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Flipkart, Amazon Won't Be Allowed To Make Sales More Than 25% From One Vendor, Says DIPP

In a move that can have major affect on the business e-commerce players do in India, the Department of Industrial Policy and Promotion (DIPP) has recently specified that e-commerce companies doing business in the country will not be allowed to market more than 25 per cent of its annual sales coming from one vendor.

Though the government had earlier already mandated 25 per cent maximum sales from a single vendor but it had failed to provide the duration for computation of the sales.

“An e-commerce entity will not permit more than 25% of the sales value on financial year basis affected through its marketplace from one vendor or their group companies,” reads a a consolidated FDI policy circular released by the DIPP.

The 25 per cent cap will encourage e-commerce players doing business in the Indian subcontinent to sell goods from different vendors and provide livelihood to more and more Indian vendors.

US e-commerce biggie Amazon currently boosts of having more sellers on its Indian e-commerce site than the country’s homegrown e-commerce giant, Flipkart. According to latest figures released by Amazon, it has doubled the number of merchants on its e-commerce platform from one lakh to two lakhs in less than a years period.The global e-commerce major took a total of four years to reach the two lakhs merchants milestone in India.

Tweeting from its official account, DIPP, which is working under the Ministry of Commerce and Industry, Government of India, stated that the 25 per cent restriction on sales of one vendor through a marketplace are to be computed on financial year basis.

The consolidated FDI policy circular being circulated around by the DIPP also clarified what the term ‘competent authority’ means when it says a competent authority is only allowed to grant government approval for foreign investment.

According to the circular, ‘competent authority’ means the concerned administrative ministry/ department empowered to grant government approval for foreign investment under the extant FDI policy and Foreign Exchange Management Act (FEMA) Regulations.

Ever since the foreign investment promotion board has been dismissed, the responsibility of authorising the approval of foreign investment proposals has fallen to the respective ministries.

DIPP’s FDI circular 2017 includes all foreign investment policy amendments carried out since June 7, 2016. The consolidated policy is compilation of the various decisions taken by the government over the period of last one year.

For the uninitiated, DIPP, which is responsible for dealing with all FDI related matters, combines all policies related to foreign investment regime into a single document so as to make things easy for the investors to follow and understand. The aim behind this is to provide investors with a friendly investing environment and attract more FDI into the country.

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