Finance Ministry notifies norms allowing ecommerce firms to maintain inventory only for exports
According to the Department of Economic Affairs notification, the ecommerce firms must export goods manufactured or produced in India.
The Department of Economic Affairs under the Finance Ministry has notified changes in Foreign Direct Investment (FDI) norms to allow ecommerce firms to maintain inventory only for export purposes.
These firms must export goods manufactured or produced in India. Also, FDI in inventory-based ecommerce retailing has not been permitted.
In a notification dated September 2, the department has added a provision to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.
"An e-commerce entity is permitted to engage in an 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.
As a result, the decision announced in July has now taken effect.
"The restrictions on Business to Consumer (B2C) and the inventory-based model of e-commerce stipulated under the provisions…shall not apply to the export of goods or products through e-commerce…," it said.
Commenting on the decision, Amit Agarwal, Senior Partner, Nangia & Co LLP, said an FDI-invested ecommerce entity can now hold and sell its own inventory of Indian-origin goods, so long as the end-use is export and not domestic consumption.
"This amendment achieves a dual policy objective. On one hand, it opens the inventory-based model exclusively for exports, giving Indian manufacturers a genuine push to scale globally through FDI-backed platforms. On the other hand, it keeps the inventory-model barrier firmly intact for domestic B2C sales, ensuring the protection built into India's e-commerce FDI policy for kirana stores and small retailers stays undiluted," said Agarwal.
He added that an ecommerce entity relying on this exemption must demonstrate, transaction by transaction, that goods are of Indian origin, exported under FTP (foreign trade policy), and that export proceeds are realised and reported as per FEMA's Export Regulations.
"Any leakages and slippages could attract the same FEMA implications as are applicable to current restrictions on inventory-based models," said Agarwal.