Central Government Enacts E-Commerce Export Framework
On August 5, the Central government announced the activation of an inventory-based cross-border e-commerce export framework, as outlined in the Foreign Trade Policy (FTP) for 2023.
This newly established framework aims to furnish a thorough policy and procedural infrastructure that will facilitate the export of goods produced in India through inventory-based e-commerce.
The government asserts that this initiative will empower exports while safeguarding the interests of Indian sellers.
As articulated in the statement: The exponential growth of cross-border e-commerce represents a remarkable opportunity for Indian manufacturers, artisans, and micro, small, and medium enterprises (MSMEs) to tap into global markets.
Following the amendments to the Foreign Direct Investment (FDI) Policy, specifically Press Note No. 3 (2026 Series), which allows inventory-based e-commerce operations solely for exports, the government has now initiated the corresponding regulatory structure under the Foreign Trade Policy.
Under this framework, qualifying e-commerce entities are permitted to engage in export-only inventory operations via a registered Exporter-on-Record (EOR).
This EOR will source products from Indian Sellers-on-Record (SORs) based on confirmed international orders, conduct exports under its own name, and assume responsibility for export documentation, customs setup, compliance with destination-country regulations, packaging, labeling, logistics, and reverse logistics.
The government remarked that this arrangement will grant Indian manufacturers, artisans, and MSMEs enhanced access to international markets while alleviating the compliance complexities associated with exports.
Furthermore, sellers are assured timely payments within designated timelines, regardless of the payment schedules of overseas buyers. Additionally, they will have visibility into the final sale price, order status, and shipment tracking for their products.
This framework encompasses safeguards to ensure that e-commerce export advantages benefit Indian manufacturers and MSMEs.
The procurement of export inventory is constrained to confirmed export orders, disallowing speculative inventory accumulation. The inventory must be distinctly monitored, digitally traced, and cannot be redirected for domestic sales.
Moreover, export rebates and refunds are mandated to be allocated to Sellers-on-Record in proportion to the free-on-board (FOB) value of their goods.
Returned or rejected shipments must be re-exported, returned to the seller, or disposed of under specified protocols.
Annual compliance certification and the upkeep of digital records are required to enhance transparency and regulatory scrutiny.
The statement further indicated, “This framework is anticipated to facilitate increased participation of Indian manufacturers, traders, and MSMEs in global e-commerce supply chains by affording access to organized fulfillment networks while ensuring transparency, timely payments, effective pass-through of export benefits, and robust regulatory oversight.”
Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), noted that the new framework permits foreign-funded e-commerce firms to maintain inventories of Indian-made products exclusively for export under a distinct legal entity identified as an Exporter-on-Record (EOR).
He emphasized that Indian suppliers, recognized as Sellers-on-Record (SORs), must be GST-registered and can only provide goods of Indian origin.
Srivastava mentioned that the Directorate General of Foreign Trade (DGFT) could issue separate notifications regarding products that will be ineligible under this framework.
He urged caution, stating that while MSMEs will continue as domestic suppliers receiving payments in rupees, the e-commerce companies will possess ownership of and export their products.
He compared this arrangement to the existing export-house model, under which smaller companies provide goods to export houses for international sales, suggesting that the alteration in FDI policy may have been unnecessary.
Additionally, it is important to recognize that although the current relaxation pertains only to exports, it sets a precedent for foreign-funded e-commerce firms to own inventory.
“In due course, this could create pressure to extend this model to domestic sales, paving the way for inventory-based e-commerce across all transactions,” he cautioned.
The relaxation of FDI regulations declared via Press Note 3 will be effective only following the requisite amendments to the Foreign Exchange Management Act (FEMA) framework and the Non-Debt Instruments Rules, implying that full implementation remains pending.
Source link: Moneycontrol.com.
