Finance Ministry notifies norms allowing ecommerce firms to maintain inventory only for exports

The Finance Ministry has announced new Foreign Direct Investment (FDI) norms, permitting ecommerce firms to maintain inventory solely for export purposes. This means these firms can only sell goods manufactured or produced in India, and they cannot use inventory-based models for domestic consumer sales. The Department of Economic Affairs under the Finance Ministry added these provisions to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, effective as of September 2.

According to the notification, e-commerce businesses can engage exclusively in an inventory-based model for exporting goods or products made in India, following the Foreign Trade Policy 2023, the Handbook of Procedures, and the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015.

The move is aimed at supporting Indian manufacturers to scale globally through FDI-backed platforms while maintaining strict controls on inventory-based models for domestic B2C sales. Amit Agarwal, a Senior Partner at Nangia & Co LLP, explained that an FDI-invested ecommerce entity can now manage its own inventory of Indian origin goods, provided the end-use is export and not domestic consumption.

To qualify for this exemption, the ecommerce firm must ensure that each transaction meets the criteria of Indian origin, export under the Foreign Trade Policy, and that export proceeds are appropriately reported under FEMA regulations. Failure to adhere to these conditions could result in the same penalties as current restrictions on inventory-based models for ecommerce.