The Department of Economic Affairs under the Ministry of Finance has amended India’s Foreign Direct Investment (FDI) rules to allow e-commerce entities with foreign investment to maintain inventory exclusively for export purposes.
Under the revised provision, such entities can hold and sell inventory comprising goods manufactured or produced in India, provided the goods are exported in accordance with the Foreign Trade Policy (FTP) 2023, the Handbook of Procedures and applicable foreign exchange regulations.
The amendment was notified on September 2 through an addition to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The government has clarified that existing restrictions on inventory-based e-commerce retailing continue to apply to domestic sales.
The provision states that restrictions governing the Business-to-Consumer (B2C) and inventory-based models will not apply when goods or products are sold through e-commerce for export.
According to Amit Agarwal, Senior Partner at Nangia & Co LLP, the amendment enables an FDI-invested e-commerce entity to hold and sell its own inventory of Indian-origin goods, provided the final destination is an export market rather than domestic consumption.
Agarwal said the move serves a dual policy objective by enabling inventory-based e-commerce models for exports while retaining restrictions on domestic B2C inventory sales. He noted that the change could support Indian manufacturers in expanding their global reach through FDI-backed e-commerce platforms.
However, entities using the exemption will need to demonstrate that the goods are of Indian origin, exported in accordance with the FTP, and that export proceeds are realised and reported as required under FEMA’s export regulations.
Agarwal cautioned that any non-compliance or diversion from the prescribed framework could attract FEMA-related implications applicable to inventory-based e-commerce restrictions.
