Fin Min notifies norms allowing e-commerce firms to maintain inventory only for exports
The Department of Economic Affairs notified an amendment to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, permitting FDI-backed e-commerce entities to operate an inventory-based model exclusively for exporting goods manufactured or produced in India.
The notification was issued on 2 September 2026, inserting a new entry (serial number 15.2.5) in Schedule I of the rules.
Exports under this exemption must comply with the Foreign Trade Policy 2023, the associated Handbook of Procedures, and the FEMA (Export of Goods and Services) Regulations, 2015.
Domestic B2C sales through an inventory-based e-commerce model continue to remain restricted for FDI-backed entities; the relaxation applies only to inventory held and sold for the export market.
E-commerce entities relying on the exemption must be able to demonstrate, transaction by transaction, that the goods are of Indian origin, exported in compliance with foreign trade policy, and that export proceeds are realised and reported in line with FEMA's export regulations.
Marketplace Model vs Inventory-Based Model of E-Commerce
India's FDI policy for e-commerce distinguishes between two business models based on who owns the goods sold. In a marketplace model, the e-commerce entity provides only a technology platform connecting independent buyers and sellers, without owning the inventory. In an inventory-based model, the e-commerce entity itself owns the inventory of goods or services and sells directly to consumers.
Key Details
- Under the Consolidated FDI Policy, 100% FDI is permitted under the automatic route for the marketplace model of e-commerce (B2B), subject to conditions.
- FDI in the inventory-based model of e-commerce for domestic retail sale to consumers has been expressly prohibited since Press Note 2 of 2018 (effective 1 February 2019), which amended paragraph 5.2.15.2 of the Consolidated FDI Policy.
- Press Note 2 of 2018 also introduced a "control" test: an e-commerce marketplace is deemed to control a vendor's inventory if 25% or more of that vendor's purchases come from the e-commerce entity or its group companies, and such vendors are barred from selling on that marketplace.
- The new amendment carves out a narrow exception to the inventory-based-model prohibition — but only for goods being exported, not for domestic B2C sale — leaving the core restriction against inventory-based FDI e-commerce for the Indian retail market unchanged.
This notification does not overturn the Press Note 2 (2018) prohibition on inventory-based e-commerce; it creates a specific, narrower export-only exemption within the existing FDI e-commerce policy architecture.
FEMA, 1999 and the Non-Debt Instruments Rules, 2019
The Foreign Exchange Management Act (FEMA), 1999 is the principal law governing foreign investment, external trade, and payments in India, replacing the earlier Foreign Exchange Regulation Act (FERA), 1973. Under FEMA, foreign investment rules are notified by the Central Government (Department of Economic Affairs, Ministry of Finance) through instruments such as the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules), which consolidated most FDI-related regulatory provisions.
Key Details
- FEMA, 1999 replaced FERA, 1973, shifting India's foreign exchange regime from one of criminal-law-style control to civil-law-style management, in line with post-1991 liberalisation.
- The NDI Rules, 2019 were notified under FEMA to govern equity and other "non-debt" foreign investment instruments, distinguishing them from debt instrument rules governed separately.
- Sector-specific FDI conditions (such as the e-commerce provisions in paragraph/entry 15.2 of Schedule I) are amended periodically through notifications like this one, without requiring a new Act of Parliament, since FEMA delegates rule-making power to the Central Government.
- FEMA violations are civil offences attracting monetary penalty (up to three times the amount involved, or ₹2 lakh where the amount cannot be quantified), enforced by the Directorate of Enforcement (ED) and the Reserve Bank of India — distinct from the criminal-law approach under the erstwhile FERA.
The amendment operates entirely through delegated rule-making under FEMA (via the NDI Rules), illustrating how India's FDI policy for specific sectors like e-commerce is modified administratively rather than through fresh legislation.
Foreign Trade Policy 2023 and Export Compliance Framework
The Foreign Trade Policy (FTP) 2023, notified by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry, sets out India's overarching framework for export and import regulation, incentives, and procedures, replacing the previous FTP (2015-20, extended).
Key Details
- FTP 2023 introduced a shift from incentive-based schemes toward a remission and entitlement-based, technology-driven, paperless trade facilitation approach, alongside continued support for export promotion.
- Compliance under the new e-commerce export exemption explicitly requires adherence to FTP 2023 and its Handbook of Procedures, tying the FEMA-side FDI relaxation to the trade-policy-side export compliance regime.
- The FEMA (Export of Goods and Services) Regulations, 2015 separately mandate realisation and repatriation of export proceeds within a prescribed period (generally nine months from the date of export, extendable), which the notification requires e-commerce entities to follow transaction-by-transaction.
By cross-referencing FTP 2023 and the 2015 Export Regulations, the notification ensures that the new inventory-based export exemption for e-commerce entities is anchored to India's existing export documentation and proceeds-realisation framework, rather than creating a standalone compliance regime.
- Notification date: 2 September 2026, by the Department of Economic Affairs, Ministry of Finance.
- Legal instrument amended: Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 — new entry inserted as serial number 15.2.5 in Schedule I.
- Governing Act: FEMA, 1999 (replaced FERA, 1973).
- Marketplace model e-commerce: 100% FDI allowed under automatic route.
- Inventory-based model for domestic B2C: FDI remains prohibited (per Press Note 2 of 2018, effective 1 February 2019); the 25% purchase threshold defines "control" over vendor inventory.
- New exemption scope: inventory-based model permitted only for export of goods manufactured/produced in India; domestic sale via this route remains barred.
- Cross-referenced compliance frameworks: Foreign Trade Policy 2023, its Handbook of Procedures, and the FEMA (Export of Goods and Services) Regulations, 2015.