Typically, retail is understood to be the sale of goods to end users, not for resale, but for use and consumption by the purchaser. The retail transaction is at the end of the supply chain. Interestingly, courts in India have defined the term ‘retail’ as a sale for final consumption in contrast to a sale for further sale or processing (i.e. wholesale). The government of India has revised its foreign direct policy (FDI Policy) to allow foreign direct investment (FDI) in the retail sector subject to certain conditions. Some of the key changes to the whole sale sector are discussed in the paragraph below:
The FDI Policy allows 100 % FDI in entities engaged in the business of wholesale cash and carry however, per the FDI Policy, to determine whether the transaction is wholesale or retail would depend on the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would mean the sale of goods to retailers, industrial, commercial, other professional business users or to other wholesalers, but not for personal consumption. The FDI Policy also lists a number of ‘valid business customers’ with whom wholesale transactions can be entered into (besides the Government). These entities should have relevant tax and business registrations. It is expressly clarified that a wholesale trader cannot open retail outlets, whereby sales will be made to the customer directly. Under the existing FDI Policy, wholesale deals would be permitted among companies of the same group. However, such wholesale trade to group companies taken together should not exceed 25 percent of the total turnover of the wholesale venture.