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If your Indian business sells goods to EU customers, selling from India does not remove EU VAT from the transaction. Imports are generally subject to VAT, and the applicable rate for a consumer sale is usually tied to the destination country. Your obligations depend chiefly on where the goods are dispatched from and stored, who imports them, whether you sell through a marketplace, and whether a special reporting scheme applies. India’s GST treatment of the export is a separate matter.
This guide reflects European Commission and Indian CBIC guidance available on 7 October 2026. It is general information, not a determination for a particular product, country or shipping arrangement.
First separate EU VAT, customs duty and Indian GST
VAT is a consumption tax on most goods and services bought and sold in or into the EU. Import VAT generally applies when goods enter the EU; the former exemption for imports valued at EUR 22 or less has been removed. There is no single EU-wide consumer VAT rate: the rate generally depends on the destination Member State and the product. Check the current rules for the country and product before setting a customer-facing or landed price. European Commission and Your Europe VAT guidance
Customs duty is not VAT. The European Commission’s 2026 low-value customs measure is a duty measure; it does not replace or set the VAT rate. Indian GST is a third, separate system: export zero-rating in India does not cancel EU import VAT or VAT on a later sale within the EU.
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Identify your sales route before deciding whether to register
There is no single EU VAT answer for every Indian MSME. Start with the goods’ physical route and the sale arrangement—not the size of the business. A direct shipment from India, stock held in an EU warehouse, and a marketplace sale can produce different collection and registration responsibilities.
| Sales setup | Main VAT issue | What to establish |
|---|---|---|
| Goods dispatched from India directly to an EU consumer; qualifying consignment | Import VAT is due. IOSS may allow VAT collection at checkout and centralized reporting. | Consignment intrinsic value, excise status, IOSS eligibility and intermediary, destination VAT rate, and any marketplace role. European Commission OSS/IOSS guidance |
| Goods dispatched from India without IOSS | Import VAT is generally collected at import under the delivery arrangement. | Who is importer of record, who pays the import charge, what carrier or broker charges may apply, and what the customer is told before ordering. Your Europe cross-border VAT guidance |
| Goods stored in an EU country before sale | Local VAT obligations may arise from holding stock and making domestic sales; eligible cross-border consumer sales may be reportable through Union OSS. | Stock country, local registration and return obligations, and whether each onward sale qualifies for OSS. European Commission OSS guidance |
| Sale facilitated by a marketplace | A platform can be treated as the deemed supplier for specified transactions, but not automatically for every sale. | Which party is treated as supplier for that transaction, and how platform, stock location and dispatch arrangements affect responsibility. EU VAT Directive |
| Export from India | Indian GST zero-rating and the available refund route are separate from EU VAT and customs treatment. | Applicable export route, invoice endorsement, shipping bill, export manifest or report, returns and refund evidence. CBIC export FAQ |
Direct shipments from India: when IOSS may help
The Import One-Stop Shop (IOSS) is an optional EU scheme for distance sales of imported goods in consignments with an intrinsic value not exceeding EUR 150. Excise goods are excluded. If the sale qualifies and IOSS is used, the seller or qualifying marketplace collects the destination country’s VAT from the customer at checkout and reports it through monthly IOSS returns. A valid IOSS number declared with the import data supports VAT-exempt entry at the border; it is a reporting and collection mechanism, not an exemption from VAT on the sale. European Commission IOSS guidance
Non-EU sellers generally need an EU-established intermediary to use IOSS. Commission guidance describes an exception for sellers established in a third country with the specified mutual-assistance agreement, when the goods are dispatched from that country. Do not infer that India meets this condition: check current eligibility for your circumstances before relying on IOSS. European Commission registration guidance
Without IOSS, import VAT is generally collected at the border from the importer or recipient under the shipping and delivery arrangement. Who ultimately bears the charge, who pays it at import and whether the buyer encounters a payment on delivery depend on the contract, importer-of-record arrangement and carrier process. Confirm these points before advertising a delivered price.
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EU-held stock and onward sales require a different analysis
If you place inventory in an EU country before a customer buys it, direct-import IOSS is not a universal solution. Local registration may be required for inventory-related transactions or domestic sales in the country where the stock is held. Selling that stock to consumers in another Member State can also raise cross-border distance-sale reporting obligations.
Union OSS can simplify reporting for qualifying intra-EU distance sales of goods, but it does not replace domestic VAT returns or erase local registrations. Union and non-Union OSS returns are quarterly; IOSS returns are monthly, according to current European Commission scheme guidance. The EUR 10,000 threshold in EU guidance concerns specified intra-EU distance sales of goods and cross-border telecommunications, broadcasting and electronic services, subject to eligibility and conditions. It is not a general exemption for goods imported directly from India. Your Europe One Stop Shop guidance European Commission scheme guidance
Marketplace collection does not settle every seller’s obligations
EU rules treat an electronic interface, such as a marketplace, as the deemed supplier for specified transactions. That does not mean every marketplace sale is covered or that a seller can assume the platform handles all VAT. Check the platform’s treatment of the specific transaction, including whether the sale is a direct import or is made from EU-held stock, and retain records of the platform’s VAT handling. The VAT Directive sets the legal framework; the platform’s role depends on the transaction facts. EU VAT Directive
Account separately for the 2026 low-value customs change
In a notice dated 16 June 2026, the European Commission said that from 1 July 2026 the EUR 150 customs-duty exemption threshold would be abolished. It described a temporary fixed customs duty of EUR 3 per item for distance sales of imported goods in consignments not exceeding EUR 150. This is a customs duty, not a VAT rate, and it is separate from import VAT. The notice says a Union handling fee applies from November 2026 at the earliest; that is announced timing, not confirmation that the fee is already in force on 7 October 2026. Recheck the Commission’s current guidance before pricing or shipping. European Commission notice on the EUR 3 customs duty and VAT
Choose and document the Indian GST export route
CBIC describes exports as zero-rated supplies under India’s GST framework. Its guidance outlines two broad routes for eligible exports: pay IGST and claim a refund, or export under bond/LUT without payment of IGST and seek a refund of eligible accumulated input tax credit. Refund entitlement and procedure depend on current rules and the exporter’s facts; zero-rating does not mean every input-tax amount is automatically refunded. CBIC sectoral FAQ CBIC IGST guidance
CBIC materials identify the shipping bill, export manifest or report, and valid returns as relevant to export-goods refund handling. Export invoices also require the applicable endorsement for export on payment of IGST or under bond/LUT without payment, subject to the current rules. Some public FAQ wording reflects earlier procedural forms, so confirm the live filing requirements with an Indian GST professional or customs broker. CBIC GST invoice rules
Work through these checks before quoting a price
- Map the transaction: record whether the buyer is a consumer or business, who is seller of record, the dispatch country, any EU stock location and the destination Member State.
- Establish import responsibility: identify the importer of record and who pays import VAT and any customs duty under the delivery arrangement; confirm what the customer will be charged on delivery, if anything.
- Test the scheme and duty rules: establish the consignment’s intrinsic value and whether the product is excise-controlled. For potentially eligible direct consumer shipments, verify IOSS eligibility, intermediary requirements and any marketplace role; check current customs duty separately.
- Check EU registration and returns: if stock is held in the EU or sales continue across Member States, confirm local registration and domestic return requirements, then assess whether Union OSS can cover qualifying cross-border consumer sales.
- Reconcile the India export file: align the chosen GST route and invoice endorsement with shipping-bill, manifest or report, return and refund records under current procedures.
- Verify product and destination costs: check the destination VAT rate, tariff classification, customs treatment, product conformity, labelling and other import restrictions before committing to a landed price.
For a specific registration or rate decision, an adviser will need the product and HS/CN code, destination, buyer type, order values, stock and dispatch locations, marketplace and delivery terms. Those facts determine the answer more reliably than the label “MSME.”
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