Ahead of US President Barack Obama's visit to India next month, ecommerce major Amazon has asked the government to allow 49% foreign direct investment in e-tailers selling directly to consumers.
It has also asked the Centre to amend the law on value-added tax to overcome clashes with local tax authorities that have dogged its operations in Karnataka.
Amazon raised these demands at a meeting between officials from the
industry ministry and US companies. The meeting was to address the
concerns of USbased MNCs ahead of the first meeting of the
inter-ministerial committee set up to fast-track investment proposals
from the US.Obama is the chief guest for Republic Day celebrations next year.
Amazon, which has invested $300 million in India so far, argued that the current policy permitting only business-to-business (B2B) sales to foreign investorfunded companies restricts investments and local sourcing from manufacturers.
"Clarify and remove FDI restrictions in ecommerce. Allow at the minimum 49% FDI in business-to- consumer ecommerce," Amazon said, according to a document prepared for the meeting.
Agovernment official privy to deliberations confirmed that Amazon has sought FDI in businessto- consumer (B2C) ecommerce. Amazon also said the current VAT laws make it an agent, bringing its activities in direct conflict with restrictions on FDI in B2C ecommerce.
FDI up to 100% is allowed only in B2B ecommerce. While 51% FDI in multi-brand retail was permitted by the previous UPA government, the policy is effectively on hold as the ruling BJP had opposed it in its election manifesto. As a result, proposals on FDI in ecommerce are not being entertained.
Representatives from Amazon, Morgan Stanley, BAE Systems and Ford, among many other companies, met with the DIPP secretary at the meeting, which was attended by officials from related ministries.
Ford raised the issues of connectivity and logistics which are affecting its Chennai and Gujarat plants. BAE, meanwhile, wanted the offset policy to be made broad-based while Flextronics Technologies asked for 100% FDI in defence.
"It was an excellent and successful meeting. All issues related to procedural delays were referred to the respective departments. Policy issues raised by the American companies were taken note of by the officials (concerned)," said another government official. He did not disclose the government's response to Amazon's proposal.
Amazon operates through the so-called marketplace model in India, where sellers use the company's platform to reach out to buyers. The American etailer's demand could put the BJP government in a difficult situation. Commerce & Industry Minister Nirmala Sitharaman has said in the past that the government was examining whether opening up ecommerce will amount to a backdoor entry for foreign multi-brand players.
The government would also need to take into consideration complaints by traditional brick-andmortar players against recent mega sales by online retailers.
Amazon also raised the tax problems faced by it in Karnataka and sought an amendment to the VAT law, which does not recognise it as a service provider. As a result, tax authorities in Karnataka have asked the company to pay taxes on products sold from its warehouse.
Further, tax authorities have asked sellers not to store products in Amazon's warehouse near Bangalore as it was not paying VAT on the products sold from there. Ford sought a meeting with officials from the Gujarat government and the railway ministry to work out a plan for development of rail infrastructure from its plant in Sanand.
It also asked the National Highways Authority of India and Tamil Nadu government to expedite the completion of the highway to improve connectivity to Chennai Port.
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