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FDI in Cash & Carry Wholesale and Retail Trade in a Single Entity

August 2, 2018     by bsamrishindia.com

Cash & Carry Wholesale trading/Wholesale trading, means sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers and thus sales are from B2B.

Retail Trade means sale of goods/merchandise to end consumers and thus sales are from B2C.

A wholesale/cash & carry trader can undertake retail trading, subject to the conditions as applicable. An entity undertaking wholesale/cash and carry as well as retail business will be mandated to maintain separate books of accounts for these two arms of the business and duly audited by the statutory auditors. Conditions of the FDI policy for wholesale/cash and carry business and for retail business, whether single brand retail or multi brand retail, have to be separately complied with by the respective business arms.

To further explain, assuming all below entities be the one with FDI

A – a wholesaler/ cash & carry trader

B – a marketplace e-commerce

C – a single brand retail trader

D – a multi brand retail trader

  • If A wants to do activities of C and D in separate business arms under the same entity, FDI policy have to be separately complied with by the respective business arms with respect to conditions for retail trade for single and multi brand respectively besides complying with conditions of wholesale cash & carry.
  • If B wants to do activities of A, the purchases of B from A cannot be more than 25% of the total purchases of B, if under separate entity as a group company
  • C is permitted to do e-commerce to retail customers in the same legal entity
  • A and B are not permitted to do sales to retail customers

If business for Cash & Carry Wholesale Trade and Retail Trade are to be done under a single entity, it is essential that the conditions of the FDI policy for wholesale/cash and carry business and for retail business, whether single brand retail or multi brand retail, have to be separately complied with by the respective business arms.

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2 thoughts on “FDI in Cash & Carry Wholesale and Retail Trade in a Single Entity

  1. under FDI Policy 2020 para 5.2.15 relates to wholesale trading and in bracket it is mentioned as “Including sourcing from MSEs”. What does this mean ? How sourcing from MSEs to be interpreted ?

    1. MSE in FDI Policy 2020 is abbrevated as Micro and Small Enterprise. However the same is defined in Micro, Small and Medium Enterprises Development Act, 2006.
      Further Ministry of MSME vide its notification dtd. 1st June, 2020 (effective from 1st July, 2020) revised the following criteria for classification of micro, small and medium enterprises, as follows:

      1. a micro enterprise, where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
      2. a small enterprise, where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees;
      3. a medium enterprise, where the investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees

      Hence sector/activity specified in 5.2.15 as “Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs)” could be interpretated as Cash & Carry Wholesale Trading/ Wholesale trading including sourcing from Mirco and Small Enterprise (as defined in Ministry’s of MSME notification detailed above). We advise to seek professional advice on further details.

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