Changes to the FDI Policy, 2017
A significant change has been taken by the government of India with respect to FDI inSingle Brand Retail Trading (SBRT). The Union Cabinet on January 10, 2018 approved a number of amendments to the existing FDI Policy, 2017. One such amendment approved by the government is that government approval is no longer required for FDI in SBRT. 100% FDI is permitted under the automatic route for SBRT.
Additionally, the Government has decided to permit a SBRT entity to set off itsincremental sourcing of goods from India for global operations during the initial five (5) years, beginning 1st 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 INR terms) in a particular financial year over the preceding financial year, by the non-resident entities undertaking SBRT, either directly or through their group companies. After completion of this five (5) year period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis.
Furthermore, a non-resident entity or entities, whether owner of the brand or otherwise, is 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 SBRT and the brand owner.