Executive Summary:
This notification from the Reserve Bank of India amends the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017. The amendments primarily concern regulations for e-commerce entities with foreign investment. These regulations come into force on February 1, 2019, and existing investments must comply with the new conditions from January 31, 2019.
Key Points / Main Content:
General
* These regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Fifth Amendment Regulations, 2019.
* The regulations come into force on February 1, 2019.
Amendments to Regulation 16.B
* The definition of "E-commerce entity" is updated to include companies incorporated under the Companies Act of 1956 or 2013.
* E-commerce marketplace entities cannot exercise ownership or control over vendor inventory; control is indicated if over 25% of a vendor's purchases are from the marketplace entity or its group companies.
* Entities with equity participation or inventory control by e-commerce marketplace entities or their groups cannot sell products on the marketplace's platform.
* E-commerce marketplaces must maintain a level playing field and not directly or indirectly influence the sale price of goods or services.
* Services provided to vendors must be at arm's length, fair, and non-discriminatory; this includes fulfillment, logistics, warehousing, advertising/marketing, payments, and financing.
* Cash back programs offered by marketplace entities' group companies must be fair and non-discriminatory.
* E-commerce marketplace entities cannot mandate that sellers sell products exclusively on their platforms.
Compliance
* All existing investments must comply with these conditions from January 31, 2019.
Impact Analysis:
E-commerce Marketplace Entities:
Impact: Stricter regulations on inventory control, pricing influence, and vendor relationships. Existing investments and practices may need adjustment to comply with the new rules.
Action Required: Review current business practices and investment structures to ensure compliance with the amended regulations by January 31, 2019.
E-commerce Vendors/Sellers:
Impact: May experience changes in relationships with marketplace entities, particularly regarding inventory, pricing, and platform exclusivity.
Action Required: Understand the new regulations and their impact on agreements with marketplace entities.
Foreign Investors in Indian E-commerce:
Impact: Need to ensure their investments and the operations of their portfolio companies comply with the new regulations.
Action Required: Review investment structures and operational practices to ensure compliance.
Reserve Bank of India:
Impact: Responsible for enforcing the amended regulations.
Action Required: Monitor compliance with the new regulations and take necessary action in case of violations.
Key Entities Referenced
New Delhi: The location where the notification was issued.
Reserve Bank of India: The central bank of India, responsible for regulating the foreign exchange market and issuing these regulations.
Foreign Exchange Management Act, 1999: An act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Foreign Exchange Management Transfer or Issue of Security by a Person Resident outside India Regulations, 2017: The principal regulations being amended by this notification, pertaining to the transfer or issue of security by a person resident outside India.
Foreign Exchange Management Transfer or Issue of Security by a Person Resident outside India Fifth Amendment Regulations, 2019: The title of the current amendment regulations.
Companies Act, 2013: An Act of the Parliament of India on Indian company law which regulates incorporation of a company, responsibilities of a company, directors, dissolution of a company.
Companies Act 1956: A former Act of the Parliament of India on Indian company law which regulates incorporation of a company, responsibilities of a company, directors, dissolution of a company.
Ecommerce entity: An entity defined within the regulations, operating in the ecommerce space.
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EXTRAORDINARY
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No. 66] NEW DELHI, THURSDAY, JANUARY 31, 2019/MAGHA 11, 1940
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अअअअििििधधधधससससचचूूचचूू ननननाााा
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(cid:29)ारा (cid:12)ितभूित का अंतरण अथवा िनग*म) िविनयमावली, 2017 (0दनांक 07 नवंबर 2017 क(cid:23) अिधसूचना सं. फेमा. 20 (आर)/2017-
आरबी) (िजसे इसके प=ात “मूल िविनयमावली” कहा गया है) म> िन?िलिखत संशोधन करता ह,ै अथा*त:-
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(i) यह िविनयम िवदेशी मु(cid:10)ा (cid:12)बंध (भारत से बाहर के िनवासी 0कसी 1ि(cid:31) (cid:29)ारा (cid:12)ितभूित का अंतरण अथवा िनग*म) (पांचवां
संशोधन) िविनयमावली, 2019 कहलाएंगे।
(ii) यह िविनयमावली 1 फरवरी 2019 से लागू होगी।
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650 GI/2019 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
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दशा*एगी।
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जाएगा।
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रिहत होने चािहए। इस खंड के (cid:12)योजन के िलए 0कसी भी िवDेता को ऐसी शतg, जो समान प(रिKथितय! म> अ_य िवDेताP को उपलJध
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(v) Dम सं. 15.2.3 म> मौजूदा खंड (एन) के बाद एक नया खंड (ओ) जोड़ा जाएगा, अथा*त:
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vi) Dम सं. 15.2.3 के खंड (ओ) के प=ात एक नया खंड (पी) जोड़ा जाएगा, अथा*त:-
इस अिधसूचना को जारी करने क(cid:23) तारीख से सभी मौजूदा िनवेश उपयु*(cid:31) शतg के अनुपालन म> होने चािहए।
[फा. सं. 1/22/ईएम/2016]
यूजीन ई. काथ*क, ]ेRीय िनदशे क
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सा.का.िन. 279(अ) 0दनांक 26 माच*, 2018
सा.का.िन. 520(अ) 0दनांक 01 जून, 2018
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RESERVE BANK OF INDIA
(Foreign Exchange Department)
(CENTRAL OFFICE)
NOTIFICATION
Mumbai, the 31st January, 2019
No. FEMA. 20(R) (6)/2019-RB
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment)
Regulations, 2019
G.S.R. 78(E).—In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47
of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following
amendments to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India)
Regulations, 2017 (Notification No. FEMA. 20 (R)/2017-RB dated November 07, 2017) (hereinafter referred to as 'the
Principal Regulations'), namely:-
1. Short Title & Commencement
(i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident outside India) (Fifth Amendment) Regulations, 2019.
(ii) They shall come into force from February 01, 2019.
2. Amendment to Regulation 16.B
In Regulation 16.B,
(i) In the existing SL.No. 15.2.3(b) the words ‘E-commerce entity’ means a company incorporated under Companies Act,
2013 shall be substituted by ‘E-commerce entity’ means a company incorporated under the Companies Act 1956 or the
Companies Act, 2013.
(ii) The existing SL. No. 15.2.3(h) shall be substituted by the following, namely:
E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods
purported to be sold.
Explanation : 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 which will render the business
into inventory based model.
(iii) The existing SL. No. 15.2.3(i) shall be substituted by the following, namely:
‘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.’
(iv) The existing SL. No. 15.2.3(m) shall be substituted by the following, namely:
E-commerce entities providing marketplace will not, directly or indirectly, influence the sale price of any goods or
services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other
entities in which e-commerce 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.
Explanation: 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-4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
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.
(v) In existing SL. No. 15.2.3, after the existing clause (n), a new clause (o) shall be inserted, namely:
No e-commerce marketplace entity shall mandate any seller to sell any of their product exclusively on its platform.
(vi) In existing SL. No. 15.2.3, after the clause (o), a new clause (p) shall be inserted, namely:
All existing investments shall have to be in compliance with the above conditions from the date of issue of this
Notification.
[F. No. 1/22/EM/2016]
EUGENE E. KARTHAK, Regional Director
Foot Note:
The Principal Regulations were published in the Official Gazette vide G.S.R. No. 1374(E) dated November 07, 2017 in
Part II, Section 3, Sub-section (i) and subsequently amended as under.
G.S.R. No. 279(E) dated 26.03.2018
G.S.R. No. 520(E) dated 01.06.2018
G.S.R. No. 823(E) dated 30.8.2018
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.