We would like share with you a favourable update. The Honorable Delhi Government has passed a ruling today on the petition filed by the All India Footwear Manufacturers & Retailers Association (AIFMRA), which is a step in the right direction towards bringing clarity and parity on Foreign Direct Investment (FDI) in retail.

AIFMRA, the apex footwear industry body, had filed a petition in the Delhi High Court seeking clarity on FDI in e-commerce as it feels that marketplaces are in violation of the existing norms that forbid FDI in retail. In the petition, AIFMRA argued that the sales made by online marketplaces have a full character of a sale to a consumer akin to that in retail. Marketplaces are obviously retailers because the payment is accepted by them, delivery is made by them, returns are taken by them and refund are also made by them. Hence, FDI in marketplaces too should be looked at severely.

The hearing on this matter took place on today, wherein the court after noting the FDI policy, considering the taxation angle and hearing the arguments observed that there has been "a prima facie violation". Furthermore, it ordered the Government of India to file a reply in two weeks.

Welcoming this directive, Kumar Rajagopalan, CEO, Retailers Association of India, the apex body of retailers in the country said, "RAI has consistently represented to the government that e-commerce marketplaces are utilising FDI funds, dealing with customers and behaving exactly like consumers. We have sought the Government's help in clarifying the situation as FDI rules cannot be applied differently to the so-called e-commerce marketplaces while retailers are not allowed to get FDI. The e-commerce marketplaces have been behaving like retailers-they have been pricing products and have also been advertising themselves as online retail companies. We, at RAI, have been requesting the government to frame a policy that would create a level-playing field for retailers across all channels. And this directive might help setting the ball rolling in that direction."

We would like to bring your attention to the Maharashtra State Government notification dated 1 August 2015 that dealers with turnover of not less than INR 50 Crores shall only be liable for registration.

Subsequent to this announcement, RAI requested the state government to clarify the determination of turnover i.e., whether turnover within the Municipal corporation area is to be considered or turnover in relation to the business of the dealer within the entire State of Maharashtra.

In this regard, the Government has clarified that the turnover of the dealer within the Municipal corporation area is required to be considered as per Notification No. LBT. 2015 / C.R. 42 / UD-32 dated 15 September 2015 and not the turnover for the entire State of Maharashtra.

An RAI delegation had met with the Commissioner of Commercial Taxes of Karnataka regarding the cross matching of input tax credits i.e. e-UPass to address the various reasons for the occurrence of mismatch. Please click here to view the representation.

The Commissioner of Commercial Taxes, Karnataka, emphasised that even though relief, in terms of opportunity of being heard on mis-match/audit/assessments and producing invoice as proof are provided in current scenario, the same will not be available in proposed GST and any monthly mis-match will be disallowed by the system, automatically. He further highlighted that retailers and vendors need to focus on addressing the mismatch in terms of their ERP changes/process improvents/people training and guiding vendors. He also mentioned that in the GST regime, the mismatch may get more complex with product rate level data being compared. Key Relief points:

1. The Commissioner assured that current mismatch will not by default lead to disallowance of input credit. The mis-match report will only be used to identify/pick cases for Audit/assessment, whereby retailers can produce valid documents in terms of invoices etc. and can continue to be eligible for credit.
2. He agreed to provide extension in the timeline up to 31st July 2015. He further assured that depending upon progress, this can be revisited again.
3. Furthermore, it was agreed to provide details online about the nature of mismatch along with the vendor details. This will enable retailers to address the mismatch issue at a faster pace and can focus on problem areas. This would be made available at the earliest.
4. The Commissioner also assured that, in case invoice details match, however, there is amount mismatch between Vendor and Retailer [typically in case when PO raised is lower than invoice] - department will allow acceptance of mismatch for the lower of two amounts.
5. The Commissioner's office has currently finished some fine tuning of reports in terms of rounding off gaps/ improvement in logics used for invoice /date mismatches, which should reduce the gap.
6. Further Joint Commissioner - E-Audit has also offered to support the companies in terms of online report improvements/guiding them to address pain areas in the future.

The RAI delegation also requested the Joint Commissioner to address all RAI members to which he has agreed. RAI shall soon organize the seminar/workshop, dates of which will be intimited to members.

RAI delegation was invited by the Hon’ble Chief Minister of Maharashtra, Shri Devendra Fadnavis to have a detailed discussion on Maharashtra’s Retail Trade Policy. The meeting was presided over by Hon’ble Principal Secretary of Industries, Shri Apurva Chandra who presented the policy in front of the panel which included Principal Secretaries of various departments along with Shri Subhash Desai, Hon’ble Minister of Industries.

Organisations such as Future Group, Aditya Birla, Reliance Retail, Lifestyle, Shoppers Stop, K. Raheja Corp, IKEA among others attended the said meeting. The Hon. Chief Minister assured the implementation of the policy in its true spirit once it is framed. All the dignitaries welcomed the initiative taken by the Maharashtra government in framing a policy for Retail Trade for the first time in the state.

RAI has requested that RAI members be allowed to pay ESI contributions under one challan. This will save considerable time of all the stakeholders (employers/ESI/Bank) and will also dispense with the need to maintain large number of challans, every month.

Please find the representation attached here.

E-commerce is only supposed to translate the physical world into the Internet world and therefore deserves to be similarly regulated as commerce in the physical world. It is our concern that, though the outcome of e-commerce and retail in physical world is the same, the treatment meted out by the Government of India to the two players in the same market is inequitable.

Due to the advent of technology and increased reach to the general public through mobile and other hand-held devices, e-commerce has also reached a level of general and daily use. Multi brand retail is being achieved through e-commerce but on a defence of a marketplace model. E-commerce thus achieves the same result as that of multi brand retail in physical world.

Based on members’ recommendations, RAI had repeatedly sought for the government to create a simple FDI policy for Retail without segregating retail by BRANDS and CHANNELS. We have submitted that the word “retailer”cannot be allowed to have a different meaning for players in the Internet world and players in the physical world.

The continued discrimination by Government between Retailers in physical world and retailers in cyberspace compel us to represent our stand strongly with the Government.

With the above background, and under the direction of the board, RAI filed a  writ petition before  Hon'ble Delhi High Court  on 18th May 2015 to seek a “level playing field” amongst the retailers in the physical world and retailers in the cyberspace (internet world), in relation to the application of  Indian laws including the  Foreign Direct Investment Regulations.

Please click here to download the petition.

The aforesaid matter was listed before Hon'ble Justice Mr Rajiv Shakhder of the Hon'ble Delhi High Court on 20th May 2015. The Hon’ble Court after considering the arguments, held that the said petition shall be treated as representation to the respondent (i.e. Government) by the petitioner(i.e. RAI) and directed the government to discuss the matter in details with RAI within 4 months. The Court has provided the liberty to RAI to approach the Court in case of a negative response.

Click here to download the scanned copy of the Writ Petition RAI has filed with regards to FDI in retail and e-commerce.

You will be pleased to know that the registration and renewal of thelicences can now be done through the app ‘MCGM24X7’, which can bedownloaded from the ‘Play Store’ on an Android Smartphone and ‘App Store’ on an Apple Device.

For android: https://play.google.com/store/apps/details?id=in.cdac.gov.mgov.mcgm

For Apple: https://appsto.re/in/68AL6.i