The move impacts Chinese online retailers such as Shein, AliExpress and Romwe as they may have to set up entities in the country to run their online platforms. “This essentially means that all the overseas entities cannot undertake e-commerce without having any Indian presence,” Atul Pandey, partner at Khaitan & Co., told BloombergQuint over the phone. “This may impact online retailers who currently don’t have any presence in India.”
The draft e-commerce policy released on Saturday stated that all e-commerce sites or apps available for download in India 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.
Over the last two years, several Chinese online fashion portals such has Shein, Romwe and AliExpress—which also provides electronics and smartphones—have expanded their business and market share in the country. Redseer estimates that these e-commerce platforms have grabbed more than 5 percent share of the overall online fashion business, with Tier-II and Tier-III cities accounting for 30 percent of their sales.
The total number of shipments from Chinese e-commerce platforms stands close to around 2 lakh per day, according to Shayak Mazumder, chief executive and founder of homegrown cross-border e-commerce platform Eunimart.
The proposed rules on foreign e-commerce websites came after several sellers bodies including All India Online Vendor Association wrote to the consumer affairs ministry to look into the operations of Chinese e-commerce websites. "Some of the players have been misusing the rules and were shipping cheaper products to Indian customers as gifts, to avoid customs duty and goods and services tax," said Mazumder, adding that now firms will either have to get a formal importer on record or set up an entity in India so that every product that is sold can be tracked.
The draft policy has also acknowledged the misuse of the “gifting” route, and has proposed that all such parcels shall be banned, with the exception of life-saving drugs. It also added that any non-compliant e-commerce app or website will not be given access to operate in India.
AliExpress, Shein, Romwe, did not respond to an email seeking comments.
The 41-page draft document for which feedback has been sought by March 9, focuses on six broad issues of the e-commerce sector. These include data, infrastructure development, e-commerce marketplaces, regulatory issues, stimulating domestic digital economy and export promotion through e-commerce.
Amazon and Walmart-backed Flipkart said they are studying the draft, while Snapdeal welcomed the move and said that the draft policy's categorical rejection of inventory-based e-commerce model must be followed by effective implementation of foreign direct investment norms to ensure marketplaces do not own or control inventory, directly or indirectly.