Salient features of FDI in Multi Brand Retail Trading (MBRT)

MBRT means sale of different products of different brands through one platform. FDI in MBRT in all products is permitted upto 51% with Government approval and will require amongst others, compliance with the following:

1. Minimum Investment: Minimum amount to be brought in as FDI by Foreign Investor would be USD 100 million (INR 700 crores approx.);

2. Backend Infrastructure:

  • At least 50% of total FDI brought shall be invested in ‘backend infrastructure’ within 3 years of the first tranche of FDI;
  • ‘Back-End Infrastructure’ will include capital expenditure on all activities, excluding that on front-end units. For instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse, agriculture market produce infrastructure etc.;
  • Expenditure on land cost and rentals, if any, will not be counted for purposes of ‘backend infrastructure’.

3. Mandatory Procurement:

  • At least 30% of the value of procurement of manufactured/processed products purchased shall be sourced from Indian micro, small and medium industries, which have a total investment in plant & machinery not exceeding US $ 2.00 million (INR 14 crore approx.);
  • A period of 5 years has been given for meeting this requirement for the first compliance. The procurement requirement would have to be met, as an average of five years total value of the manufactured/processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis.

4. Location for Retail Stores

  • Retail sales location may be set up only in cities with a population of more than 10 lakh as per 2011 Census;
  • In addition to the above existing condition, retail sales outlets can now be set up in cities as per the decision of the respective State Governments;

5. No FDI in MBRT in NO GO States: Retails sales outlets may be set up only in those States/Union Territories which have agreed or agree in future, to allow FDI in MBRT under FDI policy. Following states have given their concurrence to allow FDI in MBRT:

  • Andhra Pradesh
  • Assam
  • Delhi
  • Haryana
  • Himachal Pradesh
  • Jammu & Kashmir
  • Karnataka
  • Maharashtra
  • Manipur
  • Rajasthan
  • Uttarakhand
  • Daman & Diu and Dadra and Nagar Haveli (Union Territories)

6. Unbranded Products: Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded.

7. Agricultural Products: First right to procure agricultural products will lie with the Government.

8. Self-Certification by Companies:

  • Companies to self-certify and ensure compliance of the stipulated conditions which could be cross checked as and when required;
  • Foreign investors are required to maintain accounts, duly certified by statutory auditors.

9. E-commerce: Retail trading, in any form, by means of e-commerce would not be permissible for companies with FDI, engaged in the activity of MBRT.

Author Bio

Qualification: CA in Practice
Company: Arora Chawla & Associates
Location: New Delhi, IN
Member Since: 23 Jul 2019 | Total Posts: 1

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