Consolidated FDI Policy Circular of 2020

Paragraph 5.2.15 Trading

Chapter: 5 · Sector Specific Conditions on FDI
Text as on: As issued 15 October 2020; Press Notes since are not applied

5.2.15 TRADING

Sector/Activity % of Equity/ Entry Route FDI Cap Automatic 5.2.15.1 100%

Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs)

5.2.15.1.1 DEFINITION: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, imply sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce.

5.2.15.1.2 GUIDELINES FOR CASH & CARRY WHOLESALE TRADING/WHOLESALE TRADING (WT):

(a) For undertaking WT, requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be obtained.

(b) Except in case of sales to Government, sales made by the wholesaler would be considered as ‘cash & carry wholesale trading/wholesale trading’ with valid business customers, only when WT are made to the following entities:

(I) Entities holding applicable tax registration; or

(II) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/Government Body/Local Self-Government Authority, reflecting that the entity/person holding the license/ registration certificate/ membership certificate, as the case may be, is itself/ himself/herself engaged in a business involving commercial activity; or

(III) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or

(IV) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self-consumption.

Note: An entity, to whom WT is made, may fulfill any one of the 4 conditions at

(b) (I) to (IV) above.

(c) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis.

(d) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture.

(e)WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations.

(f) A wholesale/cash & carry trader can undertake retail trading, subject to the conditions as applicable. An entity undertaking wholesale/cash and carry as well as retail business will be mandated to maintain separate books of accounts for these two arms of the business and duly audited by the statutory auditors. Conditions of the FDI policy for wholesale/cash and carry business and for retail business have to be separately complied with by the respective business arms.

5.2.15.2 E-COMMERCE ACTIVITIES

Sector/Activity % of Equity/ Entry Route E-commerce activities FDI Cap Automatic 100%

5.2.15.2.1 Subject to provisions of FDI Policy, e-commerce entities would engage only in Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce.

5.2.15.2.2 DEFINITIONS: i) E-commerce- E-commerce means buying and selling of goods and services including digital products over digital & electronic network.

ii) E-commerce entity- E-commerce entity means a company incorporated under the Companies Act 1956 or the Companies Act 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in section 2 (v) (iii) of FEMA 1999, owned or controlled by a person resident outside India and conducting the e-commerce business.

iii) Inventory based model of e-commerce- Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.

iv) Marketplace based model of e-commerce- Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.

5.2.15.2.3 GUIDELINES FOR FOREIGN DIRECT INVESTMENT ON E-COMMERCE SECTOR

i) 100% FDI under automatic route is permitted in marketplace model of e-commerce.

ii) FDI is not permitted in inventory-based model of e-commerce.

5.2.15.2.4 OTHER CONDITIONS

i) Digital & electronic network will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc.

ii) Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.

iii)E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.

iv) E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory will render the business into inventory-based model. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.

v) An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.

vi) In marketplace model goods/services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be responsibility of the seller.

vii) In marketplace model, payments for sale may be facilitated by the e-commerce entity in conformity with the guidelines of the Reserve Bank of India.

viii) In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.

ix) E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common

provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.

x) Guidelines on cash and carry wholesale trading as given in para 5.2.15.1.2 above will apply on B2B e-commerce.

xi) e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only.

xii) E-commerce marketplace entity with FDI shall have to obtain and maintain a report of statutory auditor by 30th of September every year for the preceding financial year confirming compliance of the e-commerce guidelines.

Subject to the conditions of FDI policy on services sector and applicable laws/regulations, security and other conditionalities, sale of services through e-commerce will be under automatic route.

5.2.15.3 SINGLE BRAND PRODUCT RETAIL TRADING

Sector/Activity % of Equity/ Entry Route Single Brand Product Retail Trading FDI Cap Automatic

100%

(1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

(2) FDI in Single Brand product retail trading would be subject to the following conditions:

(a) Products to be sold should be of a ‘Single Brand’ only.

(b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.

(d) A non-resident entity or entities, whether owner of the brand or otherwise, shall be permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, either directly by the brand owner or through a legally tenable agreement executed between the Indian entity undertaking single brand retail trading and the brand owner.

(e) In respect of proposals involving foreign investment beyond 51%, sourcing of 30% of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts which the company will be required to maintain. This procurement requirement would have to be met, in the first instance, as an average of five years’ total value of the goods procured, beginning 1st April of the year of the commencement of SBRT business (i.e. opening of the first store or start of online retail, whichever is earlier). Thereafter, SBRT entity shall be required to meet the 30% local sourcing norms on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of foreign investment for the purpose of carrying out single-brand product retail trading.

(f) For the purpose of meeting local sourcing requirement laid down at para (e) above, all procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported. SBRT entity is also permitted to set off sourcing of goods from India for global operations against the mandatory sourcing requirement of 30%. For this purpose, ‘sourcing of goods from India for global operations’ shall mean value of goods sourced from India for global operations for that single brand (in INR terms) in a particular financial year directly by the entity undertaking SBRT or its group companies

(resident or non-resident), or indirectly by them through a third party under a legally tenable agreement.

(g) An SBRT entity operating through brick and mortar stores can also undertake retail trading through e-commerce. However, retail trading through e-commerce can also be undertaken prior to opening of brick and mortar stores, subject to the condition that the entity opens brick and mortar stores within 2 years from date of start of online retail.

NOTE:

(i) Conditions mentioned at Para 5.2.15.3 (2) (b) & 5.2.15.3 (2) (d) will not be applicable for undertaking SBRT of Indian brands.

(ii) Indian brands should be owned and controlled by resident Indian citizens and/or companies which are owned and controlled by resident Indian citizens.

(iii)Sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of the first store or start of online retail, whichever is earlier for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting-edge’ technology and where local sourcing is not possible. Thereafter, provisions of Para 5.2.15.3 (2) (e) will be applicable. A Committee under the Chairmanship of Secretary, DPIIT, with representatives from NITI Aayog, concerned Administrative Ministry and independent technical expert(s) on the subject will examine the claim of applicants on the issue of the products being in the nature of ‘state-of-art’ and ‘cutting-edge’ technology where local sourcing is not possible and give recommendations for such relaxation.

5.2.15.4 MULTI BRAND RETAIL TRADING

Sector/Activity % of Equity/ Entry Route Multi Brand Retail Trading FDI Cap Government

51%

(1) FDI in multi brand retail trading, in all products, will be permitted, subject to the following conditions:

(i) Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded.

(ii) Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million.

(iii)At least 50% of total FDI brought in the first tranche of US $ 100 million, shall be invested in 'back-end infrastructure' within three years, where ‘back-end infrastructure’ will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of backend infrastructure. Subsequent investment in backend infrastructure would be made by the MBRT retailer as needed, depending upon its business requirements.

(iv) At least 30% of the value of procurement of manufactured/processed products purchased shall be sourced from Indian micro, small and medium industries, which have a total investment in plant & machinery not exceeding US $ 2.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. The ‘small industry’ status would be reckoned only at the time of first engagement with the retailer, and such industry shall continue to qualify as a ‘small industry’ for this purpose, even if it outgrows the said investment of US $ 2.00 million during the course of its relationship with the said retailer. Sourcing from agricultural co-operatives and farmers co-operatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years’ total value of the manufactured/processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis.

(v) Self-certification by the company, to ensure compliance of the conditions at serial nos. (ii),

(iii) and (iv) above, which could be cross-checked, as and when required. Accordingly, the investors shall maintain accounts, duly certified by statutory auditors.

(vi) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas

as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.

(vii) Government will have the first right to procurement of agricultural products.

(viii) The above policy is an enabling policy only and the State Governments/Union Territories would be free to take their own decisions in regard to implementation of the policy. Therefore, retail sales outlets may be set up in those States/Union Territories which have agreed, or agree in future, to allow FDI in MBRT under this policy. The list of States/Union Territories which have conveyed their agreement is at (2) below. Such agreement, in future, to permit establishment of retail outlets under this policy, would be conveyed to the Government of India through the Department for Promotion of Industry and Internal Trade and additions would be made to the list at (2) below accordingly. The establishment of the retail sales outlets will be in compliance of applicable State/Union Territory laws/ regulations, such as the Shops and Establishments Act etc.

(ix) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi-brand retail trading.

(2) List of States/Union Territories as mentioned in Paragraph 5.2.15.4(1)(viii)

1. Andhra Pradesh

2. Assam

3. Delhi

4. Haryana

5. Himachal Pradesh

6. Jammu & Kashmir

7. Karnataka

8. Maharashtra

9. Manipur

10. Rajasthan

11. Uttarakhand 12.Daman & Diu and Dadra and Nagar Haveli (Union Territories)

5.2.15.5 DUTY FREE SHOPS

Sector/Activity % of Equity/ Entry Route Duty Free Shops FDI Cap Automatic 100%

(i) Duty Free Shops would mean shops set up in custom bonded area at International

Airports/International Seaports and Land Custom Stations where there is transit of international passengers.

(ii) Foreign investment in Duty Free Shops is subject to compliance of conditions stipulated under the Customs Act, 1962 and other laws, rules and regulations.

(iii) Duty Free Shop entity shall not engage into any retail trading activity in the Domestic Tariff Area of the country.

5.2.15 TRADING

Sector/Activity                            % of Equity/  Entry Route
                                                       FDI Cap      Automatic
5.2.15.1                                                  100%

Cash & Carry Wholesale Trading/Wholesale
Trading (including sourcing from MSEs)

5.2.15.1.1 DEFINITION: Cash & Carry Wholesale trading/Wholesale trading, would mean
sale of goods/merchandise to retailers, industrial, commercial, institutional or other
professional business users or to other wholesalers and related subordinated service
providers. Wholesale trading would, accordingly, imply sales for the purpose of trade,
business and profession, as opposed to sales for the purpose of personal consumption. The
yardstick to determine whether the sale is wholesale or not would be the type of customers to
whom the sale is made and not the size and volume of sales. Wholesale trading would
include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded
warehouse business sales and B2B e-Commerce.

5.2.15.1.2 GUIDELINES FOR CASH & CARRY WHOLESALE TRADING/WHOLESALE
TRADING (WT):

(a) For undertaking WT, requisite licenses/registration/ permits, as specified under the
  relevant Acts/Regulations/Rules/Orders of the State Government/Government
  Body/Government Authority/Local Self-Government Body under that State Government
  should be obtained.

(b) Except in case of sales to Government, sales made by the wholesaler would be considered
  as ‘cash & carry wholesale trading/wholesale trading’ with valid business customers, only
  when WT are made to the following entities:

(I) Entities holding applicable tax registration; or

(II) Entities holding trade licenses i.e. a license/registration certificate/membership
        certificate/registration under Shops and Establishment Act, issued by a Government
        Authority/Government Body/Local Self-Government Authority, reflecting that the
        entity/person holding the license/ registration certificate/ membership certificate, as
        the case may be, is itself/ himself/herself engaged in a business involving commercial
        activity; or

(III) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and
        similar license for hawkers) from Government Authorities/Local Self Government
        Bodies; or

(IV) Institutions having certificate of incorporation or registration as a society or
        registration as public trust for their self-consumption.

Note: An entity, to whom WT is made, may fulfill any one of the 4 conditions at
       (b) (I) to (IV) above.

(c) Full records indicating all the details of such sales like name of entity, kind of entity,
  registration/license/permit etc. number, amount of sale etc. should be maintained on a day
  to day basis.

(d) WT of goods would be permitted among companies of the same group. However, such
  WT to group companies taken together should not exceed 25% of the total turnover of the
  wholesale venture.

(e)WT can be undertaken as per normal business practice, including extending credit facilities
  subject to applicable regulations.

(f) A wholesale/cash & carry trader can undertake retail trading, subject to the conditions as
  applicable. An entity undertaking wholesale/cash and carry as well as retail business will
  be mandated to maintain separate books of accounts for these two arms of the business and
  duly audited by the statutory auditors. Conditions of the FDI policy for wholesale/cash
  and carry business and for retail business have to be separately complied with by the
  respective business arms.

5.2.15.2 E-COMMERCE ACTIVITIES

Sector/Activity  % of Equity/  Entry Route
E-commerce activities                     FDI Cap      Automatic
                                             100%

5.2.15.2.1 Subject to provisions of FDI Policy, e-commerce entities would engage only in
Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce.

5.2.15.2.2 DEFINITIONS:
i) E-commerce- E-commerce means buying and selling of goods and services including digital
products over digital & electronic network.

ii) E-commerce entity- E-commerce entity means a company incorporated under the
Companies Act 1956 or the Companies Act 2013 or a foreign company covered under section
2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in
section 2 (v) (iii) of FEMA 1999, owned or controlled by a person resident outside India and
conducting the e-commerce business.

iii) Inventory based model of e-commerce- Inventory based model of e-commerce means an
e-commerce activity where inventory of goods and services is owned by e-commerce entity
and is sold to the consumers directly.

iv) Marketplace based model of e-commerce- Marketplace based model of e-commerce
means providing of an information technology platform by an e-commerce entity on a digital
& electronic network to act as a facilitator between buyer and seller.

5.2.15.2.3 GUIDELINES FOR FOREIGN DIRECT INVESTMENT ON E-COMMERCE SECTOR

i) 100% FDI under automatic route is permitted in marketplace model of e-commerce.

ii) FDI is not permitted in inventory-based model of e-commerce.

5.2.15.2.4 OTHER CONDITIONS

i) Digital & electronic network will include network of computers, television channels and
   any other internet application used in automated manner such as web pages, extranets,
   mobiles etc.

ii) Marketplace e-commerce entity will be permitted to enter into transactions with sellers
   registered on its platform on B2B basis.

iii)E-commerce marketplace may provide support services to sellers in respect of
   warehousing, logistics, order fulfillment, call centre, payment collection and other services.

iv) E-commerce entity providing a marketplace will not exercise ownership or control over
   the inventory i.e. goods purported to be sold. Such an ownership or control over the
   inventory will render the business into inventory-based model. Inventory of a vendor will
   be deemed to be controlled by e-commerce marketplace entity if more than 25% of
   purchases of such vendor are from the marketplace entity or its group companies.

v) An entity having equity participation by e-commerce marketplace entity or its group
  companies, or having control on its inventory by e-commerce marketplace entity or its
  group companies, will not be permitted to sell its products on the platform run by such
  marketplace entity.

vi) In marketplace model goods/services made available for sale electronically on website
   should clearly provide name, address and other contact details of the seller. Post sales,
   delivery of goods to the customers and customer satisfaction will be responsibility of the
   seller.

vii) In marketplace model, payments for sale may be facilitated by the e-commerce entity in
   conformity with the guidelines of the Reserve Bank of India.

viii) In marketplace model, any warrantee/ guarantee of goods and services sold will be
   responsibility of the seller.

ix) E-commerce entities providing marketplace will not directly or indirectly influence
   the sale price of goods or services and shall maintain level playing field. Services
   should be provided by e-commerce marketplace entity or other entities in which e-
   commerce marketplace entity has direct or indirect equity participation or common

control, to vendors on the platform at arm's length and in a fair and non--
   discriminatory manner. Such services will include but not limited to fulfilment,
   logistics, warehousing, advertisement/ marketing, payments, financing etc. Cash back
   provided by group companies of marketplace entity to buyers shall be fair and non-
   discriminatory. For the purposes of this clause, provision of services to any vendor on
   such terms which are not made available to other vendors in similar circumstances
   will be deemed unfair and discriminatory.

x) Guidelines on cash and carry wholesale trading as given in para 5.2.15.1.2 above will
   apply on B2B e-commerce.

xi) e-commerce marketplace entity will not mandate any seller to sell any product
   exclusively on its platform only.

xii) E-commerce marketplace entity with FDI shall have to obtain and maintain a report
   of statutory auditor by 30th of September every year for the preceding financial year
   confirming compliance of the e-commerce guidelines.

Subject to the conditions of FDI policy on services sector and applicable laws/regulations,
security and other conditionalities, sale of services through e-commerce will be under
automatic route.

5.2.15.3 SINGLE BRAND PRODUCT RETAIL TRADING

Sector/Activity  % of Equity/  Entry Route
Single Brand Product Retail Trading       FDI Cap      Automatic

100%

(1) Foreign Investment in Single Brand product retail trading is aimed at attracting
investments in production and marketing, improving the availability of such goods for the
consumer, encouraging increased sourcing of goods from India, and enhancing
competitiveness of Indian enterprises through access to global designs, technologies and
management practices.

(2) FDI in Single Brand product retail trading would be subject to the following conditions:

(a) Products to be sold should be of a ‘Single Brand’ only.

(b) Products should be sold under the same brand internationally i.e. products should be
    sold under the same brand in one or more countries other than India.

(d) A non-resident entity or entities, whether owner of the brand or otherwise, shall be
    permitted to undertake ‘single brand’ product retail trading in the country for the
    specific brand, either directly by the brand owner or through a legally tenable agreement
    executed between the Indian entity undertaking single brand retail trading and the
    brand owner.

(e) In respect of proposals involving foreign investment beyond 51%, sourcing of 30% of the
    value of goods purchased, will be done from India, preferably from MSMEs, village and
    cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic
    sourcing will be self-certified by the company, to be subsequently checked, by statutory
    auditors, from the duly certified accounts which the company will be required to
    maintain. This procurement requirement would have to be met, in the first instance, as
    an average of five years’ total value of the goods procured, beginning 1st April of the
    year of the commencement of SBRT business (i.e. opening of the first store or start of
    online retail, whichever is earlier). Thereafter, SBRT entity shall be required to meet the
    30% local sourcing norms on an annual basis. For the purpose of ascertaining the
    sourcing requirement, the relevant entity would be the company, incorporated in India,
    which is the recipient of foreign investment for the purpose of carrying out single-brand
    product retail trading.

(f) For the purpose of meeting local sourcing requirement laid down at para (e) above, all
     procurements made from India by the SBRT entity for that single brand shall be
     counted towards local sourcing, irrespective of whether the goods procured are sold in
     India or exported. SBRT entity is also permitted to set off sourcing of goods from India
     for global operations against the mandatory sourcing requirement of 30%. For this
     purpose, ‘sourcing of goods from India for global operations’ shall mean value of goods
     sourced from India for global operations for that single brand (in INR terms) in a
     particular financial year directly by the entity undertaking SBRT or its group companies

(resident or non-resident), or indirectly by them through a third party under a legally
       tenable agreement.

(g) An SBRT entity operating through brick and mortar stores can also undertake retail
      trading through e-commerce. However, retail trading through e-commerce can also be
      undertaken prior to opening of brick and mortar stores, subject to the condition that the
      entity opens brick and mortar stores within 2 years from date of start of online retail.

NOTE:

(i) Conditions mentioned at Para 5.2.15.3 (2) (b) & 5.2.15.3 (2) (d) will not be applicable for
      undertaking SBRT of Indian brands.

(ii) Indian brands should be owned and controlled by resident Indian citizens and/or
      companies which are owned and controlled by resident Indian citizens.

(iii)Sourcing norms will not be applicable up to three years from commencement of the
      business i.e. opening of the first store or start of online retail, whichever is earlier for
      entities undertaking single brand retail trading of products having ‘state-of-art’ and
      ‘cutting-edge’ technology and where local sourcing is not possible. Thereafter,
      provisions of Para 5.2.15.3 (2) (e) will be applicable. A Committee under the
      Chairmanship of Secretary, DPIIT, with representatives from NITI Aayog, concerned
      Administrative Ministry and independent technical expert(s) on the subject will examine
      the claim of applicants on the issue of the products being in the nature of ‘state-of-art’
      and ‘cutting-edge’ technology where local sourcing is not possible and give
      recommendations for such relaxation.

5.2.15.4 MULTI BRAND RETAIL TRADING

Sector/Activity  % of Equity/  Entry Route
Multi Brand Retail Trading                FDI Cap     Government

51%

(1) FDI in multi brand retail trading, in all products, will be permitted, subject to the
following conditions:

(i) Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh
    poultry, fishery and meat products, may be unbranded.

(ii) Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100
    million.

(iii)At least 50% of total FDI brought in the first tranche of US $ 100 million, shall be invested
    in 'back-end infrastructure' within three years, where ‘back-end infrastructure’ will
    include capital expenditure on all activities, excluding that on front-end units; for
    instance, back-end infrastructure will include investment made towards processing,
    manufacturing, distribution, design improvement, quality control, packaging, logistics,
    storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land
    cost and rentals, if any, will not be counted for purposes of backend infrastructure.
    Subsequent investment in backend infrastructure would be made by the MBRT retailer as
    needed, depending upon its business requirements.

(iv) At least 30% of the value of procurement of manufactured/processed products
    purchased shall be sourced from Indian micro, small and medium industries, which have
    a total investment in plant & machinery not exceeding US $ 2.00 million. This valuation
    refers to the value at the time of installation, without providing for depreciation. The
    ‘small industry’ status would be reckoned only at the time of first engagement with the
    retailer, and such industry shall continue to qualify as a ‘small industry’ for this purpose,
    even if it outgrows the said investment of US $ 2.00 million during the course of its
    relationship with the said retailer. Sourcing from agricultural co-operatives and farmers
    co-operatives would also be considered in this category. The procurement requirement
    would have to be met, in the first instance, as an average of five years’ total value of the
    manufactured/processed products purchased, beginning 1st April of the year during
    which the first tranche of FDI is received. Thereafter, it would have to be met on an
    annual basis.

(v) Self-certification by the company, to ensure compliance of the conditions at serial nos. (ii),
    (iii) and (iv) above, which could be cross-checked, as and when required. Accordingly,
    the investors shall maintain accounts, duly certified by statutory auditors.

(vi) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as
    per 2011 Census or any other cities as per the decision of the respective State
    Governments, and may also cover an area of 10 kms around the municipal/urban
    agglomeration limits of such cities; retail locations will be restricted to conforming areas

as per the Master/Zonal Plans of the concerned cities and provision will be made for
     requisite facilities such as transport connectivity and parking.

(vii) Government will have the first right to procurement of agricultural products.

(viii) The above policy is an enabling policy only and the State Governments/Union
     Territories would be free to take their own decisions in regard to implementation of the
     policy. Therefore, retail sales outlets may be set up in those States/Union Territories
     which have agreed, or agree in future, to allow FDI in MBRT under this policy. The list of
     States/Union Territories which have conveyed their agreement is at (2) below. Such
     agreement, in future, to permit establishment of retail outlets under this policy, would be
     conveyed to the Government of India through the Department for Promotion of Industry
     and Internal Trade and additions would be made to the list at (2) below accordingly. The
     establishment of the retail sales outlets will be in compliance of applicable State/Union
     Territory laws/ regulations, such as the Shops and Establishments Act etc.

(ix) Retail trading, in any form, by means of e-commerce, would not be permissible, for
     companies with FDI, engaged in the activity of multi-brand retail trading.

(2) List of States/Union Territories as mentioned in Paragraph 5.2.15.4(1)(viii)

1. Andhra Pradesh
      2. Assam
      3. Delhi
      4. Haryana
      5. Himachal Pradesh
      6. Jammu & Kashmir
      7. Karnataka
      8. Maharashtra
      9. Manipur
      10. Rajasthan
      11. Uttarakhand
      12.Daman & Diu and Dadra and Nagar Haveli (Union Territories)

5.2.15.5 DUTY FREE SHOPS

Sector/Activity  % of Equity/  Entry Route
Duty Free Shops                           FDI Cap      Automatic
                                             100%

(i) Duty Free Shops would mean shops set up in custom bonded area at International

Airports/International Seaports and Land Custom Stations where there is transit of
international passengers.

(ii) Foreign investment in Duty Free Shops is subject to compliance of conditions
stipulated under the Customs Act, 1962 and other laws, rules and regulations.

(iii) Duty Free Shop entity shall not engage into any retail trading activity in the
    Domestic Tariff Area of the country.