🗞️ Why in News The Directorate General of Foreign Trade issued Public Notice No. 25/2026-27 on August 5, 2026, operationalising an inventory-based framework for cross-border e-commerce exports under the Foreign Trade Policy 2023. The framework creates two new registered categories, the Exporter-on-Record and the Seller-on-Record.
The Problem This Solves
An Indian MSME that makes a product a foreign consumer wants faces a chain of obligations that has nothing to do with making the product.
It must hold an Importer Exporter Code. It must file a shipping bill. It must classify the goods correctly under the customs tariff. It must claim its GST refund and its duty drawback, each through a separate process. It must arrange international logistics, handle customer returns across a border, and manage foreign-exchange realisation certificates.
A weaver in Varanasi or a brassware unit in Moradabad can make the product. Very few can do the rest. The binding constraint on India’s e-commerce exports has never been demand or product quality. It has been the last mile of compliance.
The Two New Roles
Exporter-on-Record (EOR)
An EOR is an entity holding a valid Importer Exporter Code (IEC) and a GSTIN, registered with the DGFT under this framework.
The EOR:
- Receives confirmed overseas orders
- Procures goods from one or more Indian manufacturers or suppliers
- Classifies the goods as export inventory in its digital inventory system
- Completes customs clearance, shipping and all regulatory documentation
Seller-on-Record (SOR)
An SOR is the Indian manufacturer or supplier from whom the EOR procures. The SOR makes the product. It does not have to file anything.
The Design Feature That Makes It Work
Seller-attributable export rebates, meaning Duty Drawback, RoDTEP and RoSCTL, are apportioned to the Sellers-on-Record in proportion to their FOB value. The refund of taxes under the CGST Act is expressly an Exporter-on-Record entitlement and is not part of the apportioned pool, because the EOR is the entity that bears and claims it.
This is the provision that determines whether the framework helps manufacturers or merely creates a new class of intermediary. Without it, the EOR would be the exporter of record for rebate purposes and would capture the incentive, leaving the manufacturer to negotiate for a share of it commercially. Proportional apportionment by FOB value hard-wires the incentive to the party that actually made the goods.
FOB (Free on Board) value is the value of goods at the point they are loaded onto the carrying vessel or aircraft, excluding freight and insurance. It is the standard basis on which Indian export incentives are computed.
The Anti-Speculation Guard
Speculative stocking is prohibited. Exports must correspond to confirmed overseas orders.
This matters because an inventory-based model without that condition would permit an entity to accumulate goods, claim export classification and the associated tax treatment, and hold them against anticipated demand. That converts an export facilitation scheme into a tax-deferral instrument. Requiring a confirmed order upstream of the inventory classification closes it.
Why an Export-Only Carve-Out Was Needed
India’s FDI policy distinguishes two e-commerce models.
| Model | What it is | FDI treatment (domestic market) |
|---|---|---|
| Marketplace model | The platform provides an IT facility connecting buyer and seller; it does not own inventory | 100 per cent FDI permitted under the automatic route |
| Inventory model | The platform owns the inventory and sells directly to consumers | FDI prohibited |
The prohibition on foreign-funded inventory-based B2C e-commerce is a long-standing protection for domestic retail. It also blocks exactly the operational model that global e-commerce fulfilment depends on, because global fulfilment networks work by holding inventory close to the customer.
This framework creates an export-only lane where the prohibition does not bite. Goods classified as export inventory are, by definition, not being sold into the Indian domestic market, so the policy rationale for the prohibition does not apply. FDI in inventory-based B2C e-commerce for the domestic market remains prohibited. That is the Prelims-critical qualification.
The Argument
The case for. The state has correctly identified that it cannot make every MSME an exporter, and has instead created a legally recognised entity that carries the compliance risk while the rebates flow back proportionally. This is industrialising the paperwork rather than the product, and it is the right level at which to intervene. Compare the alternative approaches: skilling every MSME in customs procedure does not scale, and simply lowering compliance requirements would compromise revenue and enforcement.
The counter to engage. Concentration risk. If two or three large platforms become the Exporters-on-Record for the bulk of Indian MSME e-commerce exports, the state will have replaced a compliance bottleneck with a market-power bottleneck. An EOR that handles a manufacturer’s customs, logistics, returns and rebate apportionment holds considerable leverage over that manufacturer’s terms of trade, and the framework as described contains no cap on EOR market share and no obligation of non-discriminatory access.
Balanced verdict. The apportionment rule shows the drafters were alert to the risk of the intermediary capturing the benefit, and addressed it on the fiscal side. The unaddressed limb is commercial power rather than fiscal share, and it is the limb worth watching as the framework beds in.
UPSC Relevance
GS Paper 3: Indian economy and mobilisation of resources; effects of liberalisation on the economy; industrial policy and its effect on industrial growth; MSME sector; external sector and export promotion.
GS Paper 2: Government policies and interventions for development in various sectors; issues arising from their design and implementation.
Prelims focus: DGFT Public Notice No. 25/2026-27 and Notification No. 27/2026-27, both dated August 5, 2026, with DPIIT Press Note No. 3 (2026 Series) making the FDI carve-out; the EOR and SOR definitions; the IEC and GSTIN requirement; FOB-proportional rebate apportionment; the marketplace versus inventory FDI distinction; Foreign Trade Policy 2023 as the enabling instrument.
Mains angle: “India’s e-commerce export problem was never demand, it was the last mile of compliance.” Examine the Exporter-on-Record framework as an instrument of MSME export promotion, and assess the risk that a compliance bottleneck is replaced by a market-power bottleneck.
📌 Facts Corner, Knowledgepedia
Cross-Border E-Commerce Export Framework:
- Instruments: DGFT Public Notice No. 25/2026-27 (amending the Handbook of Procedures 2023) and Notification No. 27/2026-27 (incorporating the framework into FTP 2023), both dated August 5, 2026; the FDI carve-out is made by DPIIT Press Note No. 3 (2026 Series) of 23 July 2026
- Enabling policy: Foreign Trade Policy 2023
- Exporter-on-Record (EOR): must hold a valid IEC and GSTIN, and be registered with DGFT
- Seller-on-Record (SOR): the Indian manufacturer or supplier from whom the EOR procures
- Seller-attributable rebates (Duty Drawback, RoDTEP, RoSCTL) apportioned to SORs in proportion to FOB value; the CGST refund is an EOR entitlement and is not apportioned
- The EOR may retain an administrative charge capped at 10 per cent of gross rebates, the balance payable to sellers within 30 days
- Speculative stocking prohibited: exports must match confirmed overseas orders
FDI in E-Commerce:
- Marketplace model: 100 per cent FDI permitted under the automatic route
- Inventory model: FDI prohibited for the domestic market, and this framework does not change that
- The carve-out applies only to export inventory
Institutions:
- DGFT: Directorate General of Foreign Trade, under the Ministry of Commerce and Industry, headed by the Director General of Foreign Trade
- CBIC: Central Board of Indirect Taxes and Customs, under the Ministry of Finance, administers customs clearance
- IEC: Importer Exporter Code, a 10-digit code issued by DGFT, mandatory for import or export
- FOB: Free on Board, value at the point of loading, excluding freight and insurance
Other Relevant Facts:
- The Foreign Trade (Development and Regulation) Act, 1992 is the parent statute under which the Foreign Trade Policy and DGFT public notices are issued
- Duty Drawback refunds customs and central excise duties on inputs used in exported goods, under Section 75 of the Customs Act, 1962
- Exports are zero-rated under Section 16 of the IGST Act, 2017, permitting either export under bond without payment of IGST with refund of input tax credit, or export on payment of IGST with refund of the tax paid
Sources: DGFT, PIB, Business Standard
Source: Industrialising the Paperwork: India Opens an Inventory Lane for E-Commerce Exports — Ujiyari.com | Free UPSC & State PCS Current Affairs
