The Commerce minister Nirmala Sitharaman has released that FDI rules for multi brand retail shall now apply to e-commerce.
The Enforcement Directorate was closely scanning the capital structures of various companies operating in e-commerce when this amendment came up.Few days back the enforcement directorate has tapped a big e-commerce player in the retail market in violation of Foreign Exchange Management Act.It is also investigating similar players in the division of e- commerce.
As per section 13 of the Foreign Exchange Management Act (FEMA), 1999, if any person or entity were found to be in contravention of the Act, after the process of adjudication, the person or entity could be liable to face a penalty up to three times the sum involved.
Minister’s statement merely reiterates government™s stand that it is not yet ready to allow FDI in B2C companies. That being the case, companies like Flipkart will now have to raise money to pay the penalties given the fact that penalties are three times the investment. As none of the e-commerce companies are profitable there can be a shakeout in the sector.