India is presently witnessing an e-retailing era. This is a golden time for e-retailing entrepreneurs who have multiple domains to explore. This is also a challenging period for the Indian government that is clearly struggling to deal with technology related issues. Some of these issues include taxation of online transactions by companies like Google, foreign direct investment (FDI) regulations for e-retailing companies, techno legal framework for online businesses, cyber security issues of e-retailing businesses in India, e-commerce dispute resolutions, etc.
As per the existing FDI policy, contained in the "Consolidated FDI Policy Circular 2015" (pdf) (FDI Policy) as amended from time to time, FDI up to 100% under automatic route is permitted in Business to Business (B2B) e-commerce. No FDI is permitted in Business to Consumer (B2C) e-commerce. However, FDI in B2C e-commerce is permitted if certain conditions are fulfilled.
However, companies are violating these norms by accepting FDI by citing different purposes for the use of such FDI money. Both the Reserve Bank of India (RBI) and Enforcement Directorate (ED) are aware of these issues but none of them has taken any action against the guilty individuals and companies. RBI is also maintaining a vigil over e-commerce gateway operators, many of whom store financial information about Indians on overseas servers, but is not imposing new stringent regulations on new form of transactions.
In other such developments, the Maharashtra’s FDA ordered filing of FIR against Snapdeal, its CEO Kunal Bahl, Directors and distributors for online sale of prescription drugs. There are many techno legal requirements to open online pharmacy stores in India that almost all e-retailing fail to adhere to. To deal with this nuisance, a dedicated online pharmacy law is needed for India. For some time it was believed that the Telecom Regulatory Authority of India (TRAI) may be given the task to regulate e-commerce in India. However, TRAI refused to take the additional responsibility in this regard.
As far as FDI is concerned, the documents titled Consolidated FDI Policy Circular Of 2015 By DIPP (pdf) and Guidelines For Foreign Direct Investment (FDI) On E-Commerce 2016 Series (pdf) would be helpful for detailed insight. However, Indian government must be ready for new challenges from global players. For instance, recently US sought trade rules for e-commerce and cloud computing under the WTO banner. Similarly, deep discounting and predatory pricing issues are also required to be resolved by Indian government. Taxation issues are already vexing Indian government for long. We hope that these issue would be resolved by Indian government very soon.