Online sellers seek FDI in inventory-based model of e-commerce for export purposes
E-commerce stakeholders urged the department for the promotion of industry and internal trade to relook at the FDI policy
Parul November 17, 2023
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The e-commerce industry has suggested the government permit foreign direct investment (FDI) in inventory-based model of online trade only for export purposes, a senior government official said on Friday. At present, the country’s FDI policy does not permit foreign direct investment in the inventory-based model of e-commerce. It is allowed only in firms that are operating through a marketplace model.
Director General of Foreign Trade (DGF) Santosh Kumar Sarangi said that they are working on several steps to promote exports through e-commerce medium.
He said that the e-commerce stakeholders have asked the department for the promotion of industry and internal trade (DPIIT) to relook at the FDI policy on this issue.
“For export purposes, if these (rules) could be revisited is something that we are requesting the DPIIT to examine and explore… and this could be one step forward for creating the e-commerce export zones that DGFT and its team has been working on,” Sarangi said here at a conference on e-commerce exports.
Talking about steps they are working on to promote exports through e-commerce medium, he said many of these exporters even the smaller ones are subjected to a mandatory GST regime, so the directorate is working with the Department of Revenue (doR) to see if there could be a scheme like ‘composition levy scheme’ for smaller players so that this mandatory GST could be waived till they attain a certain threshold of export value.
“Similarly, exports through e-commerce many a time are not getting benefits like duty drawback or DGFT schemes like Remission of Duties and Taxes on Exported Products (RoDTEP) or Rebate of State and Central Taxes and Levies (RoSCTL). So we are now working with Express Cargo Clearance Systems (ECCS) and postal bill of exports to ensure that the shipping bills flow directly so that these kinds of exports also get covered under these kinds of schemes,” he said.
He added that the DGFT is also working with the Department of Post to ensure that Dak Niryat Kendras and foreign post offices (FPOs) get strengthened and expanded.
The Department of Post has the objective to open 1,000 such Kendras which will work on a hub and spoke model with the FPOs and they are trying to ensure that the export consignments are reached at the quickest possible time, get the customs clearance and are sent abroad.
The department is working with the US Postal services as well as postal services of other countries to provide a full online tracking mechanism for the e-commerce export consignments, he added.
Further Sarangi said that providing warehousing facilities as well as quick packaging clearance facilities from e-commerce export zones is one of the top priorities.
“But the present policy ecosystem does not support creation of this because the export-oriented unit (EOU) model is exclusively for manufacturing. But here we are talking of a facility which is not exactly manufacturing but a little bit of processing and packaging,” he said.
So how do “we implement an EOU model” for e-commerce exports is something that “we are working” on with the Department of Revenue and “hopefully going forward, we will be able to convince DOR on the feasibility of this model,” he said adding the DGFT is trying to increase awareness and importance of e-commerce exports in different departments.
Until now, the entire orientation for the export ecosystem was modelled on a B2B shipment of goods through air, and ships.
“The possibility that our people will be able to sell their own brand to the entire globe using e-commerce platform is something which would require a lot of mindset change…So we are working with the DoR, RBI, and the DPIIT to see how this mindset change can come,” he said.
Within DGFT, he said, they are ensuring that all their regional authorities get acquainted with the nuances of e-commerce and then take this initiative to train potential e-commerce exporters.
They are also looking at joining hands with private sector players to promote e-commerce exports and create this awareness at the field level.
“To begin with, we are joining hands with Amazon and we are signing an MoU with them to do a pilot in 20 districts where we will try to train e-commerce exporters. Similarly, we are working with Walmart and Flipkart to do it in a few more districts. We are also in talks with eBay to ensure that we take more and more districts and try this model,” he added.
Huge potential is there in the sector as highly educated people are entering this segment and a pool of mentors within India can be created to handhold and guide the potential exporters in the sector, he said.
“In the days to come, we will focus on creating a pool of mentors in our country to provide guidance to e-commerce exporters. I can foresee that the e-commerce ecosystem is going to evolve in a much more rapid manner. It is going to explode and possibly it will be one of the biggest feeders in realising the dream of USD 2 trillion worth of goods and services exports” by 2030, he said.