FDI in Single Brand Product Retail Trading in India

A non-resident entity can invest in India subject to the Consolidated FDI Policy (effective 17 April 2014) except
in those sectors/activities that are prohibited. FDI in retail trading in India is permitted according to the
following broad categories:
1. Single Brand Product Retail Trading (SBRT)


SBRT is the retail trading of products under a single brand name worldwide.
100% FDI allowed
2. Multiple Brand Retail Trading (MBRT)


MBRT is the retail trading of products of different brands owned by a single company.
With a view to integrating the Indian economy with the world market and to encourage further FDI in
India, the government has allowed 51% FDI in MBRT, subject to prior approval from the government
and certain conditions.
While both models facilitate growth in the retail sector, MBRT has typically been tightly regulated, considering
the associated economic and political challenges. On the other hand, SBRT regulations have been consistently
liberalised over the years. This has provided the necessary impetus to the sector and has increased the number
of international brands accessible to Indian consumers.
FDI in Single Brand Product Retail Trading
1.
Objective
FDI in single brand product retail trading aims to:
 Attract investments in production and marketing;
 Improve the availability of goods for consumers;
 Encourage increased sourcing of goods from India; and
 Enhance competitiveness of Indian enterprises through access to global designs, technologies and
management practices.
2.
Current Scenario
Available route




3.
% of FDI permitted
Automatic
Up to 49%
Government approval
Beyond 49%
FDI exceeding 49% in a company that proposes to undertake SBRT in India would require
permission from the Secretariat for Industrial Assistance (SIA) in the Department of Industrial
Policy & Promotion (DIPP).
The applications should specify the product/product categories that are proposed to be sold under
a ‘single brand’.
For FDI up to 49%, the list of products/product categories proposed to be sold except food
products should be provided to the Reserve Bank of India (RBI).
Any addition to the product/product categories to be sold under the ‘single brand’ would require a
fresh approval from the government.
Conditions
 The liberalisation of the sector comes with a set of prescribed conditions:
Condition
Remarks
Single brand

Products to be sold should be of a ‘single brand’ only.
Same brand
internationally

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.
Branding during
manufacturing

SBRT would cover only products that are branded during manufacturing.
Investment by
more than one
non-resident
entity

A non-resident entity or entities, whether owner of the brand or
otherwise, shall be permitted to undertake SBRT in the country for the
specific brand, directly or through a legally tenable agreement with the
brand owner for undertaking SBRT.

In cases where FDI exceeds 51%, sourcing of 30% of the value of goods
purchased by the SBRT entity will be done from India, preferably from
micro, small and medium enterprises (MSMEs), village and cottage
industries, artisans and craftsmen.
It is sufficient to comply with the 30% sourcing condition cumulatively in
the first five years of FDI investment.
Thereafter, the sourcing requirement must be complied with on an
annual basis.
The quantum of domestic sourcing will be self-certified by the company
and in turn by its auditors.
The company that is the recipient of FDI for the purpose of SBRT will have
the onus of ascertaining the sourcing requirement.

Sourcing



E-commerce
prohibited

Retail trading, in any form, by means of e-commerce would not be
permissible for companies with FDI engaged in SBRT.
Conclusion
The government is progressively undertaking reforms and liberalising the retail sector to attract foreign
investments. It has gradually eased the regulatory environment with respect to retail trading to pave the way
for retail innovation and enhance competitiveness of Indian enterprises through access to global designs,
technologies and management practices. The opening of the retail industry to global competition is expected to
spur a retail rush to India. It has the potential to not only transform the retail landscape but also the nation’s
ailing infrastructure.
About us
SKP is a long established and rapidly growing professional services group located in six major cities across
India. We specialise in providing sound business and tax guidance and accounting services to international
companies that are currently conducting or initiating business in India as well as those expanding overseas. We
serve over 1200 active clients including multinationals, companies listed on exchanges, privately held and
family-owned businesses from more than 45 countries.
From consulting on entry strategies to implementing business set-up and M&A transactional support, the SKP
team assists clients with assurance, domestic and international tax, transfer pricing, corporate services, and
finance and accounting outsourcing matters, all under one roof. Our team is dedicated to ensuring clients
receive continuity of support, right across the business lifecycle.
Contact
Mumbai
19, Adi Marzban Path
Ballard Estate, Fort
Mumbai 400 001
T: +91 22 6730 9000
Chennai
Office No. 3, Crown Court
128 Cathedral Road
Chennai 600 086
T: +91 44 4208 0335
Pune
VEN Business Centre
Baner–Pashan Link Road
Pune 411 021
T: +91 20 6720 3800
Bengaluru
Office No. 312/313, Barton Centre
Mahatma Gandhi Road
Bengaluru 560 001
T: +91 80 4140 0131
Hyderabad
6-3-249/3/1, SSK Building
Ranga Raju Lane
Road No. 1, Banjara Hills
Hyderabad 500 034
T: +91 40 2338 6912
Toronto
269 The East Mall
Toronto
ON M9B 3Z1
Canada
T: +1 647 707 5066
New Delhi
B-376
Nirman Vihar
New Delhi 110 092
T: + 91 11 2242 8454
www.skpgroup.com
Connect with us
[email protected]
www.linkedin.com/company/skp-group
www.twitter.com/SKPGroup
www.facebook.com/SKPGroupIndia
http://goo.gl/NF29sj
Subscribe to our alerts
Disclaimer
The contents herein are solely meant for communicating information and not as professional advice. It may
contain confidential or legally privileged information. The addressee is hereby notified that any disclosure, copy,
or distribution of this material or the contents there of may be unlawful and is strictly prohibited. Also the
contents can not be considered as any opinion/advice and should not be used basis for any decision. Before
taking any decision/advice please consult a qualified professional advisor. While due care has been taken to
ensure the accuracy of the information contained herein, no warranty, express or implied, is being made by us as
regards the accuracy and adequacy of the information contained herein. SKP Business Consulting LLP shall not
be responsible for any loss whatsoever sustained by any person who relies on this material.
© 2015 SKP Business Consulting LLP. All rights reserved.