DGFT Introduces India's First Inventory-Based Cross-Border E-Commerce Export Framework: A Landmark Reform for Digital Exports

On 5 August 2026, the Directorate General of Foreign Trade (DGFT), Ministry of Commerce & Industry, issued Notification No. 27/2026-27, introducing a new Inventory-based Cross-border E-Commerce Facilitation Framework under the Foreign Trade Policy (FTP) 2023. The notification represents one of the most significant policy reforms for India's e-commerce export ecosystem. Until now, India's foreign direct investment (FDI) framework largely permitted cross-border e-commerce exports through marketplace models. The newly introduced framework formally recognizes and regulates an inventory-based export model, enabling eligible entities to procure goods from Indian manufacturers and sellers, maintain export-designated inventory, and sell directly to international customers. The reform is expected to significantly strengthen India's e-commerce exports, improve market access for MSMEs, streamline export operations, and create a transparent framework balancing commercial flexibility with regulatory safeguards.

Background - Cross-border e-commerce has become one of the fastest-growing segments of international trade. Consumers worldwide increasingly purchase products directly through digital platforms, creating unprecedented opportunities for manufacturers and small businesses. India possesses a strong manufacturing base in sectors such as:

• Handicrafts
• Apparel
• Leather goods
• Home de cor
• Jewellery
• Engineering products
• Health and wellness products
• Consumer goods

However, many Indian sellers lack the expertise, logistics capability, international marketing infrastructure, and regulatory compliance systems necessary for exporting directly. The newly introduced framework seeks to bridge this gap by allowing specialized entities to undertake export functions on behalf of domestic suppliers while maintaining clear legal responsibility for exports.

Introduction of the Exporter-on-Record (EOR) - The cornerstone of the framework is the concept of the Exporter-on-Record (EOR). An Exporter-on-Record is an entity that:

• possesses a valid Import Export Code (IEC),
• possess a valid GST registration,
• is registered with DGFT under this framework,
• procures goods from one or more domestic suppliers,
• exports those goods to overseas buyers, and
• assumes responsibility for all export-related compliances.

Unlike traditional marketplace models where sellers directly export products, the EOR legally becomes the exporter responsible for customs documentation, shipping, logistics, export compliance, returns management, and claiming export incentives. Where an existing e-commerce company wishes to undertake inventory-based exports, the notification requires such activities to be carried out through a separate legal entity. Furthermore, the entity must disclose:

• its shareholding pattern,
• ownership structure, and
• relationship with the parent e-commerce platform.

This requirement enhances transparency while ensuring compliance with India's FDI policy.

Seller-on-Record (SOR) - The notification introduces another important participant, the Seller-on-Record (SOR). A Seller-on-Record is a GST-registered Indian business that supplies goods manufactured in India to the Exporter-on-Record against confirmed export orders. Unlike conventional exports where manufacturers often interact directly with overseas customers, the Seller-on-Record's role is confined to supplying goods domestically to the EOR. The EOR subsequently undertakes:

• international marketing,
• export documentation,
• customs procedures,
• shipping,
• customer service,
• overseas sales, and
• post-sale obligations.

This division of responsibilities substantially lowers the compliance burden for small businesses and manufacturers.

Export Inventory vs Domestic Inventory - One of the major innovations introduced by the framework is the legal distinction between Export Inventory and Domestic Inventory.

Export Inventory - Export Inventory refers to goods:

• procured against confirmed export orders,
• designated exclusively for exports,
• digitally identifiable,
• traceable throughout the export process.

Domestic Inventory - Domestic Inventory continues to refer to goods intended for sale within India's Domestic Tariff Area (DTA). This segregation prevents diversion of export inventory into domestic commerce and enables easier regulatory monitoring.

Confirmed Export Orders: No Speculative Inventory - An important safeguard introduced by DGFT is the prohibition on speculative inventory accumulation. Ownership of goods can transfer from the Seller-on-Record to the Exporter-on-Record only after a confirmed export order has been received from an overseas buyer. This provision prevents:

• inventory speculation,
• artificial stock transfers,
• misuse of export incentives,
• warehousing without actual export demand.

Consequently, inventory-based exports under this framework remain firmly linked to genuine export transactions.

Only Indian-Origin Goods Are Eligible - The framework clearly states that only goods of Indian origin qualify. Responsibility for declaring and ensuring origin rests with the Seller-on-Record. This ensures that:

• export incentives remain available only for Indian products,
• origin-related trade obligations are respected,
• international preferential trade commitments remain protected.

DGFT also reserves the authority to notify a list of ineligible products from time to time.

Digital Inventory Management and Traceability - To strengthen transparency, the framework imposes significant record-keeping obligations. The Exporter-on-Record must maintain:

• distinct identification of export inventory,
• physical segregation,
• digital inventory records,
• procurement records,
• inventory status,
• linkage with shipping documents,
• complete traceability.

Detailed operational procedures will be prescribed separately in the Handbook of Procedures. This digital repository is expected to facilitate customs verification, audits, incentive claims, and regulatory compliance.

Mandatory Payment Protection for Sellers - Perhaps the most business-friendly provision is the payment protection extended to domestic suppliers. The Exporter-on-Record must pay the Seller-on-Record:

• promptly after acceptance of goods,
• and in any event within seven days.

Most importantly, payment cannot be delayed because:

• overseas buyers have not yet paid,
• goods are returned,
• foreign customers cancel orders,
• any other event outside the seller's control.

This provision shifts commercial risk from small manufacturers to the Exporter-on-Record. For MSMEs, this significantly improves cash flow and reduces uncertainty associated with international trade.

Export Incentives and Revenue Sharing - The notification also establishes a structured mechanism for sharing export incentives. The Exporter-on-Record remains entitled to claim export benefits such as:

• Duty Drawback,
• RoDTEP,
• RoSCTL,
• other notified export incentive schemes.

However, these benefits cannot simply be retained by the Exporter.

Instead:

• export incentives must be apportioned among participating sellers,
• allocation is based upon the FOB value attributable to each seller's goods,
• only a reasonable administrative charge may be retained by the Exporter.

The remaining amount becomes Seller-attributable Export Benefits. This mechanism ensures that manufacturers also participate in the economic value generated by exports. However, the obligation to distribute incentives arises only after the Exporter-on-Record has actually received the export rebates or refunds.

Treatment of GST Refunds - The notification clarifies an important distinction. GST refunds obtained by the Exporter-on-Record remain the Exporter's entitlement. Unlike Duty Drawback or RoDTEP, GST refunds are not considered Seller-attributable Export Benefits. This clarification removes ambiguity regarding ownership of indirect tax refunds.

Reverse Logistics - Returns management is another major feature of international e-commerce. The framework assigns complete responsibility for reverse logistics to the Exporter-on-Record. Accordingly:

• returned goods remain under the Exporter's ownership,
• all reverse logistics costs are borne by the Exporter,
• returned products cannot be sold in the Indian domestic market.

The prohibition against domestic resale prevents misuse of export channels for introducing goods into the domestic market.

Encouragement to Use E-Commerce Export Hubs - The framework encourages Exporters-on-Record to use notified E-Commerce Export Hubs (ECEHs) wherever operationally feasible. These hubs are expected to provide integrated infrastructure for:

• customs clearance,
• warehousing,
• packaging,
• logistics,
• inspection,
• export facilitation.

Although utilisation is not mandatory, the policy clearly signals the Government's intention to build specialised export infrastructure for digital commerce.

Alignment with the FDI Policy - The notification closely aligns with the recent amendments made under the Consolidated FDI Policy. Rather than allowing unrestricted inventory-based exports through existing marketplace structures, the Government has introduced a carefully regulated model featuring:

• separate legal entities,
• disclosure requirements,
• inventory controls,
• export-only operations,
• traceability,
• incentive-sharing mechanisms.

This approach seeks to balance investment facilitation with regulatory oversight.

Expected Benefits - The framework has the potential to transform India's cross-border e-commerce ecosystem.

• For MSMEs - Small manufacturers can now access overseas customers without establishing export departments or mastering complex customs procedures.
• For E-commerce Companies - Platforms can build organised export operations using dedicated inventory structures while remaining compliant with FDI norms.
• For Consumers Abroad - International buyers are likely to experience improved product availability, quicker order fulfilment, and more reliable post-sale support.
• For the Government - Enhanced digital traceability, better compliance, and structured inventory management improve monitoring while reducing the scope for misuse of export incentives.

Potential Challenges - While the framework is progressive, implementation will require robust operational systems. Exporters may need to invest significantly in:

• inventory management technology,
• ERP integration,
• digital traceability,
• accounting systems,
• compliance processes,
• incentive distribution mechanisms.

The effectiveness of the framework will also depend on timely issuance of detailed procedures through the Handbook of Procedures.

Conclusion - DGFT Notification No. 27/2026-27 marks a significant evolution in India's export policy by formally introducing an inventory-based cross-border e-commerce model. The framework creates a balanced regulatory structure that promotes exports while safeguarding transparency, accountability, and compliance.

By defining the respective roles of Exporters-on-Record and Sellers-on-Record, mandating digital inventory traceability, ensuring timely payment to domestic suppliers, regulating the distribution of export incentives, and imposing strict controls over inventory and reverse logistics, the policy lays a strong foundation for the next phase of India's digital export growth.

As global online commerce continues to expand, this framework has the potential to accelerate India's participation in international e-commerce, empower domestic manufacturers; particularly MSMEs-and strengthen India's position as a trusted sourcing destination for global consumers.

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