would be prohibited.
Another suggestion mandates that home-grown card network RuPay — owned by 10 local and foreign banks — be included as a payment option for all online transactions. The move will enable RuPay to compete with global payment firms like Visa and MasterCard.
For the draft e-commerce policy, the task force has strongly recommended data localization, it has suggested a two-year sunset period for the industry to adjust before localization rules becomes mandatory. It has also suggested direct and indirect tax incentives as well as according infrastructure status to data centres to encourage domestic data storage.

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