On September 02, 2026, the Ministry of Finance, Department of Economic Affairs notified the Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2026 (“2026 Amendment Rules”), further amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“NDI Rules”). The amendment came into force upon publication in the Official Gazette.
Under the existing foreign direct investment (“FDI”) framework, 100% FDI under the automatic route is permitted in the marketplace model of e-commerce, where the e-commerce entity acts as a facilitator between buyers and sellers. FDI has, however, historically been prohibited in the inventory-based model of e-commerce, under which the e-commerce entity owns the inventory and sells directly to consumers. On July 23, 2026, the Department for Promotion of Industry and Internal Trade (“DPIIT”) issued Press Note No. 3 (2026 Series) (“Press Note 3”), carving out a limited exception to this restriction for export of goods manufactured or produced in India. Press Note 3 expressly provided that this relaxation would become effective only upon the corresponding amendment under the Foreign Exchange Management Act, 1999 (“FEMA”). The 2026 Amendment Rules now give effect to the FDI policy relaxation under FEMA and makes the export-focused inventory model legally operative.
KEY AMENDMENT:
The 2026 Amendment Rules insert a new serial number 15.2.5 in Schedule I of the NDI Rules, permitting an e-commerce entity to undertake an inventory-based model exclusively for the export of goods or products manufactured or produced in India. The relaxation is subject to the Foreign Trade Policy, 2023 (“FTP”), the Handbook of Procedures (“HBP”) and the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 (“FEMA Export Regulations”). Importantly, the existing restrictions on domestic B2C and inventory-based e-commerce under serial numbers 15.2.1 to 15.2.4 continue to apply.
IMPLICATIONS AND ANALYSIS:
1. Limited Liberalisation, with Operational Segregation Requirements:
The amendment creates a targeted relaxation in the e-commerce FDI framework by permitting foreign-invested e-commerce entities to undertake inventory-based operations exclusively for exports of goods manufactured or produced in India, while leaving the restrictions applicable to domestic inventory-led retail unchanged. Platforms undertaking both domestic marketplace and export operations will therefore need clear segregation of inventory, accounting, order-routing and fulfilment processes to ensure that goods held under the export model are not diverted to domestic consumers.
2. Documentation and Multi-Regulatory Compliance:
The requirement that exported goods be manufactured or produced in India will require entities to maintain a defensible evidentiary trail, including supplier declarations, invoices and manufacturing records, particularly where imported inputs are used in the final product. Further, since the relaxation is expressly linked to the FTP, the HBP and the FEMA Export Regulations, implementation will require coordinated compliance across FDI, export documentation, realisation and repatriation of proceeds, reverse logistics and related foreign-exchange requirements.
3. Areas Requiring Clarification:
In lieu of this amendment, there are certain issues which may require further clarifications, including the precise scope of the requirement that the inventory model be used “exclusively” for exports, the treatment of goods incorporating imported components, and whether domestic marketplace and export inventory operations may be undertaken within the same legal entity. Given that the relaxation now forms part of the NDI Rules, entities relying on it are suggested to maintain clear eligibility and monitoring controls, preserve an adequate audit trail and closely track any further guidance issued by DPIIT, the Directorate General of Foreign Trade or the Reserve Bank of India.
This update has been contributed by Jitendra Soni (Partner) and Samia Haider (Associate).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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