E-commerce sites or apps available for download in India must have a registered business entity in the country, according to latest draft e-commerce policy, which also proposes regulation of cross-border flow of data collected by sector players in India.
According to analysts, the move to make it mandatory for foreign online retailers to register entities in India follows the relatively recent spread and expansion in the country of Chinese e-commerce platforms which do not have an Indian presence.
These include Chinese portals such as Shein, Romwe and AliExpress and the proposed registration norms come after complaints made to the government by traders' bodies like the All India Online Vendor Association about Chinese online operators shipping cheaper products to Indian customers as gifts in order to avoid customs duty.
As per the proposed norms, all foreign e-commerce sites must have a registered business entity in India as the importer on record or as the entity through which all sales in India are transacted.
The draft policy has also proposed a ban on all parcels designated as gifts, with the exception of life-saving drugs.
Moreover, as per the draft policy, all data collected by e-tailers in India and stored abroad should not be made available to other business entities outside the country, for any purpose, even with customer consent.
However, the government will have the right to access the data of Indian consumers stored abroad.
Restrictions on cross-border flows of data would not apply to data which is not collected in India, business-to-business (B2B) data sent to India as part of a commercial contract between a business entity located outside India and an Indian business entity.
Software and cloud computing services involving technology-related data flows, which have no personal or community implications and multi-national companies, moving data across borders, which is largely internal to the company and its ecosystem, would not have to follow the regulations.
New foreign direct investment (FDI) norms, which prohibit the e-tailers from selling products of companies in which they have stakes, came into effect on February 1 despite both Amazon and Walmart seeking a six-month delay in their implementation.
The second e-commerce draft policy has been welcomed by sector players like Snapdeal and trader associations such as the Confederation of All India Traders (CAIT).
Snapdeal said the draft policy's rejection of inventory based e-commerce must be followed by effective implementation of FDI norms to ensure marketplaces do not own or control inventory, directly or indirectly.
"The recognition of data as a strategic national asset is well-timed and will lead to the development of required regulation in this regard," a Snapdeal spokesperson said.
US giants Amazon and Walmart, which recently acquired a 77 per cent majority stake in the Indian e-retail major Flipkart, said they are reviewing the draft e-commerce policy and will share their inputs on the proposals in course of time.
Amazon has been forced to remove an array of products from its India website in order to comply with the new FDI regulations in e-commerce.