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India has introduced an important change in its e-commerce foreign direct investment (FDI) rules. Under the new framework, foreign-invested e-commerce companies can now hold inventory of Indian-made products specifically for export purposes.
This is a major change because India has traditionally restricted FDI in inventory-based e-commerce for domestic retail. The new rule creates a limited exception aimed only at boosting exports from India.
What was the rule earlier?
India broadly follows two e-commerce models: the marketplace model and the inventory-based model.
In the marketplace model, an e-commerce platform connects buyers and independent sellers without owning the products itself. Foreign investment is permitted in this model subject to applicable conditions.
In an inventory-based model, the e-commerce company purchases or owns the products and then sells them to customers. Foreign investment in this model has generally been restricted for domestic business-to-consumer e-commerce.
The new policy now allows foreign-invested e-commerce companies to use the inventory model where the products are being exported from India.
What rule has changed?
Under the new framework, an FDI-backed e-commerce company can purchase, hold and export products that are manufactured or produced in India.
For example, an international e-commerce company may receive an overseas order for Indian handicrafts, garments, jewellery or other locally manufactured products. It can purchase those products from an Indian seller, temporarily hold the inventory and export the goods to the overseas customer.
However, this relaxation applies only to exports. It does not generally allow foreign-funded e-commerce businesses to operate an inventory-based retail model for Indian customers.
Want to know how India’s export rules have changed and how these changes could benefit your business? Click here to read the full article.
Exporter-on-Record Registration Is Required
One of the key requirements under the new framework is registration as an Exporter-on-Record (EOR).
The EOR is the entity responsible for carrying out the export and complying with the applicable regulatory requirements.
The entity must have a valid Import Export Code (IEC), GST Identification Number (GSTIN) and the required registration with the Directorate General of Foreign Trade (DGFT).
The EOR can also help manage important export activities such as customs procedures, export documentation, packaging, labelling, testing, certification, logistics, fulfilment and reverse logistics.
This can significantly reduce the export burden on smaller Indian manufacturers and MSMEs.
A separate legal entity is also important
The framework says these export operations are to be carried out through a separate legal entity incorporated for this purpose.
When registering or modifying its EOR registration, the entity must disclose its shareholding structure and its ownership/control relationship with the e-commerce company.
This gives the government visibility over who actually owns and controls the export operation.
Inventory Can Be Purchased Only Against Confirmed Export Orders
The government has also introduced safeguards to prevent misuse of the new relaxation.
E-commerce companies cannot simply buy large quantities of Indian products and hold them as speculative inventory.
Products can be purchased from Indian sellers only against confirmed overseas export orders.
For example, if an overseas customer orders 1,000 products, the EOR may purchase those products from the Indian manufacturer and export them. However, buying large quantities without confirmed export demand and storing them for future sales would not be permitted under this framework.
Export Inventory Must Remain Separate
Goods purchased under this arrangement must be clearly identified and kept separate from other inventory.
Companies must maintain proper digital records and traceability of the goods.
Most importantly, products purchased for export cannot later be diverted and sold in India’s domestic market.
The framework also requires the export operations to be carried out through a separate legal entity incorporated for this purpose, with appropriate disclosure of its ownership and control structure.
Why is the Government making this change?
The main objective is to increase India’s e-commerce exports and make it easier for Indian manufacturers, MSMEs and artisans to reach international customers.
Many small businesses have good products but may not have the infrastructure, regulatory knowledge or logistics network required to manage international exports.
Large e-commerce businesses already have global customers, technology and logistics capabilities. The new framework allows them to act as a bridge between Indian manufacturers and international buyers.
In simple terms, the new system can work as:
Indian Manufacturer → Registered EOR/E-Commerce Company → International Customer
The policy therefore creates a new opportunity for global e-commerce companies while also helping Indian businesses access international markets more easily.
How Mercurius Can Help
If you are a foreign e-commerce company planning to source and export Indian-made products, Mercurius can help you understand the applicable FDI, DGFT, IEC, GST and compliance requirements. From setting up the right entity to supporting registrations and ongoing regulatory compliance, our team can help make your India export journey simpler and more structured.
Planning to start or expand your e-commerce export operations from India? Contact Mercurius today.
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DGFT Notification No. 27/2026-27
https://www.dpiit.gov.in/static/uploads/2026/07/ceb0cae74fd4e83094dc6b50c3d53f92.pdf
