Centre puts e-com firms under regulatory lens

New Delhi: The government has made it mandatory for e-commerce companies like Amazon and Flipkart to submit FDI policy compliance report by statutory auditor by September 30 every year, a move aimed at ensuring that they follow all the norms properly.

As per the government notification issued on Thursday, e-commerce companies have to 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 September 30, 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.