% of FDI under direct rout in Trading sector.

In the trading business 100% FDI can be invited provided that the Investee company is not undertaking retailing.

Regards

FDI is prohibited in Retail Trading Sector.

Trading is premitted under automatic route with FDI upto 51% provided it is primarily export activities, and the undertaking is an export house/ trading house/ super trading house/ star trading house. however, under the FIPB route:

1- 100% FDI is permitted in case of trading companies for the following activities:-

     (a) exports

    (b) bulk imports with export/exbonded warehouse sales

    (c) other import of goods or services provided at least 75% is for procuremednt and sale of the same froup and not for third party use or onward transfer/ distribution/sales.

2-Certain other trading are also permitted, subject to provisions of EXIM Policy.

Further, please refer to Master Circular on Foreign Investment in India.

Trading in FDI

a. Wholesale/cash& carry trading                         - 100%  Automatic Route

b. Trading for Exports/Ex boded sale                    -100%  Automatic Route

c. Trading of items sourced from SSI Units            -100%   by FIPB Aproval Route

d. Test marketing of such items for which acompany has approval formanufacture      -100% by FIPB Approval Route (Subject to the condition that thetest marketing approval will befor a period of two years andinvestment in setting upmanufacturing facilities commences simultaneously with test marketing.)

e. Single Brand Product Retailing Trading                -51% FIPB Subject to Press Note 3 (2006 Series) issued by DIPP

Note-

(1) "wholesale cash & carry" means  sale on Business to Business (B2B) + cash & carry model basis (Metro cash & carry (I) Pvt Ltd.  Vs. Union of India).

Cash & carry by its gramatical cognate "selling something gross in exchange for cash at the counter" .So credit period is not allowed neither delivery made to customer place.

B2B includes trading/selling to a business unit having a valid sale tax number for laters internal/captive consumption or resale to retailer or consumer.Hence the Trading company cannot hold a retail office/shop/godown to trade with common consumer/public of India

(2)Other than "Single Brand Retail Trading" , Retail Trading is Prohibited-

To qualify under 'Single Brand retail Trading' 3 conditions must satishfied- 1 Products to be sold should be of a single brand only. 2 The products should be sold under the same brand internationally 3 single-brand product retailing covers only products that are branded during manufacturing

However there is ambiguity & so many controversy going on legal clarity of  "single brand retail Trading" since the Govt. has no specific explanation on these defination.

Please follow new updated FDI Master circular in www.rbi.org.in jointly read with Draft Press Note (2010) in www.dipp.nic.in

Dear Ashis,

Just let me know whether credit can be extend to its customer by any WOS of foreign company being established to undertake 100% wholesale cash & carry business  with approval of FIPB.

Thanks & Regards,

Originally posted by : Kumar
	Dear Ashis,   Just let me know whether credit can be extend to its customer by any WOS of foreign company being established to undertake 100% wholesale cash & carry business  with approval of FIPB. Thanks & Regards,

CREDIT+CASH & CARRY

Hi Kumar

See that exact provision is not covered by Act neither DIPP/FIPB give much clarity on this issue.With ref. to Metro case study & by its gramatical cognate "cash & carry"  means exclusively sale for cash at the point of sale.So no question of credit comes to matter.

However something SPECIFIC approval from regulator has a different standing unless it contradicts the original Law.But so far my knowledge & perception is concerned, the intention of legislature is not to provide any credit period to its customer as cleared in Metro case law.And the companies I hv come across in FDI they do an agreement rekconing the same clause.

You know trading is a sensitive matters in FDI.Retail market is unorganised & unstructured in India.Last year our PM has rejected the  WALMART CEO request for multibrand retail trading .And I think probably to avoid backdoor retail trading practice the Govt. want to go more conservative on this specific issue wat you have raised . 

However there is no problem in seeking a clarity from FIPB on this issue by wring a letter.

Dear Ashis,

Thanks.

Best Regards

Hi Mr Kumar !

After DIPP Circular on "Consolidated FDI guidelines 2010" its clear that a Wholesale Trading can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations.So normal credit is allowed. Chek this circular on www.dipp.nic.in

Thank You Ashish for sharing on  your views on this topic.

As you stated that 2010 guideline makes it clear that the WOS Of a Foreign Company  trading under "Cash and Carry Wholesale"can offer credit facilities to their customers. But I did not found any specefic guidance in the circular on this. Can you just confirm where it has been mentioned.

Further can this particular Wos can import goods from its parent Co. and trade in that?  

as it is written in point no. 5.2.24.1.2 e that extending credit is allowed as per the applicable gidelines

what are these guidelines?

As per my knowledge WOS Of a Foreign Company  trading under "Cash and Carry Wholesale" CANNOT offer credit facilities to their customers.