New rules allow foreign investment-backed ecommerce entities to hold Indian-origin inventory exclusively for exports while restrictions on domestic B2C sales remain unchanged
The Department of Economic Affairs under the finance ministry has notified changes to India’s foreign direct investment (FDI) rules, allowing ecommerce entities to operate an inventory-based model exclusively for exports. The amendment permits ecommerce entities to hold inventory of goods manufactured or produced in India for export, while the prohibition on foreign investment in inventory-based ecommerce retailing for the domestic market remains unchanged.
The Department of Economic Affairs notified the changes on 2 September through an amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, giving effect to the policy decision announced in July.
“An ecommerce entity is permitted to engage in inventory-based model of e-commerce exclusively for the export of goods or products manufactured or produced in India in accordance with the provisions of the Foreign Trade Policy 2023 read with the Handbook of Procedures (HBP) and the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015,” the provision says.
The notification further exempts ecommerce exports from restrictions applicable to business-to-consumer (B2C) sales and inventory-based ecommerce models. “The restrictions on Business to Consumer (B2C) and the inventory-based model of ecommerce stipulated under the provisions…shall not apply to the export of goods or products through ecommerce…,” it said.
Compliance Requirements Remain
However, entities using the exemption will continue to face transaction-level compliance requirements. Ecommerce companies will need to demonstrate that the goods are of Indian origin, exported in accordance with the Foreign Trade Policy, and that export proceeds are realised and reported under the Foreign Exchange Management Act (FEMA) export regulations, Agarwal said.
The amendment creates a separate pathway for foreign investment-backed ecommerce platforms to support exports while retaining existing restrictions on inventory-led retail sales in India.
