Audit for FDI norms must for e-com firms

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News:The government has issued new rules that makes it compulsory for e-commerce companies with foreign investments to submit an audit report every year.

Facts:

About the new rules:

  • The rules will be applicable on E-commerce companies with foreign investments such as Amazon, Flipkart among others.
  • These companies have to submit a report prepared by statutory auditors, by September 30 every year.
  • They have to show that they have been in compliance with the foreign direct investment(FDI) rules for the e-commerce sector.

About the FDI Rules for E-commerce companies:In 2018,Government of India had announced the FDI rules for ecommerce companies which were:

  • If an entity is owned by an e-commerce marketplace(ECM),it cannot sell its products on the platform run by the same ECM 
  • A single vendor can’t account for more than 25% of sales in an ECM or platform and 
  • The rules puts curbs on exclusive partnerships with brands or providing favorable services to a few vendors.

Significance of these rules:

  • These rules were directed at protecting small vendors on e-commerce websites.
  • It seeks to ensure small players selling on the portals are not discriminated against in favour of vendors in which e-commerce companies have a stake.
  • It will also ensure a level playing field for all vendors looking to sell on the e-commerce portals.