Govt tells e-com firms to file FDI compliance report annually

As per the government notification issued on Thursday, e-commerce companies must obtain statutory auditor report by September-end for the preceding financial year. Section 15 of the Foreign Exchange Management Act (FEMA) deals with e-commerce entities.

“Against Sl. No. 15.2.3, for entry (p), the following entry shall be substituted, namely-(p) 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,” the gazette notification said

According to government sources, this decision will help in ensuring compliance of FDI policy in the e-commerce sector. The move will raise compliance cost for such companies. Trader bodies have been raising concern over violation of foreign direct investment (FDI) norms. The Confederation of All India Traders asked the government not to give in the demands of global e-commerce players and American industry chambers to amend the recent changes made to the foreign direct investment (FDI) norms for e-commerce.

It asked the government to make it mandatory for the e-commerce companies to obtain a compliance certificate by March 31, to be able to raise funds. The CAIT has often complained about predatory pricing and discounts, along with other violations of the FDI policy, particularly during festive season. Commerce and Industry Minister Piyush Goyal had warned e-commerce companies of strict action if they do not halt predatory pricing on their platforms, flouting FDI rules.

The issue figured in a discussion Goyal had with Amazon India head Amit Agarwal on November 5, sources said. A clarification of Press Note 2 issued last December had barred marketplaces from selling products from vendors in which they have an equity interest. They also can’t enter into deals with any brand to sell products exclusively on their platforms. These norms came into force in February.

US wants India to ensure that its data localisation plan does not “stymie growth” and American financial transaction companies are treated “fairly”, Treasury Secretary Steven Mnuchin has said.

Mnuchin also insisted that America has no problem if countries want to have local data for regulatory purposes as long as they do not eliminate it outside the country. Data localisation is the practice of physically storing data on servers located within a country’s territory.

RBI had, in April last year, asked payment firms to ensure their data were stored exclusively on local servers, setting a tight six-month deadline for compliance. US firms like Google, Mastercard, Visa and Amazon have lobbied against data localisation rules around the world including India, stressing that it would make their operations more complicated and costly. The issue is one of the sticking points between India and the US in their trade negotiations.  

Mnuchin, who was recently in India, said that this had been an issue of discussion between the two countries. The US has been in conversation with India on the issue of data localisation, Mnuchin told members of the House Financial Services Committee during a Congressional hearing on Thursday.

“In my recent trip, we’ve had very specific conversations. We’ve been dealing with them over the last year on this issue. We want to make sure, one, that US companies are treated fairly and can compete,” he said.

“We have no issues with if countries want to have local data for regulatory purposes they do that. It’s the issue of then eliminating data outside it, and I think, as you know, we’re in a global economy,” Mnuchin said.