The Indian government aims to achieve $200-300 billion in e-commerce exports as part of its $1 trillion overall merchandize export target by FY 2030, requiring a 50-60 fold increase in current export levels.
Complex customs procedures, payment repatriation challenges, and restrictive policies are significant barriers. Policy changes are needed in payments, customs, and logistics to help MSMEs access export markets and achieve the goal.
Reduce the cost burden of payment reconciliation, enhance payment realization timelines, enable periodic shipping bill reconciliation and removal of 25% variance limitation to enhance financial flexibility for e-commerce exporters especially MSMEs
Increase courier consignment limit, streamline clearance and reverse logistics processes and create Customs Supervision Codes to facilitate faster and efficient handling of e-commerce exports.
Establishing e-commerce export hubs with integrated training centers, introducing regulatory testing sandboxes, extending export incentives to e-commerce exports.
E-commerce exports in India for FY2023 are estimated to range between US$4 to US$5 billion, accounting for approximately 0.9% to 1.1% of India’s total merchandise exports, according to the latest report by the leading professional services firm EY in association with ASSOCHAM titled “Enabling e-commerce exports from India.” The report suggests that adopting more flexible policies and addressing existing challenges in customs, payments, and logistics could help boost e-commerce exports and achieve the government’s target of $200-300 billion by FY 2030. Key recommendations include creating separate customs supervision codes for e-commerce exports and increasing the consignment limit for courier exports. Additionally, the report emphasizes facilitating re-imports, removing the variance cap on realized payments, and extending the proceeds realization deadline. Other suggestions include clearly defining the responsibilities of exporters on record and sellers on record, extending export incentives to e-commerce exports, and effectively implementing e-commerce export hubs.
“In today’s global marketplace, the need for streamlined regulations and supportive policies for e-commerce exports cannot be overstated. This report’s recommendations are essential for empowering Indian e-commerce exporters and positioning them competitively on the world stage”, said Deepak Sood, Secretary General, ASSOCHAM.
Reflecting on the report’s findings, Bipin Sapra, Tax Partner, EY India, said, “Indian e-commerce export ecosystem is poised to grow exponentially in the coming years benefitting the economy in general and MSMEs in particular. The government and other regulators need to take cues from other developed e-commerce export markets to iron out the kinks in the current law and processes to help the MSMEs gain access to global markets efficiently and easily. This report brings together all the recommendations needed to build a thriving e-commerce export ecosystem in India.”
The recommendations for reforming India’s laws and regulations to achieve exponential growth in e-commerce exports include easing customs procedure, enabling robust reconciliations and payment settlement mechanisms and various policy interventions.
Customs and regulatory reforms:
To bolster e-commerce exports, amendments to the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 are proposed, which includes increasing the consignment limit of courier exports to US$50,000. Creating separate custom supervision codes for cross-border e-commerce trade to ensure speedy custom clearance, simplify payment procedures and enable data collection for policymaking. Reducing the time for custom clearance of courier shipments by enabling certain functionalities in the CSB-V and collaborate with the e-commerce marketplace for verification. Prescribing clear guidelines for re-import transactions to allow duty-free re-import of consignments up to US$600 and for consignments above this threshold, formulating SOP to recognize returns as re-imports of returned goods.
Payment reconciliation:
Recommendations include reducing the cost of payment reconciliation by levying them as a percentage of consignment value to ease financial burdens on small-scale e-commerce exporters. Enabling periodic shipping bill reconciliation and removing the 25% variation clause on realized payments as well as extending payment realization and repatriation periods up to 18 months aligned with global practices. Redefining the responsibilities of sellers and the e-commerce operators to streamline processes and reduce administrative burdens for exporters.
Policy interventions:
The EY – ASSOCHAM report calls for extending export promotion incentives to e-commerce exporters under the Courier Import and Export Regulations, 2010 to stimulate sector growth. Expanding the scope of E-commerce Export Hubs (ECEH) by providing customs support via stationing of a customs official within these ECEH, training support via development of integrated training centres and logistical support through development of such ECEH near air cargo terminals. Specifically adding a clarification in FDI policies to allow FDI-funded e-commerce entities to hold inventory for sale in international marketplaces to facilitate global sales of Indian MSME products. Establishing a regulatory testing sandbox for e-commerce exports to foster innovation and compliance testing. Moreover, including e-commerce exports in the RBI’s priority sector lending category to enhance access to affordable finance. Granting AEO-T3 status to e-commerce marketplaces to facilitate customs procedures, while incorporating provisions for cross-border e-commerce trade in bilateral agreements to boost India’s global e-commerce export capabilities.
