DGFT notifies FDI relaxation for e-commerce firms to hold Indian-made goods in inventory for exports

The new rules that permit e-commerce companies, including foreign-funded firms, to hold Indian-made goods in inventory exclusively for exports will turn operational soon.

The Directorate General of Foreign Trade (DGFT), in a notification issued on August 5, has implemented this revised foreign direct investment (FDI) policy of the government. The changes to the FDI policy was announced by the Department for Promotion of Industry and Internal Trade (DPIIT) through its Press Note No. 3 (2026 Series) on July 23.

Since the Press Note states that the FDI relaxation will take effect only after the corresponding FEMA notification, amendments to FEMA and the Non-Debt Instruments Rules are therefore still required for complete implementation.

Under the new framework, an e-commerce company covered by the amended FDI policy must conduct exports through a separate legal entity registered with DGFT as an Exporter-on-Record (EOR). The EOR must have an Importer-Exporter Code and GST registration. Indian suppliers will be called Sellers-on-Record (SORs). They must be registered under GST and can supply only Indian-origin goods.

However, e-commerce companies cannot buy goods merely to build inventory for possible future demand. The EOR can acquire ownership of goods only after receiving a confirmed order from an overseas buyer. Export goods must be kept separate and digitally linked to the seller, overseas order and export documents. The EOR must pay the Indian seller within seven days of accepting the goods. Payment cannot be delayed because the foreign buyer has not paid or has returned the product.

“Ideally, e-commerce firms should act as third-party platforms that help MSMEs reach overseas buyers, while the MSMEs remain the exporters. Under the new framework, however, MSMEs will remain domestic suppliers even when their products receive export orders through an e-commerce firm’s website. They will be paid in rupees, while the e-commerce company will own and export the goods”, explains Ajay Srivastava, founder of Delhi based think tank Global Trade Research Initiative (GTRI).

According to Srivastava, the new policy is broadly similar to DGFT’s existing export-house model, under which small firms supply goods to export houses for overseas sale. E-commerce companies were already free to use this arrangement, so a change in the FDI policy may not have been necessary. “The new FDI relaxation raises a larger concern. Although currently limited to exports, it establishes the principle that foreign-funded e-commerce companies (Read American) may own inventory. Soon, this could create pressure to extend the same model to domestic sales, opening the door to inventory based e-commerce across all transactions”, he cautions.