40/3 Flat No-102, Manikprabhu Apartment, Bhonde Colony, Erandawane, Pune 411004

+91 9145113311, +91 8668549082


FDI Guidelines on Trading and E-Commerce

FDI Guidelines on Trading and E-Commerce

Consolidated FDI Policy by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry

FDI Policy on Trading and eCommerce

Following are relevant provisions of FDI policy of DPIIT in respect of trading activity:

100% FDI under Government approval route is allowed for retail trading, including through e-commerce, in respect of food products manufactured and/or produced in India.


Sector/Activity % of Equity/



Entry Route


Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs)


100% Automatic
Single Brand Product Retail Trading 100% Automatic
Multi Brand Retail Trading 51% Government approval


DEFINITION: Cash & Carry Wholesale trading/Wholesale trading, would mean

sale of goods/merchandise to retailers, industrial, commercial, institutional or other

professional business users or to other wholesalers and related subordinated service

providers. Wholesale trading would, accordingly, imply sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce.




(a) For undertaking WT, requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government

Body/Government Authority/Local Self-Government Body under that State Government should be obtained.

(b) Except in case of sales to Government, sales made by the wholesaler would be considered as ‘cash & carry wholesale trading/wholesale trading’ with valid business customers, only when WT are made to the following entities:

(I) Entities holding applicable tax registration; or

(II) Entities holding trade licenses i.e. a license/registration certificate/membership

certificate/registration under Shops and Establishment Act, issued by a Government Authority/Government Body/Local Self-Government Authority, reflecting that the

entity/person holding the license/ registration certificate/ membership certificate, as the case may be, is itself/ himself/herself engaged in a business involving commercial

activity; or

(III) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or

(IV) Institutions having certificate of incorporation or registration as a society or

registration as public trust for their self-consumption.

Note: An entity, to whom WT is made, may fulfil any one of the 4 conditions at

(b) (I) to (IV) above.

(c) Full records indicating all the details of such sales like name of entity, kind of entity,

registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis.

(d) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture.

(e)WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations.

(f) A wholesale/cash & carry trader can undertake retail trading, subject to the conditions as applicable. An entity undertaking wholesale/cash and carry as well as retail business will be mandated to maintain separate books of accounts for these two arms of the business and duly audited by the statutory auditors. Conditions of the FDI policy for wholesale/cash and carry business and for retail business have to be separately complied with by the respective business arms.

Multi Brand retail trading under FDI in all products, will be permitted, subject to certain terms and conditions.

eCommerce Activities

Sector/Activity % of Equity/



Entry Route


E-commerce activities – only B2B and not B2C


100% Automatic


Subject to provisions of FDI Policy, e-commerce entities would engage only in

Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce.


  1. i) E-commerce- E-commerce means buying and selling of goods and services including digital products over digital & electronic network.
  2. ii) E-commerce entity- E-commerce entity means a company incorporated under the

Companies Act 1956 or the Companies Act 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in section 2 (v) (iii) of FEMA 1999, owned or controlled by a person resident outside India and conducting the e-commerce business.

iii) Inventory based model of e-commerce- Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.

  1. iv) Marketplace based model of e-commerce- Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.


  1. i) 100% FDI under automatic route is permitted in marketplace model of e-commerce.
  2. ii) FDI is not permitted in inventory-based model of e-commerce.


  1. i) Digital & electronic network will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc.
  2. ii) Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.

iii) E-commerce marketplace may provide support services to sellers in respect of

warehousing, logistics, order fulfilment, call centre, payment collection and other services.

  1. iv) E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory will render the business into inventory-based model. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.
  2. v) An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.
  3. vi) In marketplace model goods/services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be responsibility of the seller.

vii) In marketplace model, payments for sale may be facilitated by the e-commerce entity in

conformity with the guidelines of the Reserve Bank of India.

viii) In marketplace model, any warrantee/ guarantee of goods and services sold will be

responsibility of the seller.

  1. ix) E-commerce entities providing marketplace will not directly or indirectly influence

the sale price of goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which ecommerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm’s length and in a fair and non-discriminatory manner. Such services will include but not limited to fulfilment, logistics, warehousing, advertisement/ marketing, payments, financing etc. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory.

For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.

  1. x) Guidelines on cash and carry wholesale trading as given above will apply on B2B e-commerce.
  2. xi) e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only.

xii) E-commerce marketplace entity with FDI shall have to obtain and maintain a report of statutory auditor by 30th of September every year for the preceding financial year confirming compliance of the e-commerce guidelines.

Subject to the conditions of FDI policy on services sector and applicable laws/regulations, security and other conditionalities, sale of services through e-commerce will be under automatic route.


To know more, connect with our team of experts.