Law Updates

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Summary: India has made a specific change to its FEMA framework for e-commerce exports. The Ministry of Finance, through the Department of Economic Affairs, has notified the Foreign Exchange Management (Non-Debt Instruments) (Fourth Amendment) Rules, 2026 under S.O. 4870(E). The change adds a new serial number 15.2.5 to Schedule I of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Under this provision, an e-commerce entity can use the inventory-based model of e-commerce exclusively for exports of goods or products manufactured or produced in India.  There is, however, an important limit. This is an export-specific permission. It should not be read to mean that inventory-based e-commerce has been opened generally for domestic B2C sales. For exporters, Indian manufacturers and e-commerce businesses with foreign investment, that difference needs to be understood before the business model is changed. Summary of the FEMA E-Commerce Amendment 2026 The FEMA e-commerce amendment 2026 creates a specific exception for inventory-based e-commerce used for qualifying exports. The new rule says that an e-commerce entity may use an inventory-based model where: the activity is exclusively for export  the goods or products are manufactured or produced in India and  the export is carried out in accordance with the Foreign Trade Policy 2023, Handbook of Procedures and applicable FEMA export regulations.  The amendment also states that the B2C and inventory-based model restrictions referred to in serial numbers 15.2.1 to 15.2.4 will not apply to exports permitted under the new provision.  So, the change is better understood as a controlled export exception, not as the removal of the wider e-commerce restrictions. Notification at a Glance Particular Details Issuing Ministry Ministry of Finance Department Department of Economic Affairs Notification S.O. 4870(E) Rules Foreign Exchange Management (Non-Debt Instruments) (Fourth Amendment) Rules, 2026 Governing Law Foreign Exchange Management Act, 1999 Principal Rules FEMA (Non-Debt Instruments) Rules, 2019 Notification Date 2 September 2026 Gazette Date 3 September 2026 New Provision Serial No. 15.2.5 Business Model Inventory-based e-commerce Permitted Purpose Export Goods Covered Goods or products manufactured or produced in India Connected Framework FTP 2023, Handbook of Procedures and FEMA Export Regulations, 2015 Separate Future Deadline Not expressly specified The notification is dated 2 September 2026, while the Gazette carrying it is dated 3 September 2026. The rules state that they take effect from their publication in the Official Gazette.  What Is the FEMA (Non-Debt Instruments) Fourth Amendment Rules, 2026? The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 form part of the legal framework governing foreign investment in India. The 2026 amendment does not replace those rules. It changes one part of Schedule I by adding a new entry after serial number 15.2.4. That new entry is 15.2.5. Its purpose is narrow but commercially relevant. It gives an e-commerce entity room to use an inventory-based model for a particular type of activity: exporting India-made goods. This is why the amendment matters most to businesses operating at the meeting point of: foreign investment  e-commerce  exports  Indian manufacturing and  cross-border B2C sales.  The change should be read together with the rest of the e-commerce conditions already contained in the Non-Debt Instruments Rules. What Has Changed Under the FEMA E-Commerce Amendment 2026? The real change is not that all inventory-based e-commerce is now permitted. The Government has instead created a specific exception for export activity. Before relying on the provision, a business needs to separate two questions: 1. Is the business using an inventory-based model? An inventory-based model generally involves the e-commerce entity controlling or owning the inventory sold through its platform. 2. Is that inventory being used exclusively for qualifying exports? This is where serial number 15.2.5 becomes relevant. If the activity is being carried out for export of goods manufactured or produced in India, the new provision may apply, subject to the other conditions attached to it. Area Position Under Serial No. 15.2.5 What It Means for Business Inventory ownership Permitted for the covered export activity Export-focused inventory structures may be possible Nature of sale Export Domestic sales should not be assumed to fall within the exception Product origin Manufactured or produced in India Imported finished goods should not automatically be treated as covered B2C restriction Relaxed for exports permitted under 15.2.5(a) Cross-border consumer sales can fall within the exception Other export laws Continue to apply FEMA permission alone is not enough What Does New Serial Number 15.2.5 Actually Say? Serial number 15.2.5 has two parts. Both need to be read together. Clause 15.2.5(a): Inventory-Based E-Commerce for Exports Clause 15.2.5(a) gives the main permission. It allows an e-commerce entity to engage in the inventory-based model of e-commerce exclusively for exporting goods or products manufactured or produced in India.  Four things stand out. The permission is for an e-commerce entity. The provision is not drafted as a general export incentive available without reference to the e-commerce framework. It specifically deals with an e-commerce entity. The inventory-based model is permitted. This is the commercially relevant part of the change. For the export activity covered by the provision, the e-commerce entity can operate through an inventory-based structure. The activity must be exclusively for export. The word “exclusively” limits the scope. The amendment therefore should not be used as a basis to say that the same exception automatically covers domestic inventory-based retail. The goods must come from India. The covered goods must be manufactured or produced in India. The notification does not simply say “goods located in India” or “goods sold from India.” The manufacturing or production link is expressly stated. Clause 15.2.5(b): Existing Restrictions Do Not Apply to the Permitted Export The second part deals with the restrictions contained in serial numbers 15.2.1 to 15.2.4. It says that the restrictions relating to B2C activity and the inventory-based model of e-commerce under those entries will not apply to exports permitted under clause 15.2.5(a).  This is a targeted exemption. It does not say that serial numbers 15.2.1 to 15.2.4 have been deleted. It also does not say that the restrictions no longer apply in every situation. The exception follows the qualifying export activity. Who Can Use the Inventory-Based E-Commerce Model for Exports? The notification refers to “an e-commerce entity.” It does not separately provide: a minimum turnover  a minimum export value  a special capital threshold  a separate application form  a new licence  a new registration certificate or  a special approval procedure under serial number 15.2.5.  Businesses should therefore avoid assuming that the notification itself creates a new registration route. The provision is likely to be most relevant where an e-commerce business is operating within the foreign investment framework and wants to hold inventory for exports. Before using the model, the business should examine: Business structure Does the FEMA foreign-investment framework cover the entity? Nature of activity Is the inventory being used for export, rather than domestic retail? Product origin Are the goods manufactured or produced in India? Connected export laws Does the export comply with the Foreign Trade Policy, Handbook of Procedures and applicable FEMA export rules? A FEMA compliance consultant in India can be useful at this stage, where the company's foreign investment structure and proposed export model need to be reviewed together. Which Goods Are Covered Under the New E-Commerce Export Rule? The new rule is tied to one clear condition: the goods or products must be manufactured or produced in India. This is more specific than saying that the goods must be stored, packed or shipped from India. For example, merely bringing a foreign-made finished product into an Indian warehouse would not, by itself, prove that the product satisfies the wording used in serial number 15.2.5. Businesses relying on the provision should therefore look carefully at: where the goods are manufactured  where they are produced  how the sourcing records describe the goods  whether manufacturing records support the India-origin position and  whether any other applicable trade rule affects the product.  The notification itself does not prescribe a new origin certificate or a special format for proving this condition. That distinction should be preserved. A business may need records to support its position, but it should not be claimed that S.O. 4870(E) itself creates a new certificate requirement. Is Inventory-Based E-Commerce Now Allowed for Domestic Sales? No. The notification does not create a general permission for domestic inventory-based e-commerce. The language is specifically tied to exports. Clause 15.2.5(a) uses the expression “exclusively for the export”, while clause 15.2.5(b) limits the relaxation from existing restrictions to exports allowed under clause (a).  This means businesses should keep the following distinction clear: Export activity The new exception can apply where the conditions of serial number 15.2.5 are met. Domestic activity The notification does not say that existing restrictions have been removed for domestic inventory-based e-commerce. This is particularly important for businesses that intend to run both domestic and overseas sales from the same entity or inventory system. The structure should be reviewed carefully before assuming that one set of inventory arrangements can be used for both. Main Conditions for Using the Inventory-Based E-Commerce Export Model The amendment itself points to a small number of clear conditions. 1. The activity must relate to exports The permission is not drafted as a general e-commerce relaxation. 2. Goods must be manufactured or produced in India This is written directly into clause 15.2.5(a). 3. Foreign Trade Policy 2023 continues to apply The notification specifically refers to the FTP. That means an exporter still needs to consider the trade policy applicable to the goods and the export activity. 4. The Handbook of Procedures must also be followed The HBP works alongside the Foreign Trade Policy and deals with procedural aspects of export regulation. 5. FEMA export regulations continue to apply The amendment expressly refers to the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015.  The new e-commerce permission therefore does not remove foreign-exchange compliance from the export transaction. What Does the Amendment Mean for B2C E-Commerce Exports? This is one of the more useful parts of the change for cross-border e-commerce. B2C means a business selling directly to the final consumer. Serial number 15.2.5(b) specifically says that the B2C restrictions referred to in serial numbers 15.2.1 to 15.2.4 will not apply to exports permitted under clause 15.2.5(a).  In practical terms, an e-commerce entity operating within the new export exception may have more room to sell India-made goods directly to customers located outside India. But two ideas should not be mixed: cross-border B2C export and  domestic B2C retail.  The notification gives relief for the first category where the statutory conditions are satisfied. It does not generally liberalise the second. How Does the New Permission Interact with Existing E-Commerce Restrictions? The amendment itself tells us that serial numbers 15.2.1 to 15.2.4 already contain restrictions relating to B2C and inventory-based e-commerce. Instead of removing those provisions, the Government has added a new clause saying that those restrictions will not apply to the qualifying exports covered by serial number 15.2.5. The distinction can be understood like this: Issue Position Under the New Rule Existing e-commerce restrictions Continue to exist Inventory-based model Exception available for qualifying exports B2C restrictions Do not apply to qualifying exports under 15.2.5 Domestic inventory sales No general exemption stated Export of India-made goods Specifically covered FTP/HBP/FEMA export compliance Continues to apply This approach is narrower than completely rewriting the e-commerce framework. For businesses, that makes scope assessment one of the first compliance questions. What Remains Unchanged After the FEMA E-Commerce Amendment? The new rule is useful, but it does not wipe out the rest of the regulatory framework. The notification does not state that: all restrictions on inventory-based e-commerce have ended  domestic B2C inventory sales are now generally permitted  all FDI conditions relating to e-commerce have been removed  the Foreign Trade Policy no longer applies  FEMA export compliance has been waived  every product manufactured in India can automatically be exported  customs or sector-specific requirements have been removed or  a business can ignore other export laws once it satisfies serial number 15.2.5.  This makes the amendment more of a specific operating permission than a complete liberalisation of the sector. Effective Date of the FEMA Fourth Amendment Rules, 2026 The rules state that they come into force from the date of their publication in the Official Gazette.  There are three dates readers should not mix: Notification date: 2 September 2026  Gazette date: 3 September 2026  Commencement: date of publication in the Official Gazette  The Gazette itself records the issue as dated 3 September 2026.  No separate transition period or future compliance deadline is stated in this amendment. How Is Foreign Trade Policy 2023 Connected with the Amendment? Foreign Trade Policy 2023 is directly mentioned in serial number 15.2.5(a). That reference means the FEMA permission cannot be viewed in isolation. A business may satisfy the e-commerce model requirement under FEMA but still need to consider other questions under India's export framework, such as: whether the product can be exported  whether any DGFT condition applies  what export procedure is relevant  whether any product-specific restriction exists and  what documentation is required under the applicable export route.  The same applies to the Handbook of Procedures. For this reason, businesses may need both FEMA compliance services and DGFT compliance services when structuring a new inventory-based export operation. Impact on E-Commerce Exporters For e-commerce exporters, the biggest change is the ability to consider inventory ownership as part of a qualifying export model. That can affect how an exporter manages: Stock The entity can examine whether holding inventory for overseas orders is workable under the new rule. Order fulfilment Keeping goods ready for export may help businesses structure faster overseas fulfilment. Direct customer sales Clause 15.2.5(b) makes the rule relevant to B2C export models as well. Internal compliance Businesses operating both domestic and export channels may need stronger internal controls so that the export exception is not unintentionally applied to domestic transactions. Regulatory review FEMA, FDI, DGFT and product-specific export rules may need to be checked together rather than one by one. Impact on Indian Manufacturers and Made-in-India Brands The wording of the amendment gives Indian manufacturing a direct place in the new framework. The permitted goods must be manufactured or produced in India. That can be useful for: Indian manufacturers looking for overseas customers  MSMEs selling through online channels  Indian consumer brands developing international sales  exporters working with e-commerce companies  manufacturers supplying export-focused inventory and  direct-to-consumer brands targeting overseas buyers.  The commercial benefit is not automatic. Logistics costs, overseas demand, customs treatment and product regulation will still affect whether a particular export model works. Still, from a regulatory standpoint, the new clause gives businesses a clearer route to examine inventory-backed e-commerce exports of Indian products. Impact on Foreign-Invested E-Commerce Entities The amendment sits within the FEMA Non-Debt Instruments Rules, which makes it particularly relevant to businesses involving foreign investment. Such businesses should review at least three separate parts of their model. Foreign-investment position The ownership and investment structure of the entity should be checked against the applicable FEMA framework. Export operation The business should determine whether the inventory-based activity falls squarely within serial number 15.2.5. Domestic operation If the same entity also sells in India, it should not assume that the export exception automatically covers its domestic inventory arrangements. This is one area where an experienced FDI compliance consultant or FEMA compliance consultant in India can help businesses identify whether their proposed structure matches the legal exception. Benefits for E-Commerce Exporters For qualifying businesses, the change can offer practical flexibility. Better control over export inventory:  An entity may be able to hold stock specifically for overseas sales instead of working only as a marketplace intermediary. Faster export fulfilment:  Ready inventory can reduce the time between an overseas order and shipment, depending on the business setup. More scope for direct overseas sales:  The reference to B2C restrictions makes the change relevant to businesses selling directly to foreign consumers. New route for India-made products:  Manufacturers and brands may get more options for reaching international customers through e-commerce. Clearer planning for foreign-invested businesses:  The amendment gives businesses a specific provision to examine when building an export-focused inventory model. None of these benefits should be treated as guaranteed commercial results. They depend on the business structure and compliance with other applicable export laws. Compliance Challenges Businesses Should Consider The new rule creates flexibility, but it also makes correct classification more important. Separating domestic and export inventory- Where the same company handles both domestic and international sales, inventory and transactions should be mapped carefully. Proving the India manufacturing connection- Businesses should keep reliable sourcing and manufacturing records where the benefit of the rule depends on the product being made or produced in India. Matching the business model with FEMA- A company should understand whether it is actually using an inventory-based model and whether that use is limited to the export activity covered by the rule. Checking DGFT requirements- FEMA permission does not replace Foreign Trade Policy or procedural export requirements. Reviewing foreign-exchange compliance- Export transactions remain linked to the applicable FEMA regulations governing exports. Product-specific requirements- Some goods may be subject to separate export, quality, safety or sectoral rules. These checks may form part of an e-commerce compliance consultant or export compliance consulting assignment where several laws apply to the same operating model. Business Opportunities Created by the Amendment The change may support several commercial models connected with cross-border trade. Cross-Border D2C Brands Indian brands that want to sell directly to overseas customers can examine whether the new framework supports their inventory structure. Indian Manufacturers Manufacturers can explore partnerships with export-focused e-commerce operators that maintain stock for foreign orders. MSME Exporters Smaller manufacturers that find conventional distribution difficult may look at e-commerce as another international sales channel. Export Fulfilment Businesses Warehousing, fulfilment and cross-border logistics services may become more relevant where exporters hold inventory for overseas orders. Compliance and Trade Support As companies move into new export structures, demand may also increase for foreign trade compliance services, FEMA reviews and DGFT-related support. These are business possibilities arising from the regulatory change. The notification itself does not guarantee demand, revenue or market growth. Is the FEMA E-Commerce Amendment a Good Opportunity for Indian Exporters? For export-focused businesses, the change can be useful because it addresses the inventory model directly. But the benefit comes with boundaries. Opportunity What Businesses Need to Watch Hold inventory for qualifying exports Inventory use must stay within the permitted export model. Sell India-made goods overseas Product must satisfy the India manufacturing/production condition. Develop cross-border B2C sales Domestic B2C should not be treated as covered automatically. Improve export fulfilment planning Other export regulations still apply Build foreign-invested export models FEMA and FDI position still needs review The amendment gives genuine operating flexibility, especially for businesses built around India-made products and overseas buyers. Its value will be highest where the business model is designed around the legal boundary rather than trying to stretch the exception beyond what the notification says. What Should E-Commerce Businesses Do Now? Businesses considering the new route should not start with platform changes or inventory purchases. The regulatory fit should be checked first. Step 1: Review the proposed sales model Identify whether the business is marketplace-based, inventory-based or uses different models for different activities. Step 2: Separate domestic and export operations Determine exactly which transactions are expected to rely on serial number 15.2.5. Step 3: Check where the goods are manufactured Confirm whether the relevant products are manufactured or produced in India. Step 4: Review the FEMA position Check whether the entity's foreign investment and e-commerce structure are consistent with the new exception. Step 5: Examine FTP and HBP requirements The Foreign Trade Policy and Handbook of Procedures are expressly linked to the permission. Step 6: Review FEMA export requirements Foreign-exchange obligations relating to exports continue to apply. Step 7: Check product-level export controls Do not assume that a FEMA permission removes restrictions arising under other laws. Step 8: Keep clear records Businesses should be able to separate export inventory and transactions from domestic activity where this distinction matters. These are practical controls, not a new application procedure created by S.O. 4870(E). How Corpseed Can Help with FEMA and E-Commerce Export Compliance The new e-commerce export permission touches more than one regulatory area. A business may need to look at its foreign investment structure, FEMA position, e-commerce model, DGFT obligations and product-specific export requirements together. Corpseed can support businesses looking for a FEMA compliance consultant in India with the following services. FEMA Applicability Assessment Corpseed can review the proposed activity and assess whether serial number 15.2.5 is relevant to the business model. This can include checking: the nature of the e-commerce activity  the role of inventory  the export-only condition  the India-manufactured product requirement and  connected FEMA issues.  E-Commerce Business Model Review A regulatory review can help distinguish between: marketplace operations  inventory-based operations  domestic sales and  export-focused transactions.  This is particularly useful where a company operates more than one sales channel. FDI and FEMA Compliance Review Where foreign investment is involved, Corpseed can help review the company's existing structure and identify FEMA or FDI issues linked to the proposed export model. DGFT Compliance Services Because Foreign Trade Policy 2023 and the Handbook of Procedures are expressly referred to in the amendment, businesses may also need to check their export-side compliance. Corpseed can assist with relevant DGFT compliance services and foreign trade requirements based on the nature of the product and transaction. Export Compliance Consulting Support can include reviewing the regulatory requirements connected with: export transactions  business documentation  product-specific conditions  applicable DGFT provisions and  ongoing export compliance.  Compliance Gap Assessment Before changing an existing e-commerce model, Corpseed can review the current structure against the new provision and identify areas that may need further legal or regulatory attention. Ongoing FEMA Advisory Services Businesses involved in regular cross-border trade may require continuing support where FEMA, FDI and export rules overlap. A proper review can help the company understand what the new exception actually permits before operational changes are made. For businesses planning an inventory-based export model, Corpseed's FEMA compliance services, export compliance consulting, DGFT compliance services, and e-commerce regulatory support can help assess the business structure against the applicable rules without treating the new amendment as wider than it is. Key Takeaways The FEMA e-commerce amendment 2026 creates a specific opening for inventory-based e-commerce exports, but it comes with clear limits. S.O. 4870(E) introduces the Foreign Exchange Management (Non-Debt Instruments) (Fourth Amendment) Rules, 2026.  A new serial number 15.2.5 has been inserted into Schedule I.  An e-commerce entity can use the inventory-based model exclusively for exports.  Goods or products must be manufactured or produced in India.  B2C and inventory-model restrictions under serial numbers 15.2.1 to 15.2.4 will not apply to exports covered by the new provision.  The amendment does not generally open domestic inventory-based e-commerce.  Foreign Trade Policy 2023, the Handbook of Procedures, and FEMA export regulations continue to apply.  Businesses involving foreign investment should review the exact structure before relying on the exception.  For exporters, the amendment creates a useful operating option. For compliance teams, the bigger task is making sure the business stays inside the export-specific boundary created by the rule.