In order to comply with the latest government FDI regulations, Amazon India’s own seller — Cloudtail is now going to stop selling mobile phones on the e-commerce platform. This was reported by ETTech citing four people aware of the development.

As per the newest government FDI norms, a single seller on an e-commerce platform cannot account for more than 25 percent of the total sales on the marketplace platform. Considering this new rule, the company has already stopped selling newly launched smartphones through Cloudtail.

Smartphones is one of the largest category for e-commerce platforms. It is a high value and high volume segment which contributes significantly towards the overall sales of the marketplaces in India.

In order to grow other categories on the platform, Cloudtail will now play the role of a strategic builder, report the sources. It will be focusing more on categories such as FMCG, lifestyle products and consumer electronics. As products under this categories have much lower unit value as compared to smartphones, the merchant will be able to comply with the cap suggested in the FDI norms.

A seller of Amazon India said to ETTech:

The easiest way for Cloudtail to comply with the FDI norms is to move out of high-value categories, especially smartphones, which is estimated to contribute more than half to its revenues. The process has started and Cloudtail is currently liquidating existing stock and has stopped sourcing mobile phones.

Amazon India’s lead seller — Cloudtail is a joint venture between Amazon Asia and Infosys founder Narayan Murthy’s personal investment firm Catamaran.

Amazon has been trying really hard to get a lead in the Indian market, which is one of the largest e-commerce markets in the world. After losing the battle in China, India seems to be the only hope for Amazon to build its empire in Asia. Recent reports have also suggested that the Indian e-commerce market is currently at a tipping point as the sales of Amazon have topped those of Flipkart’s in the month of July. Both are now relying on the humongous festival sales to bag more users and compete in sales figures.

While Amazon is complying with this new regulation guidelines, it is opposing the Goods and Service Tax, also called GST,  along with other e-tailers like Flipkart and Snapdeal. The GST bill actually proposes an indirect, national, value added tax to be implemented in the country starting from 1 April 2017. This tax will be levied on the manufacture, sale and consumption of goods and services throughout India. It will also replace most of the taxes levied by the central and state governments.

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