Guidelines for Single Brand Retail Trade

(Judicial Quest News Service)

FDI policy on Single Brand Retail Trade(SBRT) has been in operation since 2006. From 2006 till 29.03.2018, 112 brands have obtained approval of Government for SBRT activities. FDI upto 100% under automatic route has been allowed in SBRT vide Press Note 1 of 2018 which was subsequently notified vide Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Amendment) Regulations, 2018 on 26/03/2018. From April, 2006 to April, 2019, SBRT sector has received total FDI equity of USD 1,636.24 million.

A committee under the chairmanship of Secretary, Department for Promotion of Industry and Internal Trade, with representatives from NITI Aayog, concerned Administrative Ministry and independent technical expert(s) on the subject examines the claim of applicants on the issue of the products being in the nature of ‘state-of-art’ and ‘cutting-edge’ technology where local sourcing is not possible and gives recommendations for such relaxation. However, no FDI application has been granted waiver from local sourcing norms on the basis of ‘state-of-art’ or ‘cutting-edge’ technology till now.

The details of Foreign Direct Investment (FDI) policy/ guidelines on Single Brand    Retail Trading (SBRT) is given below:

Single Brand Product Retail Trading

Sector/Activity	% of Equity/FDI Cap	Entry Route
5.2.15.3 Single Brand product retail trading	100%	Automatic

1. Foreign Investment in single brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

 FDI in single brand product retail trading would be subject to the following conditions:

1. Products to be sold should be of a single brandonly.
2. Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.
3. Single brand product-retail trading would cover only products which are branded during manufacturing.
4. A non-resident entity or entities, whether owner of the brand or otherwise, will be permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, either directly by the brand owner or through a legally tenable agreement executed between the Indian entity undertaking single brand retail trading and the brand owner.
5. In respect of proposals involving foreign investment beyond 51%, sourcing of 30% of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts which the company will be required to maintain. This procurement requirement would have to be met, in the first instance, as an average of five years’ total value of the goods purchased, beginning 1^st April of the year of the commencement of the business i.e. opening of the first store. Thereafter, it would have to be met on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of foreign investment for the purpose of carrying out single-brand product retail trading.
6. Subject to the conditions mentioned in this Para, a single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.
7. Single brand retail trading entity would be permitted to set off its incremental sourcing of goods from India for global operations during initial 5 years, beginning 1^st April of the year of the opening of first store, against the mandatory sourcing requirement of 30% of purchases from India. For this purpose, incremental sourcing will mean the increase in terms of value of such global sourcing from India for that single brand (in rupee terms) in a particular financial year from India over the preceding financial year, by the non-resident entities undertaking single brand retail trading, either directly or through their group companies. After completion of this 5-year period, the SBRT entity will be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis.

Note:

(i)         Conditions mentioned at Para 5.2.15.3 (2) (b) & 5.2.15.3 (2) (d) will not be applicable for undertaking SBRT of Indian brands.

(ii)        Indian brands should be owned and controlled by resident Indian citizens and/or companies which are owned and controlled by resident Indian citizens.

(iii)       Sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of the first store for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting-edge’ technology and where local sourcing is not possible. Thereafter, provisions of Para 5.2.15.3 (2) (e) will be applicable. A Committee under the Chairmanship of Secretary, DIPP, with representatives from NITI Aayog, concerned Administrative Ministry and independent technical expert(s) on the subject will examine the claim of applicants on the issue of the products being in the nature of ‘state-of-art’ and ‘cutting-edge’ technology where local sourcing is not possible and give recommendations for such relaxation.

This information was given by the Union Minister of Commerce and Industry, PiyushGoyal, in a written reply in the Lok Sabha today.