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India To Bring In Regulator For e-­Commerce

The task force has also recommended that the goods and services tax (GST) procedures for e-commerce be simplified by allowing centralized registration instead of local registration.

NEW DELHI – A national regulator for e-commerce, mandatory data localization and tax sops for data centres are part of an upcoming legislation governing all aspects of electronic commerce in the country, the draft of a national policy showed. The regulator will ensure consumer protection and compliance with foreign investment caps in e-commerce.

The national policy framework in this regard, prepared by a task force headed by commerce secretary Rita Teaotia, was discussed on Monday by a think tank, headed by industry minister Suresh Prabhu, set up for the purpose. The draft will be further fine-tuned before it is sent for inter-ministerial consultations.

The government has been striving to build consensus on an e-commerce policy to mitigate the policy vacuum on key issues related to the sector as well as to effectively respond to a proposal for multilateral discipline in e-commerce at the World Trade Organization (WTO) as various government departments have contradictory views on the matter.

While the draft e-commerce policy has strongly recommended data localization, it has suggested a two-year sunset period for the industry to adjust before localization rules becomes mandatory. It has also suggested direct and indirect tax incentives as well as according infrastructure status to data centres to encourage domestic data storage.

The move will help private sector companies comply with the norms laid down by the Srikrishna committee on data localization. The 10-member expert group headed by former Supreme Court judge BN Srikrishna, which submitted the draft bill titled The Personal Data Protection Bill, 2018, to the ministry of information and technology (MeitY) on Friday necessitates companies to store a copy of a user’s personal data in the country.

“It is a very encouraging move to give some time to the domestic industry to come to terms with the data storage procedures before actually imposing the legislation. However, it is important to carefully examine which companies actually qualify for this,” said Amber Sinha, lawyer and senior programme manager at Centre for Internet and Society (CIS), a Bengaluru-based think tank.

Both the draft e-commerce policy and the Srikrishna panel have suggested that the government would have access to data stored in India for national security and public policy objectives subject to rules related to privacy, and consent.

To encourage micro, small and medium enterprises, the draft e-commerce policy recommends allowing them to follow inventory-based models for selling locally produced goods through an online platform.

Such companies may also be allowed up to 49% foreign investment. Currently, e-commerce platforms are allowed only to follow marketplace model where 100% FDI is allowed. However, the government has so far not permitted any FDI in inventory-based models.

In what could worry the e-commerce companies, the draft policy recommends that the Competition Commission of India consider suitably amending the thresholds so that competition-distorting mergers and acquisitions below the existing threshold also get mandatorily examined by it in case of e-commerce entities. “For such entities, thresholds based on other variables (such as access to data) which are more relevant in this area, would be considered,” it added.

The task force has also recommended that the goods and services tax (GST) procedures for e-commerce be simplified by allowing centralized registration instead of local registration. “The relevant GST provisions would be modified in order to create a level-playing field between online and offline delivery of goods and services for the purpose of GST,” it said.

Currently, MSMEs with revenue of less than ₹20 lakh a year are not subject to GST if they sale offline whereas they have to pay GST if they sell goods on online platforms.

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