Draft e-commerce policy seeks to establish regulator and restrict data storage


Amazon, Flipkart, Facebook, YouTube and other companies that store or reflect Indian user data overseas will be subject to periodic audit, according to a soon-to-be-released draft e-commerce policy. E-commerce companies will have to make all the data sought by the government available within 72 hours or pay a penalty, depending on the draft, which ET has seen.

“The focus is more on promoting e-commerce as we’ve tried to move away from data localization,” an official said, drawing a distinction from last year’s plan that sought to impose controls strict rules on user information stored overseas.

The new draft policy proposes a regulator for the sector and an e-commerce law that limits the information these companies can store, use, transfer, process and analyze. It also empowers the government to review, investigate and take action against any e-commerce activity that threatens the country’s security. Country of origin and value added in India will need to be clearly specified by e-commerce entities for imports and exports respectively.

The Department for Promotion of Industry and Internal Trade (DPIIT) is finalizing the new draft e-commerce policy which provides regulations on issues such as security, public order, law enforcement, taxation and personal security, to enable the government to have quick access to data circulating on e-commerce platforms in the country, the official said.

“There is consensus on the outline of the draft policy, but the form it will take will be decided after it is approved by all and then submitted for public consultation,” the official added.

Safeguards for data storage

“For categories of data that may be stored/mirrored overseas, companies should ensure that adequate safeguards are in place at the specified data storage location through periodic comprehensive auditing,” according to the proposed policy. .

According to the draft, the government, in consultation with relevant stakeholders, will define the categories of e-commerce that will require mirroring or local storage of data. It proposes to prohibit cross-border flows of information relating to defence, medical records, biological records, cartographic data and genome mapping without proper authorization.

The draft policy made public last year had been criticized for being data-driven and seeking to impose strict conditions on cross-border information flows and payment and duration of data stored at the abroad, as well as the location of IT facilities in the country. It covered individual, national and sensitive data.

New areas covered

The new draft policy aims to bring online sellers who are currently offline and support them with computerization and enabling digital payment.

In a radical departure from the previous bill, the new bill proposes legislation that protects users under the age of 18 who are unable to enter into valid contracts with their e-commerce service providers and therefore at risk. because they cannot assert their rights against these companies.

According to the draft, payments made through tokens created by foreign e-commerce entities such as those providing live video streaming services will have to be routed through the Liberalized Remittance System (LRS), prepaid wallets or payment gateways. online authorized by the Reserve Bank of India.

“The new emerging regime may require new insurance offerings in the country that would cover the liability of e-commerce entities,” he said.

The new draft states that individuals cannot be required to pay companies to access their own data and that the government should not be required to do so to access this information. The previous project asked whether individuals and the government should pay private companies for this data.

Broader definition

According to the new draft, e-commerce includes buying, selling, marketing, distributing or providing access to goods, including digital products or services through any electronic network for a price. These can be business-to-consumer (B2C), business-to-business (B2B), e-commerce marketplaces, consumer Internet content platforms, application-based e-commerce, Internet of objects (IoT), services based on connected devices and a combination of none of these.

“Platforms for social interaction, search and sharing of information and provision of free services are e-commerce entities if their revenue model involves advertising on this portal or the sale, rental or use of visitor information collected during this service,” he said, adding that the policy will also apply to entities with foreign and domestic investments.

The previous draft had defined e-commerce as including the buying, selling, marketing or distribution of goods, including digital products and services. This can be done through an electronic network in which the delivery of goods, including digital products, and services can be done online or through the traditional banking channels of cheque, demand draft or cash. .

In both projects, the government has reserved the right to request disclosure of source code and algorithms, and obliges all such companies to have a registered business entity in India either as a registered importer or as an entity by which local sales are made.

“For products supplied by the e-commerce entity, liability for the counterfeit product rests jointly and severally with the e-commerce entity and the seller,” he said. An industry stakeholder group will be created that will identify “rogue e-commerce entities”, referring to platforms that host pirated content.

Export Promotion

The ministry recommended that the government establish dedicated e-commerce export promotion cells, e-commerce export zones and a “one-stop shop” for storage (including cold storage facilities), certification , testing labs, internal customs clearance and features to improve exports through expediting. processing export incentives, goods and services tax, tax incentives, input tax credit refunds and duty refunds.

States will be encouraged to forge institutional links with various e-commerce players to enable exports of Indian handicrafts, he said.

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