The draft national e-commerce policy has outlined the need to regulate cross-border data flows, the need for e-tailers to set up a registered business entity in the country, and a series of conditions to operate online retail businesses through the marketplace model.

A framework would be created to provide the basis for imposing restrictions on cross-border data flow from specified sources, including data collected by IoT devices installed in public spaces and data generated by users in India on e-commerce platforms, social media, search engines, the 41-page draft policy released on Saturday said.

Stakeholders can comment on the draft till March 9. This is the second draft prepared by the department for promotion of industry and internal trade (DPIIT) as several concerns were raised over the first draft made by the department of commerce.

“A business entity that collects or processes any sensitive data in India and stores it abroad shall be required to adhere to certain conditions,” the policy draft said.

All such data stored abroad shall not be made available to other business entities outside India, for any purpose, even with the customer’s consent.

Data not collected in India, B2B data shared between business entities under a commercial contract, data flows through software and cloud computing services (having no personal or community implications), data shared internally by multinational companies are exempted from restrictions on cross-border data flows.

“A suitable framework will be developed for sharing community data that serves a larger public interest (subject to addressing privacy-related issues) with start-ups and firms,” it added.

The policy “was much desired as the e-commerce business was greatly vitiated by global players,” Praveen Khandelwal, secretary-general of the Confederation of All India Traders, said.

The draft focuses on six broad issues of the e-commerce sector, which includes data, infrastructure development, e-commerce marketplaces, regulatory issues, stimulating domestic digital economy and export promotion through e-commerce.

Marketplace model

On e-commerce marketplace businesses, the policy aims to invite and encourage foreign direct investment (FDI) in the marketplace model “alone”.

“An e-commerce platform, in which foreign investment has been made, therefore, cannot exercise ownership or control over the inventory sold on its platform. Foreign investment is not seen as a threat by small offline retailers of multi-branded products,” it said.

Online marketplaces should not adopt business models or strategies that favour one or few sellers operating on their platforms over others, the draft clarifies.

The policy also calls for all e-commerce websites and applications available for download in India to have a registered business entity in India. It also seeks to bar payments from Indian banks and payment gateways to unauthorised and unregistered sites and apps. This may hit Chinese e-commerce apps such as ClubFactory and Shein.

Online retailers will have to mention seller details on the website for all products and vendors will be fined if they are found to be selling counterfeit products.

Regulatory changes

The government is finding existing regulations and structures inadequate to deal with issues thrown up by the digital economy. Existing statutes and laws, the draft said, need to evolve to take into account the changing ways of doing business and changing business models.

On taxation related issues, the draft policy said the current practice of not imposing custom duties on electronic transmissions must be reviewed in the light of the changing digital economy.