What online retailers, lobby groups want govt to change in draft e-commerce policy

A number of e-commerce companies and industry bodies have submitted their responses to the Department for Promotion of Industry and Internal Trade (DPIIT) on the draft national e-commerce policy. The government has started reviewing the responses and will call for a review meeting with stakeholders, according to people familiar with the matter.

The DPIIT held two pre-submission meetings in March with about 20 industry representatives. The draft policy was made public on February 23 and touched upon six key aspects: data, infrastructure development, e-commerce marketplaces, regulatory issues, domestic digital economy and export promotion.

This is what multiple industry bodies had to say in their submissions on March 29 on various aspects of the draft: 

Data is not a national asset: The Asia Internet Coalition said “India does not have sovereign right on Indian data”. The group represents global companies such as Amazon, Google, Facebook, Rakuten and Apple on matters of public policy. It said the draft’s insistence on data localisation will “harm the growth prospects of the Indian digital economy by limiting India’s access to global technology, collaborations, and economies of scale”.

The group took a strong stand against the requirement for businesses operating in India to set up a registered entity. It called the proposed measure “unnecessary” and added that it would adversely “impact cross-border investment flows”. 

The draft national e-commerce policy as well as the draft intermediary guidelines (amendment) for regulating internet content global business operating in India to set up a registered entity in the country for taxing income generated from their local operations.

The coalition also said that the draft policy “should refrain from addressing competition issues” and leave it to the competition law review committee. The draft addresses ‘significant first-mover advantage’ stating that it gives an edge to early entrants, stifling innovation by startups, and allows a Standing Group of Secretaries on e-commerce to recommend policy challenges under the Competition Act.

Centralised repository for know-your-customer (KYC) norms: IndiaTech, the group which represents the interests of local technology companies and investors, said the existing Central KYC Records Registry should be developed for ease of access to digital KYC records of users by any reporting entity in the financial sector for establishing an account. 

This would bring down the cost of KYC-compliance for fintech companies and digital lenders, especially since Aadhaar-based eKYC was barred for use by private entities as per the Supreme Court judgement in September 2018.

The group, which represents companies such as Ola and MakeMyTrip and investors such as Steadview Capital and Matrix Partners, also said that tax collection at source under the Goods and Services Tax mentioned in the draft should be removed for creating a level-playing field for e-commerce players on a par with brick-and-mortar businesses.

The group sought clarity on whether ‘services’ fall under the provision of Press Note 2, which prohibits marketplaces from owning or controlling inventory. Both ride-hailing app Ola and online travel services firm MakeMyTrip broadly fall under this category.

The lobby group also supported taxation based on ‘significant economic presence’ and permanent establishment of companies operating in India. It said that an Indian traveller can book a domestic hotel or flight on the online portal of foreign travel services firms, but no taxes are payable in India on such incomes. Foreign companies can choose a tax haven to offer such services in India and enjoy a pricing advantage, the group said. 

Regulatory environment to address e-commerce issues: Industry body FICCI, which represents over 2.5 lakh businesses, sought to protect the interests of brand owners and customers by addressing the issue of counterfeit goods sold on e-commerce platforms. 

FICCI demanded ‘penal provisions’ to hold marketplaces responsible for what they sell on their platform. It suggested creating a database for blacklisted entities found to be dealing in counterfeit products and compliance by a marketplace with the brand for any investigation into such a matter.

FICCI requested the draft policy to refrain from creating confusion by outlining a different set of rules in case of the data governance framework, which is being addressed by the Ministry of Electronics and Information Technology through a Personal Data Protection law.

The role of marketplace is distinct from that of sellers: The Ecommerce Council of India, which was founded by ShopClues, Snapdeal, UrbanClap and others last month, sought protection for marketplaces on counterfeit products being sold by sellers. 

It said that marketplaces should be exempt of legal obligations pertaining to sellers or brands as the platforms neither own nor sell the goods.

The group sought effective implementation of foreign investment rules to prevent marketplaces from acting as sellers. Marketplaces like Amazon, Flipkart and Myntra sell private labels on their platform.

The group proposed that all cross-border e-commerce sites selling to consumers in India need to comply with Indian laws or should be allowed to align with other compliant India-based entities for ease of business.

Ban cash on delivery orders: The Confederation of All India Traders (CAIT), which claims a membership of six crore small and medium merchants, sought digital payments for all orders through e-commerce and asked for ban on cash on delivery orders. It also demanded a central registration system for all e-commerce entities for a database on the number of platforms operating in India.