On August 5, 2026, the Directorate General of Foreign Trade (DGFT) fundamentally restructured India’s digital trade architecture. Through Notification No. 27/2026-27 and the corresponding Public Notice No. 25/2026-27, the government officially operationalized the Inventory-Based Cross-Border E-Commerce Facilitation Framework.
Designed in alignment with the Consolidated FDI Policy (Press Note 3, 2026 Series), this framework inserts Chapter 9 into the Foreign Trade Policy (FTP) 2023 and the Handbook of Procedures. It provides a highly regulated mechanism for e-commerce entities to operate as export hubs while safeguarding the commercial interests of local Indian manufacturers.
For enterprise exporters, CFOs, and supply chain leaders, this is a mandatory shift in financial and compliance operations. Below is the definitive regulatory breakdown of the framework, the new Exporter-on-Record (EOR) model, and the financial mandates required to maintain compliance.
The Core Mechanism: EOR and SOR Operations
The framework enables a specialized legal entity to hold export-designated inventory, manage overseas statutory compliances, and facilitate global market access for Indian manufacturers. It establishes two distinct operating entities:
- Exporter-on-Record (EOR): An entity holding a valid IEC and GSTIN, officially registered with the DGFT under this framework via form ANF-9A. The EOR holds the export inventory, executes the export in its own name, claims the export incentives, and assumes full responsibility for destination-country compliance (certifications, labeling, product testing, etc.).
- Seller-on-Record (SOR): The Indian GST-registered manufacturer or supplier who produces the goods. The SOR supplies the goods to the EOR exclusively against confirmed export orders.
Note on FDI Compliance: If an e-commerce platform with foreign investment proposes to operate as an EOR under this E-Commerce Export framework, it must do so through a newly incorporated, separate legal entity and fully disclose its shareholding pattern to the DGFT.
Critical Financial and Regulatory Mandates
Operating as an EOR under this framework carries strict fiduciary and regulatory responsibilities. Failure to comply with these rules can result in the suspension of the Importer-Exporter Code (IEC), placement on the Denied Entity List (DEL), and recovery of disbursed incentives.
Restrictions on Inventory Procurement
The EOR is permitted to hold “Export Inventory,” but it cannot purchase and hoard stock speculatively. The title of the goods transfers from the SOR to the EOR strictly against a confirmed export order from an overseas buyer. Speculative inventory build-up for export purposes is expressly prohibited.
The 7-Day Payment Mandate
Cash flow protection for the Indian supplier is the bedrock of this policy. The EOR must execute payment to the SOR within 7 days of accepting the goods. This payment is absolute and cannot be made contingent upon international shipping timelines, overseas buyer disputes, or the return of goods by the end consumer.
Mandatory Apportionment of Export Rebates (ERR)
Export Rebates and Refunds (ERR) – such as RoDTEP, RoSCTL, or Duty Drawback – are claimed by the EOR upon successful export. However, the regulatory framework dictates how these funds are handled:
- The EOR must apportion and disburse the ERR back to the respective SORs proportionally based on the Free-on-Board (FOB) value of the goods.
- This disbursement must be completed within 30 days of the EOR receiving the funds from the government.
- The EOR is permitted to retain a maximum 10% administrative charge from the gross ERR amount.
Zero Domestic Diversion for Returned Goods
The EOR is entirely responsible for the costs and management of reverse logistics. If an overseas buyer rejects or returns a consignment, the EOR has 30 days to either re-export it, return it to the SOR, or destroy it. Under no circumstances can the EOR sell returned or rejected export inventory in the Domestic Tariff Area (DTA).
Institutional Compliance Obligations
To operate within this framework, an EOR must maintain continuous institutional transparency with the DGFT through specific operational protocols:
- Digital Traceability Repository: The EOR must architect and maintain an open digital repository that links procurement records, GST invoices, and shipping bills. This system must ensure that the DGFT and the SOR have full, real-time visibility into order statuses, final sale prices, and shipment tracking.
- Annual Compliance Certification: Within 90 days of the end of each financial year, the EOR must submit a compliance certificate to the DGFT. This must be audited by an independent Chartered Accountant (CA) or Cost Accountant (CMA), explicitly confirming adherence to the 7-day payment rule, the 30-day ERR disbursement, and the strict prohibition of domestic market diversion.
- Record Retention: The EOR is legally required to preserve all records pertaining to operations under this framework for a period of five years from the end of the financial year in which the export inventory was finally disposed of.
Frequently Asked Questions (FAQs)
Export Rebates and Refunds (ERR) include direct monetary or transferable financial benefits like Duty Drawback, RoDTEP, and RoSCTL. The framework strictly excludes non-transferable remission instruments like EPCG Authorizations or Advance Authorizations, as well as standard GST refunds, which remain the entitlement of the EOR.
Grievances regarding payments, returns, or benefit apportionment must be filed with the Regional Authority (RA) of the DGFT holding jurisdiction over the Seller-on-Record’s location. The RA is mandated to facilitate a resolution within 30 days.
While MSMEs operating as Sellers-on-Record significantly benefit from this framework’s supply chain facilitation, the Exporter-on-Record (EOR) designation is designed for large-scale fulfillment, logistics, and e-commerce entities capable of holding cross-border inventory and managing end-to-end destination compliance.
The DGFT Inventory-Based Cross-Border E-Commerce Export Framework is a highly technical landscape requiring precise execution. Transitioning to an Exporter-on-Record (EOR) model without restructuring internal financial, digital, and customs architecture exposes enterprises to severe statutory risks.
At Mundhra Consulting Services (MCS), Our multidisciplinary team manages end-to-end alignment – from executing the ANF-9A registration and assessing FDI compliance, to architecting the digital tracking and ERR apportionment systems required by the DGFT.
Contact MCS today to schedule a confidential structural assessment of your export operations.
