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A journalist trials a mobile shopping app (Suzanne Plunkett/Reuters)

The government is mulling the idea of establishing a national regulator for the e-commerce sector to ensure consumer protection and compliance with foreign investment caps. The Ministry of Commerce is working on a draft which would include legislation related to mandatory data localisation and tax sops for data centres.

A task force from the commerce ministry has been assigned the task of formulating such policies under the leadership of commerce secretary Rita Teaotia.

The e-commerce sector in India has witnessed an exponential growth over the years and there is no policy to regulate the ever-growing sector. In this scenario, the government is trying to deliberate the matter to the concerned departments to arrive at a consensus on the matter. The World Trade Organization (WTO) has also sought for a proposal for multilateral discipline in e-commerce.

Here are some important points included in the policy:-

  • The draft e-commerce policy recommends data localisation along with a duration of 2 years for the companies to adjust to this newly-introduced rules. The draft has also recommended direct and indirect tax exemptions to encourage the players to establish data storage centre domestically.
  • The draft e-commerce policy advocates SMEs to follow inventory-based models for selling locally produced goods through an online platform which could give them a much-needed boost.
  • The company following inventory-based model must be allowed up to 49% foreign investment. At present, the government allows 100% FDI in marketplace model whereas inventory-based model does not have the freedom of accepting FDIs.
  • The draft policy recommends the Competition Commission of India to consider suitable amendments in the thresholds for mergers and acquisitions. Hence, the mergers below this threshold also get examined in case of e-commerce entities.
  • The task force has also recommended that there shall be centralised registration instead of local to simplify the goods and services tax (GST) procedures for e-commerce. Currently, MSMEs generating revenues less than ₹20 lakh per year are not liable to pay GST and the businesses operating online are liable to pay GST.

The draft, if implemented, is expected to help private sector companies to comply with the norms recommended by the Srikrishna Committee on data localisation.