US to India · E-commerce and distribution
Setting Up an Indian Subsidiary for a US E-commerce Company
A US e-commerce business considering India should decide how it will sell before it decides how to incorporate. Selling through a marketplace, operating a marketplace, importing products, holding local inventory and providing technology or support services can create different legal, tax and operating questions. A clear model helps the group assess the right entity, contracts and compliance steps.
Quick answer
What should a US e-commerce company check before setting up in India?
Define whether the India business will operate a marketplace, sell its own products, import and hold inventory, provide services to the US parent, or combine these activities. Then check the current foreign-investment rules for that model, map the seller and inventory flows, assess GST and import requirements, and decide which entity signs contracts and receives payments. Incorporation should follow this operating and compliance review.
1. Map the business model before choosing the entity
Write down what each group company will do and who will be responsible for the customer, goods and money. These distinctions matter more than the label “e-commerce”.
| Model | Questions to settle |
|---|---|
| Marketplace operator | Who are the sellers, what services does the platform provide, and which foreign-investment conditions apply? |
| Own-inventory seller | Which entity buys, imports, owns and sells the products, and what restrictions apply to the model? |
| Importer and distributor | Who is importer of record, which product standards apply, and how will stock, duties and returns be managed? |
| Technology or support entity | Will the India team provide software, customer support or other services to the parent, and how will those services be documented and priced? |
These models can overlap, but they should not be treated as interchangeable. A structure suitable for a technology support centre may not be suitable for a local retail or marketplace operation.
2. Check foreign-investment rules for the actual activity
Foreign direct investment (FDI) rules distinguish between marketplace-based e-commerce and inventory-based e-commerce. The right analysis depends on the platform’s role, seller relationships, inventory ownership and control. The detailed rules apply regardless of whether the parent is based in the US or elsewhere, so use our e-commerce and D2C FDI guide for the general model comparison and current policy conditions.
Recent change to check: Press Note 3 (2026 Series), effective from 3 September 2026 under the corresponding FEMA notification, introduced a narrow inventory-based e-commerce route for exports of goods manufactured or produced in India. It is not a general permission for foreign-funded inventory-based e-commerce sales to consumers in India, and it does not mean a US company importing goods for domestic online retail automatically qualifies. Review the exact business model and current notified rules before relying on this exception. See the September 2026 regulatory update and current resources from DPIIT.
Before funds are committed, document the proposed activities and ownership chain, identify any sectoral cap or approval requirement, and check whether conditions apply to the model. If the business will also carry on regulated activities, import controlled products or provide financial services, those questions need separate review.
For the broader incorporation route, see our company registration guide for US businesses and guide to foreign ownership of an Indian subsidiary.
3. Decide who owns inventory and signs customer contracts
For a product business, map each transaction from supplier to customer. Identify the entity that buys the product, imports it, holds inventory, lists it online, contracts with the customer, receives payment and handles refunds or warranties. The contracts and accounting should reflect the real flow of goods and services.
- Document the legal seller for each sales channel and customer type.
- Confirm who owns inventory at each stage and who bears loss, damage and obsolescence risk.
- Identify the importer of record and the entity responsible for customs declarations and product compliance.
- Align marketplace, fulfilment, warehousing, payment processing and returns agreements with the actual arrangement.
- Review consumer-facing terms, product descriptions, warranties and grievance handling for the proposed channel.
Do not route transactions through an entity only because it is convenient for invoicing. Legal responsibility, tax treatment and foreign-investment conditions should be assessed together.
4. Review GST and invoicing before the first sale
GST obligations depend on the supplies being made, the role of the entity, turnover, locations and applicable registration rules. An e-commerce operator and a seller using an online marketplace may have different responsibilities. Imports, domestic sales, services to the US parent and cross-border transactions may also require separate treatment.
Before launch, map the invoice flow and confirm which entity must register, collect or pay GST, issue invoices, maintain records and file returns. If the India entity provides services to a foreign group company, review the export-of-services conditions rather than assuming every cross-border invoice qualifies as an export.
5. Plan imports, product rules and fulfilment
If the Indian entity imports products, confirm the applicable Importer Exporter Code and customs requirements, as well as product-specific licences, standards, labelling and restrictions. The requirements can vary significantly by category. Electronics, food, cosmetics, medical products and other regulated goods may require additional checks before the products are shipped or listed for sale.
Also plan the commercial side: customs valuation, duty and freight costs, stock reconciliation, warehouse agreements, reverse logistics, returns and unsold inventory. Confirm the responsible entity and records for each step before choosing a fulfilment model.
6. Document transactions between the US parent and Indian entity
If the group shares technology, brand rights, staff, management services, customer leads or fulfilment functions, the arrangements may need written intercompany agreements and transfer-pricing review. The right treatment depends on what each entity does, the assets it uses, the risks it assumes and the transactions that actually occur.
List potential charges before launch, such as software or brand licences, technology services, management fees, shared costs, loans or product purchases. Keep the agreements, invoices, working papers and supporting records aligned. Our transfer-pricing guide for US parent companies covers the main considerations.
7. Build the post-incorporation checklist
Incorporation is only one milestone. Depending on the chosen model, the launch plan may need to cover:
- Bank onboarding, capital funding and share-issue records.
- Applicable foreign-investment reporting and corporate filings.
- GST registration, invoicing, returns and accounting controls.
- Import documentation, product compliance and inventory records.
- Employment and payroll setup if the India entity hires staff.
- Intercompany agreements, transfer-pricing records and a recurring compliance calendar.
The list is a planning aid, not a universal filing checklist. Confirm which requirements apply to the entity, activity, transactions and current law. Our post-incorporation checklist covers common company-level tasks.
Questions to answer before incorporation
- Will the India business operate a marketplace, sell inventory, import products or provide group services?
- Which entity will be the seller, importer of record and owner of inventory?
- Which foreign-investment conditions apply to the exact e-commerce model?
- What GST registrations, invoices and returns may be required?
- Which product licences, standards or labelling rules need to be checked?
- What agreements and pricing records are needed between the US parent and Indian entity?
- Who will own accounting, banking and ongoing compliance after launch?
Frequently asked questions
Can a US e-commerce company set up an Indian subsidiary?
A US business may be able to establish an Indian entity, but the permitted ownership and activities depend on current foreign-investment rules, the exact business model and any applicable sector conditions. Assess whether the entity will operate a marketplace, sell its own inventory, provide services or combine activities before choosing the structure.
Can the same Indian entity handle local sales and services to the US parent?
It may be possible, but the proposed activities, contracts, foreign-investment conditions, GST treatment and related-party transactions should be reviewed together. If the entity will perform more than one function, document each activity and the related revenue, cost, inventory and risk allocation rather than treating the company as a single undifferentiated operation.
Does an Indian e-commerce subsidiary need GST registration?
GST registration and reporting depend on the entity’s supplies, turnover, locations, marketplace role and other facts. E-commerce operators and sellers can have different obligations. Confirm the registration position and invoicing flow before accepting orders or issuing invoices.
Can the Indian subsidiary import products from the US?
Importing may require an Importer Exporter Code, customs documentation and compliance with product-specific standards, restrictions, labelling or licences. Requirements depend on the goods and the importer of record. Check the current DGFT and customs requirements for each product category.
Should the US parent or Indian subsidiary own the inventory and customer contracts?
There is no single answer for every group. The legal seller, inventory owner, importer, contracting party and entity receiving customer payments should match the actual operating model. The arrangement affects tax, GST, customs, consumer obligations, transfer pricing and responsibility for returns or warranties.
What should be planned after incorporation?
Plan bank onboarding and funding, tax and GST registrations where required, accounting, payroll if hiring, statutory records, inventory and import documentation, intercompany agreements, and a calendar for recurring company-law and foreign-investment reporting that applies to the entity.
How AU Corporate can help
AU Corporate supports international businesses with India entry planning, incorporation coordination and ongoing tax, accounting and compliance. For an e-commerce business, the starting point is to understand the sales model and map the parties, goods, contracts and payments before confirming the appropriate setup steps.
Explore our India incorporation support for US businesses or browse the US-to-India entry guides.
Official resources
- Department for Promotion of Industry and Internal Trade — foreign-investment policy and sector conditions.
- September 2026 e-commerce FDI update — summary of the export-only inventory-model change and its effective date.
- GST Portal — GST registration and compliance resources.
- Central Board of Indirect Taxes and Customs — GST and customs resources.
- Directorate General of Foreign Trade — import-export policy and IEC resources.
- Reserve Bank of India — foreign-investment and foreign-exchange reporting.