India retail entry rewards retailers who treat the country as a marketplace problem first and a logistics problem second. The single rule that shapes everything is simple: a foreign-funded online platform may run a marketplace that connects buyers and independent sellers, but it cannot own the inventory it sells. That one constraint decides your corporate structure, your tax registrations, and whether you sell through Flipkart, Amazon.in, or your own seller entity on both.
This guide walks through the 2026 framework a small or mid-sized brand actually faces: the foreign direct investment (FDI) rules for e-commerce, a side-by-side comparison of the two dominant platforms, and the goods and services tax (GST) plus customs duty mechanics that determine your landed cost. The numbers and steps below are concrete enough to brief a finance lead or a customs broker without translation.
In short
- 100% FDI is allowed in the marketplace model of e-commerce, but 0% FDI is allowed in the inventory-based model where the platform owns the stock it sells.
- No single seller may account for more than 25% of a marketplace’s sales, and platforms cannot mandate exclusive listings or control prices.
- Flipkart leads in Tier 2 and Tier 3 cities and value categories; Amazon.in leads in metros, premium goods, and cross-border Global Selling.
- GST registration is mandatory for any seller using a marketplace, regardless of turnover, and the platform collects 1% TCS (tax collected at source) on your behalf.
- Imported goods attract Basic Customs Duty (BCD) plus IGST (integrated GST) calculated on the duty-inclusive value, so model landed cost before you price a listing.
- The clean path for most foreign brands: sell through an Indian seller entity (your own subsidiary or a local distributor) listed on both platforms, not by trying to own a B2C platform yourself.
What are India’s FDI rules for e-commerce in 2026?
India permits 100% foreign direct investment in the e-commerce marketplace model through the automatic route, meaning no prior government approval is needed. It permits zero foreign investment in the inventory-based model. The distinction is the legal core of every entry plan.
A marketplace model means the platform is a technology intermediary: it provides the storefront, payments, and logistics rails, while legally independent sellers own the goods and issue the invoices. An inventory-based model means the entity that runs the platform also owns the stock. Foreign capital can fund the first but not the second. This is why Amazon and Walmart-owned Flipkart operate as marketplaces and route their own goods through separate Indian-controlled seller companies.
Press Note 2 of 2018, still the governing framework in 2026, added guardrails to stop platforms from gaming the marketplace label. These rules matter even if you never run a platform, because they shape how the two giants treat your listings. Understanding the tax side of cross-border selling is the necessary companion to these rules, and our guide to cross-border tax basics every small retailer should know covers the registration and remittance mechanics that sit underneath any India plan.
The four constraints that bind every marketplace seller
Four operational rules flow from Press Note 2 and directly affect a foreign brand selling into India:
- 25% concentration cap. No single seller (or its group companies) may source more than 25% of its sales through one marketplace platform. If you set up a captive seller entity, you cannot route all your volume through it on one platform.
- No equity or control links that distort the market. A platform cannot own equity in a seller and then give that seller preferential treatment. Vendors in which the platform group holds a stake face listing restrictions.
- No exclusivity. A marketplace cannot force a brand to sell exclusively on its platform. You retain the right to list the same SKU on Flipkart and Amazon.in simultaneously.
- No price influence. The platform cannot directly or indirectly set the sale price of goods. Discounts must be funded transparently, not dictated by the platform to undercut rivals.
For a foreign retailer the practical takeaway is clean: you almost never want to be the platform. You want to be a compliant seller on platforms that someone else has already built, capitalized, and licensed. That keeps you out of the FDI minefield entirely and lets you focus on assortment, pricing, and fulfillment.
How do you legally structure an India entry?
Most foreign brands choose one of three structures, and the right one depends on how much control and margin you want versus how much complexity you can absorb. The decision is upstream of everything else, including your GST footprint and your import paperwork.
- Sell through a local distributor or importer. The lowest-friction option. An Indian distributor buys your goods at the border, becomes the importer of record, handles BCD and IGST, and lists the products on Flipkart and Amazon.in under its own seller account. You collect a wholesale margin and carry almost no India compliance burden. The trade-off: you surrender retail margin and control of pricing and brand presentation.
- Use a marketplace’s cross-border program. Amazon Global Selling and similar programs let you list and ship from abroad, with the platform or a partner handling import clearance and last-mile delivery. You keep more margin than a pure distributor deal but pay program and fulfillment fees, and your delivery promise is slower unless you pre-position stock in India.
- Incorporate an Indian subsidiary as your seller entity. The highest-control, highest-cost path. You form a private limited company, register for GST, open a bank account, become importer of record, hold stock in Indian warehouses, and list as a first-party seller on both platforms. You capture the full retail margin and control the customer experience, but you take on Indian corporate tax, statutory filings, and the 25% concentration cap if you scale on a single platform.
A common 2026 pattern is hybrid: incorporate a subsidiary for brand-controlled hero products and premium lines, while keeping a distributor relationship for the long tail and for regional reach you cannot service directly. The subsidiary path is where customs strategy becomes a recurring cost center rather than a one-time event, and knowing when you actually need a customs broker can save weeks of clearance delays at Indian ports during your first import cycles.
Flipkart vs Amazon.in: which platform fits your brand?
The two platforms split the Indian market along clear lines. Flipkart, majority-owned by Walmart, is the homegrown leader with the deepest reach into smaller cities and value-conscious categories. Amazon.in is stronger in metropolitan markets, premium and imported goods, and is the obvious choice if you want to sell cross-border without first setting up Indian stock.
Both run a pure marketplace model for FDI compliance, both offer in-house logistics (Flipkart’s Ekart and Amazon’s fulfillment network), and both charge a blend of referral commission, fixed closing fees, shipping fees, and optional advertising. Commission rates vary by category, typically running from roughly 2% to over 20% depending on the product. The table below compares the structural factors that should drive your choice.
| Factor | Flipkart | Amazon.in |
|---|---|---|
| Ownership | Walmart-controlled, India-founded | Amazon (US parent), India marketplace entity |
| Geographic strength | Tier 2 and Tier 3 cities, regional depth | Metros and Tier 1 cities, urban premium |
| Category strength | Fashion (Myntra), electronics, value goods | Premium, imported, books, electronics |
| Fulfillment arm | Ekart, Flipkart Fulfillment (F-Assured) | Fulfillment by Amazon (FBA), Easy Ship |
| Cross-border seller program | Limited; favors local stock | Amazon Global Selling, mature program |
| Fee structure | Referral commission + fixed + shipping + collection fee | Referral commission + closing fee + shipping (or FBA) |
| Big sale events | Big Billion Days (festive season) | Great Indian Festival (festive season) |
| Best for | Value and mass-market brands targeting national reach | Premium and imported brands, cross-border sellers |
The practical answer for most foreign brands is to list on both. India is too large and too segmented for a single channel, and because exclusivity is prohibited under the FDI rules, you pay no penalty for dual listing. Start where your category is strongest, prove unit economics, then expand to the second platform once your fulfillment and pricing are stable.
Reading platform demand signals before you commit
Both platforms cluster the bulk of annual volume into festive-season sale events (Flipkart’s Big Billion Days and Amazon’s Great Indian Festival, both around the Diwali period), which can compress a meaningful share of category sales into a few weeks. Plan inventory and import timing around these windows, because a stockout during the festive surge costs far more than off-season. Tracking how marketplace and retail news moves these cycles is part of the job, and our explainer on how retail news shapes the global e-commerce industry today is a useful lens for reading demand signals before you commit inventory capital.
How does GST work for sellers in India?
The goods and services tax is a destination-based consumption tax that replaced India’s old patchwork of central and state levies. For an e-commerce seller, three GST facts are non-negotiable.
First, GST registration is mandatory for any business selling through an e-commerce operator, with no turnover threshold exemption. The small-business exemption that applies to offline traders does not apply once you list on a marketplace. You register, you get a GSTIN, and you file returns.
Second, the marketplace acts as a tax-collection agent. Under the TCS (tax collected at source) mechanism, Flipkart and Amazon.in deduct 1% of the net taxable value of your sales and deposit it with the government against your GSTIN. You reclaim this as a credit when you file, so it is a cash-flow timing cost, not a permanent loss.
Third, GST is levied at slab rates by product category. Most consumer goods fall into the 5%, 12%, or 18% bands, with luxury and demerit goods at 28%. The rate flows through to your listing price, so map your SKUs to their correct HSN codes (the harmonized classification used for both GST and customs) before you price anything. Misclassification triggers reassessment and penalties.
Interstate sales and IGST
India’s GST splits into CGST plus SGST for sales within a state, and IGST (integrated GST) for sales across state lines. Because e-commerce orders ship nationwide, most of your transactions are interstate and attract IGST. The total rate is the same (an 18% item is 18% either way), but the split and the place-of-supply rules change your filings. If you hold stock in multiple state warehouses (common with FBA or Flipkart fulfillment), you may need GST registration in each state where you store goods.
What are the import duty basics for bringing goods into India?
If your goods are manufactured abroad, the importer of record pays duty at the border before the products can be sold. The landed cost stack has two main layers that compound, so model them together.
Basic Customs Duty (BCD) is the primary tariff, set by HSN code and varying widely by product (often in the 7.5% to 20% range for finished consumer goods, with some categories higher or lower). On top of BCD, the importer pays IGST on the duty-inclusive value, plus a Social Welfare Surcharge (typically 10% of the BCD). The compounding matters: IGST is calculated after BCD and surcharge are added, so a high tariff inflates the GST base as well.
A simplified landed-cost example for a finished good with an assessable value of 100 currency units, 10% BCD, 10% social welfare surcharge on the duty, and 18% IGST:
- Assessable value (CIF, cost plus insurance plus freight): 100.
- Basic Customs Duty at 10%: 10.
- Social Welfare Surcharge at 10% of BCD: 1.
- Value for IGST (assessable value plus BCD plus surcharge): 111.
- IGST at 18% on 111: 19.98.
- Total duty and tax at the border: 30.98, making landed cost roughly 131 before inland logistics.
The IGST paid at import is generally creditable against your output GST when you sell, so it is recoverable for a registered seller. The BCD and surcharge are not creditable; they are a sunk cost baked into your margin. That asymmetry is the single most common modeling error new entrants make: they assume all border charges wash out, then discover the tariff portion permanently erodes margin.
Tariffs are not static, either. Indian customs rates shift with budget cycles and trade policy, and a mid-year change can move your landed cost by several points overnight. We trace this dynamic in detail in our piece on how tariff changes ripple through retail prices in weeks, which is worth reading before you lock multi-month supplier contracts denominated against an assumed duty rate. For the authoritative current schedule, consult the official Indian framework directly; a useful starting reference is the Goods and Services Tax (India) overview for the consumption-tax side.
How do you price a listing once duty and fees stack up?
Profitable pricing in India means working backward from the marketplace price to your factory cost, accounting for every layer. The reason brands fail here is that the Indian market is price-sensitive and the fee stack is deeper than in many Western markets.
A realistic per-unit stack for an imported good sold on a marketplace includes: factory cost, freight and insurance to India, BCD plus surcharge (sunk), platform referral commission, fixed closing fee, fulfillment and shipping cost, payment-gateway and return-handling reserves, advertising to win the buy box, and your target margin. IGST and the import IGST credit net out for a registered seller, so they affect cash flow but not final margin. The discipline is to build a single spreadsheet that takes a target retail price and confirms a positive contribution margin after all of the above.
Returns deserve special attention. India has a high rate of cash-on-delivery and a culture of liberal returns in fashion and apparel, so a return-reserve assumption that works in the US can wipe out margin in India. Build a category-specific return rate into the model rather than a flat number.
Advertising is the other line item that creeps. Both Flipkart and Amazon.in run sponsored-product auctions, and in competitive categories the cost to win visibility on the first page can rival the referral commission itself. Treat advertising as a variable cost of acquisition rather than a fixed marketing budget, and set a target advertising-cost-of-sale ceiling per category so the spend never outruns contribution margin. New listings carry no review history, so expect a heavier ad burden during the first few months until organic ranking builds.
Finally, pin your pricing to the duty rate you can actually defend. If your supplier contract assumes a 7.5% BCD and a budget revision lifts it to 10%, the extra points land entirely on the non-creditable side of the stack and come straight out of margin. Re-run the landed-cost sheet whenever the customs schedule moves, and hold a small buffer in your retail price so a mid-cycle tariff change does not force a disruptive relisting at a higher number during a sale event.
Common mistakes when entering the India retail market
- Trying to own a B2C platform with foreign capital. The inventory-based model is closed to FDI. Brands that try to route foreign money into a stock-owning storefront end up restructuring under pressure. Be a seller on a marketplace, not the marketplace.
- Assuming the GST turnover exemption applies. It does not once you sell through an e-commerce operator. Registration is mandatory from the first rupee of marketplace sales, and selling without a GSTIN exposes you to penalties and account suspension.
- Treating all border charges as recoverable. Only the import IGST is creditable. BCD and the social welfare surcharge are permanent costs. Pricing as if the whole 31% (in the worked example) washes out destroys margin.
- Misclassifying HSN codes. The wrong code changes both your GST slab and your customs duty, and reassessment carries interest and penalties. Get classification right at the SKU level before launch.
- Picking one platform on instinct. Flipkart and Amazon.in serve different geographies and price tiers. Defaulting to the one you know from your home market ignores where your category actually sells in India.
- Ignoring multi-state GST when using FBA. Storing stock in several state fulfillment centers can trigger GST registration in each of those states. Map your warehouse footprint to your registration obligations before you enroll in pan-India fulfillment.
- Underestimating the festive-season swing. A large share of annual demand compresses into Big Billion Days and the Great Indian Festival. Import lead times mean you must commit stock months ahead; a stockout during the surge is the most expensive mistake of the year.
- Pricing without a return reserve. High cash-on-delivery and return rates, especially in apparel, can erase a margin model that looked healthy on paper.
FAQ
Can a foreign company own an e-commerce platform in India?
A foreign company can own up to 100% of a marketplace e-commerce platform through the automatic route, with no prior government approval. It cannot own an inventory-based platform, where the operator also owns the goods it sells; foreign investment in that model is zero. In practice, foreign brands sell as independent sellers on existing marketplaces such as Flipkart and Amazon.in rather than building and capitalizing a platform themselves, which keeps them outside the FDI restriction entirely.
Do I need GST registration to sell on Flipkart or Amazon.in?
Yes. GST registration is mandatory for any business selling through an e-commerce operator in India, with no turnover threshold exemption. You obtain a GSTIN, the platform deducts 1% TCS (tax collected at source) on your net taxable sales and deposits it against your GSTIN, and you reclaim that as a credit when filing. Selling without registration risks penalties and account suspension. If you store stock in multiple state warehouses, you may need separate GST registration in each of those states.
Is Flipkart or Amazon.in better for a foreign brand?
It depends on your category and target buyer. Flipkart is stronger in Tier 2 and Tier 3 cities and in value and fashion categories, while Amazon.in is stronger in metros, premium and imported goods, and offers the more mature cross-border Global Selling program. Because the FDI rules prohibit platform-mandated exclusivity, most foreign brands list on both. The recommended approach is to launch where your category sells best, prove unit economics, then add the second platform.
How is import duty calculated on goods entering India?
The importer of record pays Basic Customs Duty (BCD), set by HSN code, plus a Social Welfare Surcharge (typically 10% of the BCD), and then IGST calculated on the duty-inclusive value. The charges compound: IGST sits on top of BCD plus surcharge, so a higher tariff also inflates the GST base. The import IGST is creditable against your output GST when you sell, but BCD and the surcharge are permanent, non-creditable costs that must be built into your margin.
What is the 25% rule for marketplace sellers?
Under Press Note 2 of 2018, no single seller (including its group companies) may source more than 25% of its sales through one marketplace platform. The rule exists to stop platforms from funneling most volume through a captive vendor and effectively running an inventory model under a marketplace label. For a foreign brand that sets up a single Indian seller entity, it means you cannot route all your volume through that one entity on one platform if you scale large; you diversify across platforms or sellers.
Should I incorporate a subsidiary or use a distributor in India?
A distributor is the lowest-friction route: the local partner becomes importer of record, handles GST and customs, and lists your goods, while you take a wholesale margin and minimal compliance burden. A subsidiary captures full retail margin and brand control but adds Indian corporate tax, statutory filings, and importer obligations. Many 2026 entrants run a hybrid: a subsidiary for hero and premium lines, a distributor for the long tail and regional reach they cannot service directly.
What is TCS and how does it affect my cash flow?
TCS (tax collected at source) is a 1% deduction the marketplace makes on the net taxable value of your sales and deposits with the government against your GSTIN. It is not an extra tax: you reclaim it as a credit when you file your GST returns. The effect is purely on cash-flow timing, because the 1% is held until your filing offsets it. Factor a short collection-to-credit lag into your working-capital planning, especially during high-volume festive periods.
When do I actually need a customs broker for India imports?
You need a customs broker (a licensed Customs House Agent in India) whenever you are the importer of record and want clearance handled correctly the first time. Brokers manage HSN classification, duty assessment, documentation, and port clearance, which reduces the risk of demurrage and reassessment. For occasional low-value cross-border shipments via a marketplace program, the platform or its logistics partner may handle this; for a subsidiary holding regular stock, a dedicated broker relationship is usually worth the fee.
What’s next
Start by mapping your top SKUs to their HSN codes and modeling landed cost with the BCD-plus-IGST stack, then decide between a distributor, a cross-border program, or an Indian subsidiary before you ever open a seller account. The tax foundations carry over to every market you enter, so it is worth grounding your plan in our cross-border tax basics for small retailers first, and pressure-testing your duty assumptions against how quickly tariff changes ripple through retail prices when policy shifts. With a compliant seller structure and a margin model that respects the non-recoverable duty layer, India becomes a scalable channel rather than a regulatory trap.