Foreign E-Commerce Companies Can Now Stock Indian Goods For Exports

 

 

New Delhi: In a move aimed at boosting exports through e-commerce, the government on Wednesday notified rules permitting e-commerce companies, including foreign funded ones, to stock Indian-origin goods in their inventories, but solely for overseas shipments.

The Directorate General of Foreign Trade (DGFT) notification implements the Foreign Direct Investment (FDI) policy changes announced by the Department for Promotion of Industry and Internal Trade (DPIIT) last month, and prescribes a separate Exporter on Record (EOR) mechanism for such exports. Micro, small and medium enterprise (MSME) owners see this as a landmark reform.

 

According to report published on this new notification by Global Trade Research Initiative (GTRI), e-commerce companies cannot buy goods merely to build inventory for possible future demand. The EOR can acquire ownership of goods only after receiving a confirmed order from an overseas buyer. Export goods must be kept separate and digitally linked to the seller, overseas order and export documents.

 

The report further adds that the EOR must pay the Indian seller within seven days of accepting the goods. Payment cannot be delayed because the foreign buyer has not paid, or has returned the product. The EOR can claim export benefits such as Duty Drawback, RoDTEP (Remission of Duties and Taxes on Exported Products) and RoSCTL (Rebate of State and Central Taxes and Levies).

 

These benefits must be shared among sellers according to the FOB value of their goods shown in the shipping bill. The EOR may deduct an administrative charge. GST refunds will remain with the EOR, while advance authorisation and Export Promotion Capital Goods (EPCG) benefits are not covered by the sharing requirement.

Talking about its impact GTRI stressed that e-commerce firms should act as third-party platforms that help MSMEs reach overseas buyers, while the MSMEs remain the exporters. Under the new framework, however, MSMEs will remain domestic suppliers even when their products receive export orders through an e-commerce firm’s website. They will be paid in rupees, while the e-commerce company will own and export the goods.

 

GTRI founder Ajay Srivastava said the new policy is broadly similar to DGFT’s existing export-house model, under which small firms supply goods to export houses for overseas sale. E-commerce companies were already free to use this arrangement, so a change in the FDI policy may not have been necessary.

The new FDI relaxation raises a larger concern. Although currently limited to exports, it establishes the principle that foreign-funded e-commerce companies (Read American) may own inventory. Soon, this could create pressure to extend the same model to domestic sales, opening the door to inventory-based e-commerce across all transactions, added Srivastava.

Talking further on the same with ETV Bharat, Vinod Kumar, President, India SME Forum said, "The DGFT notification implementing the export-only inventory model is a landmark reform for India's MSMEs. There is already a buzz of excitement among our 13 lakh-plus members and subscribers. For most MSMEs, the biggest barrier to exports has never been manufacturing capability, it has been access to global markets, customers, logistics and export infrastructure. This reform fundamentally lowers that barrier."

He added that by allowing foreign funded e-commerce companies to procure, own and export 'Made in India' products, MSMEs can focus on what they do best, manufacturing high-quality products, while leveraging world class global distribution, fulfilment and customer networks. It gives thousands of small enterprises a powerful incentive to evolve from being local sellers into globally competitive manufacturers.

 

"We believe this has the potential to bring lakhs of new MSMEs into the export ecosystem, improve manufacturing capacity utilisation, generate employment, increase export competitiveness and integrate Indian enterprises more deeply into global supply chains," said Kumar.

He added, "If complemented by easier access to finance, quality certification, digital onboarding and export readiness support, this reform could become one of the most significant catalysts for MSME led export growth in recent years."