INTRODUCTION

The Department for Promotion of Industry and Internal Trade (“DPIIT”) carved out an exception by allowing foreign investment in export-oriented inventory-based e-commerce entities under the foreign direct investment (“FDI”) framework by issuing a Press Note 3 (2026 Series) on July 23, 2026.¹. The Directorate General of Foreign Trade (“DGFT”) has issued a notification to mechanise the policy shift through Notification bearing No. 27/2026-27² and Public Notice No. 25/2026-27³, both dated August 5, 2026. The DGFT has inserted the Inventory-based Cross-border E-Commerce Facilitation Framework (“Framework”) into the Foreign Trade Policy, 2023⁴ (“FTP”) and its accompanying Handbook of Procedures, 2023 (“HBP”)⁵. This article examines the mechanics of the Framework and what it means for foreign-funded platforms and Indian sellers.

BRIEF BACKGROUND

Under the Consolidated FDI Policy, foreign investment in the inventory-based model of e-commerce had remained prohibited since the original 2016 clarifications⁶ on the sector. Only the marketplace model, where the platform merely connects buyers and sellers, has been open to up to 100 percent FDI, subject to conditions on vendor concentration and control over pricing and inventory. On July 23, 2026, DPIIT issued Press Note No. 3 (2026 Series), inserting a new provision into the FDI Policy that exempts export of goods through e-commerce from the restrictions otherwise applicable to inventory-based models. The exemption applies only where the goods manufactured or produced in India are being exported, leaving the domestic business-to-consumer prohibition untouched. Our detailed analysis of the Press Note 3 (2026 Series) can be found here.

Both notifications issued by the DGFT took effect immediately. The notifications identify two participants in every export transaction under the Framework, an Exporter-on-Record (“EOR”) and a Seller-on-Record (“SOR”). The EOR is a separate legal entity incorporated for this purpose, holding a valid Importer-Exported Code and Goods and Service Tax Registration and registered with DGFT under the Framework that procures Indian-origin goods, holds export inventory, and carries out the export in its own name. The SOR is an entity registered in India holding valid Goods and Service Tax Registration which supplies goods produced in India to EOR against EOR’s confirmed export-orders, for the purpose of export to buyers located outside India. 

KEY FEATURES OF THE FRAMEWORK

1. Registration through Form ANF-9A

An entity seeking to act as an EOR shall make an application with DGFT in Aayaat Niryaat Form (ANF) 9A, disclosing its Import-Export Code, GST registration, ownership structure, existing export operations, warehouse locations and its relationship with the associated e-commerce platform.

Any material changes to these particulars after obtaining the registration shall be intimated to the DGFT in revised Form ANF 9A, and the DGFT examines whether EOR continues to satisfy the conditions mentioned under the Framework.

2. Procurement against the Confirmed Export Orders

The Framework does not permit an EOR to build up export inventory in anticipation of demand. Goods may be procured from an SOR only against a confirmed export order already placed by an overseas buyer. This is a deliberate restriction meant to prevent speculative stockpiling and to provide relaxation only under this policy strictly to genuine export activity.

3. Segregation and traceability

Export inventory procured under the Framework has to be maintained separately. The EOR is required to keep digital records that link procurement, GST invoices and export documentation for each consignment, so that the movement of goods can be traced end to end by the authorities.

4. Payment to SOR and Export Rebate and Refunds 

EOR must pay the SOR within 7 days of accepting the goods, regardless of whether the overseas buyer has paid or whether the goods are later returned. The EOR can claim applicable export rebates/refunds under the FTP and related regulations. 

Once the rebates/refunds are received, the EOR must pass them on to the SOR in proportion to the Free On Board (“FOB”) value of their goods included in the shipment. The EOR may deduct an agreed administrative charge before making this payment. This obligation to pass on the benefits arises only after the EOR has actually claimed the relevant rebates/refunds.

5. Reverse Logistics and Returned Consignments:

The EOR will be responsible for managing the entire process when goods are returned or rejected by the overseas buyer and EOR shall also bear all costs relating to bringing the goods back.

The returned or rejected goods cannot be sold or supplied in the Indian domestic market by the EOR, either directly or through any third party.

EOR shall return to the SOR any goods that do not meet the required description, specifications or quality parameters, generally within 7 days of acceptance or deemed acceptance.

Returned or rejected consignments received from overseas buyers must then be re-exported, returned to the SOR, or destroyed/disposed of, as agreed between the parties, within 30 days of receipt in India.

The commercial terms for dealing with such consignments — including cancellation, return or rejection of export orders, repair, re-export, destruction or disposal — must be clearly specified in the agreement between the SOR and EOR. These terms are required to be fair, transparent and verifiable.

6. EOR obligations throughout the export lifecycle

Once inventory is designated for export, the EOR takes on responsibility for the entire transaction. This spans customs clearance and shipping, compliance with the destination country's testing, certification, labelling and product registration requirements, claiming of eligible export incentives, and, where goods are rejected or returned by the overseas buyer, management of reverse logistics including re-export, return to the SOR, or disposal as permitted.

7. Ongoing compliance and dispute resolution

Registration is not the end of the compliance exercise. An EOR must obtain an annual compliance certificate from an eligible professional, retain operational records for five years, and continue to preserve those records even after its registration is cancelled or surrendered. Disputes between an EOR and an SOR may be taken to the DGFT Regional Authority with jurisdiction over the SOR's place of business, which is expected to attempt resolution within thirty days and may refer unresolved matters to DGFT headquarters. Importantly, this mechanism sits alongside, and does not take away, an SOR’s statutory rights under the Micro, Small and Medium Enterprises Development Act, where applicable.

STRATEGIC IMPLICATIONS FOR STAKEHOLDERS

For Indian Sellers/MSMEs: The Framework enables the Indian sellers, particularly MSMEs, to access global markets without having to independently manage warehousing, global shipping, customs and other export related compliances. By partnering with a well-capitalised, foreign-invested platform, sellers can focus on manufacturing and sourcing while the platform manages the export process.

This can reduce the SOR infrastructure and working-capital requirements, improve cash-flow predictability through defined payment timelines, and provide access to the platform’s global customer base, technology and logistics network of EOR. SOR can also benefit from export rebates and refunds, which are passed through based on the FOB value of their goods, after the permitted administrative charge. 

For Global E-commerce Platforms: Framework allows EOR Platforms with foreign investment to establish dedicated export verticals, moving beyond the limitations of the pure marketplace model to provide integrated fulfilment solutions for Indian goods. They can aggregate products from multiple sellers and manage warehousing, logistics, export documentation and reverse logistics, creating an end-to-end export solution.

Overall, the Framework can benefit both sides. SOR get easier and more cost-effective access to international markets, while EOR can build a scalable export business leveraging their global customer base and logistics infrastructure.

CONCLUSION

Press Note No. 3 (2026 Series) only notified the opening of access to foreign capital to export-oriented inventory-based e-commerce. The DGFT’s Notification and Public Notice provided the structure to function, who bears responsibility when something goes wrong, and how an Indian supplier is protected once its goods leave its own custody. The emphasis on confirmed-order procurement and strict segregation of export inventory suggests the government has pre-emptively prevented routes by which the exemption could be used to indirectly service the domestic market. The seller-facing safeguards ensure the interests of domestic suppliers especially MSMEs and other entities with lower bargaining power are protected by providing protection on payment terms and rebates.

For Indian manufacturers, artisans and MSMEs, it opens a formal channel to reach overseas buyers through organised fulfilment networks, with statutory backing for timely payment that informal arrangements with export intermediaries have not always guaranteed.

¹Available at: https://www.dpiit.gov.in/static/uploads/2026/07/ceb0cae74fd4e83094dc6b50c3d53f92.pdf (Last accessed on August 4, 2026)

²Available at: https://content.dgft.gov.in/Website/dgftprod/c6898e09-daac-4df8-a981-d3124f047547/Notif%2027%20-%20English.pdf (last accessed on August 19, 2026)

³Available at: https://content.dgft.gov.in/Website/dgftprod/a0a2dcc6-b0f7-4b4d-8163-abbe3e404689/PN 25- English.pdf (last accessed on August 19, 2026)

⁴Available at https://www.dgft.gov.in/CP/?opt=ft-policy (Last accessed on August 19, 2026)

⁵Available at: https://content.dgft.gov.in/Website/dgftprod/e1cb52ea-0c3a-4c2a-8cd7-dd992e9bdc98/HBP_2023.pdf (Last accessed on August 19, 2026)

⁶Available at https://www.dpiit.gov.in/static/uploads/2025/07/551a1ef3a4a5257343ffe276ada52c7b.pdf (last accessed on August 19, 2026)