E-commerce players may also be forced to give up the word "exclusive" when they launch products such as smartphones on their platforms, as the rules mandate that an online retailer can not push vendors to "sell any product exclusively on its platform only".
As a result, the entire range of AmazonBasics products - which includes everything from batteries to laptop cases to camera tripods - are now unavailable across the country.
Some products began to disappear from Amazon India, including Echo speakers, Presto home cleaning goods, and other AmazonBasics products. Previously, some of these products were available for delivery within a day or two.
"There is much uncertainty as to what the impact of the government rule changes is going to have on the e-commerce sector but we are still evaluating it".
Industry sources have said the new rules will dent foreign investor sentiment and force the big online retailers to change their business structures, raising compliance costs.
Such arrangements will be barred under the new policy.
Amazon.com Inc. and Walmart Inc. suffered a blow in India, the next frontier of e-commerce, when the government rejected requests to defer a deadline requiring online retailers to comply with tighter new rules starting on Friday.
"We believe that policy should be created in a consultative, market-driven manner and we will continue to work with the government to promote fair, pro-growth policies", Rajneesh Kumar, senior vice president & chief of corporate affairs, said in a statement.
After weeks of lobbying with the erstwhile Department of Industrial Policy and Promotion (DIPP), NITI Aayog, finance ministry officials and Commerce Minister Suresh Prabhu, Amazon India and Flipkart lost the battle to traders and wholesalers who were vehemently against deadline extention. Various trader bodies had also alleged that these entities were giving preferential treatment to certain sellers.
Another rule blocks entities in which an e-commerce firm, or any of its group companies, owns a stake from selling its products on that firm's marketplace. They had also written to the government stating that they need more time to understand the details of the framework.
But the group wants the government to go further by forming a new regulatory authority and a "special investigation team" to look into the business models of major e-commerce players. According to a CRISIL report, almost 35-40 per cent of e-retail industry sales amounting to Rs 40,000 crore could be impacted due to the tightened policy.
In late December, India modified rules around foreign direct investment (FDI) in e-commerce.
According to a quick estimate, more than 400,000 items that account for almost a 3rd of Amazon's $6 billion in annual sales in India will probably disappear at least temporarily from the company's service in India. Amazon had committed an investment of over United States dollars 5 billion, while Walmart made its biggest bet pumping in USD 16 billion for 77 per cent stake in Flipkart.