If your Indian business sells goods to customers in the European Union, Indian GST and EU VAT are separate obligations. The right EU VAT route depends chiefly on where the goods are when they are sold, where they are dispatched from, who imports them, and whether a marketplace handles the transaction. Direct shipments from India, goods stored in an EU warehouse, and marketplace sales can all produce different VAT responsibilities.
Start with the physical route of the goods
EU VAT is a consumption tax on most goods and services bought and sold in or into the EU. Imports are generally subject to VAT, including low-value imports: the former EUR 22 import VAT exemption has been removed. A consumer sale is generally taxed at the rate applicable in the destination Member State, so there is no single rate to use for all EU orders. Check the rate for the product and destination before setting a delivered price. European Commission guidance on cross-border VAT
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VAT and customs duty are different charges. In particular, the EU’s 2026 EUR 3 measure described below is a customs duty, not a VAT rate. European Commission guidance on the EUR 3 customs duty
| Sales setup | Main VAT question | What to establish |
|---|---|---|
| Ship from India directly to an EU consumer; eligible low-value consignment | Whether to collect import VAT at checkout through IOSS | Consignment value, excise status, IOSS intermediary eligibility, destination rate and marketplace role |
| Ship from India without IOSS | Who pays import VAT when the goods enter the EU | Importer of record, delivery terms, carrier or broker charges, and what the customer is told |
| Hold stock in an EU country and sell from it | Local VAT on sales from that stock and any qualifying cross-border sales | Stock location, local registration and return requirements, and OSS eligibility |
| Sell through an online marketplace | Whether the platform is treated as supplier for the particular transaction | Seller of record, platform terms and settings, inventory location, and dispatch route |
| Export from India under GST | Which Indian zero-rated export route and refund conditions apply | GST route, invoice endorsement, shipping bill, export manifest or report, returns and refund records |
These distinctions matter more than whether a business is described as an MSME. The buyer type, stock location, dispatch country, consignment value, sales channel and delivery arrangement all affect the analysis.
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Direct shipments from India: decide how import VAT will be collected
For a direct sale to an EU customer, import VAT is part of the transaction even though the seller is based in India. The collection point and customer experience depend on the arrangement: eligible sellers can use the Import One-Stop Shop (IOSS) to collect destination-country VAT at checkout, while without IOSS import VAT is generally collected at import from the importer or recipient under the shipping and delivery terms. Make clear who is expected to pay any charge on delivery; otherwise a customer may face an unexpected bill. European Commission overview of the One-Stop Shop
When IOSS can apply
IOSS is an optional scheme for distance sales of imported goods in consignments with an intrinsic value of no more than EUR 150. Excise goods are excluded. Under the scheme, the seller or an eligible marketplace charges the customer VAT at the destination rate; valid IOSS information declared for the import supports VAT-exempt entry at the border. IOSS does not cover every shipment or replace the need to check customs duty separately. European Commission IOSS guidance EU VAT Directive
Intermediary and filing requirements
A seller established outside the EU generally needs an EU-established intermediary to use IOSS. Commission guidance describes an exception for sellers established in a third country covered by the specified mutual-assistance arrangement, where the goods are dispatched from that country. Do not assume India meets that condition: verify current eligibility for the seller and route before relying on IOSS. IOSS returns are monthly. European Commission registration guidance
The IOSS number must be handled securely and supplied through the import process as required. Treat access to it as a compliance control: confirm who will transmit it and how, rather than placing it where customers or unauthorized parties can see it.
If you do not use IOSS
Import VAT is generally charged at import under the delivery arrangement. The person liable to pay, and whether the customer sees a collection by the carrier or broker, depends on who imports the goods and the agreed delivery terms. Check those details with the carrier or customs broker and disclose likely charges before purchase; the evidence here does not establish a single arrangement for every shipment.
EU-held stock changes the VAT picture
If goods are stored in an EU country before sale, the sale is no longer simply a direct import from India to the consumer. A local VAT registration may be required for domestic sales or inventory-related transactions. If you then make qualifying cross-border intra-EU distance sales to consumers, Union OSS may simplify reporting of those sales, but it does not replace domestic VAT returns or local registration obligations. European Commission OSS guidance
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The EU guidance also sets out a EUR 10,000 combined threshold for specified intra-EU distance sales of goods and cross-border telecommunications, broadcasting and electronic (TBE) services, subject to eligibility and conditions. It is not a blanket exemption for an Indian seller, for domestic sales, or for goods imported directly from India. Establish whether the threshold applies to your particular establishment and transaction pattern before using it in pricing or registration decisions. Your Europe One-Stop Shop guidance
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1Fix the driver behind crashes, sound loss and screen glitches2Repair Windows errors before they cause bigger problems3Scan for outdated or missing drivers - takes under a minuteUnion and non-Union OSS returns are quarterly; IOSS returns are monthly. OSS is a reporting simplification for qualifying transactions, not a substitute for every national VAT filing. European Commission return guidance
Check what the marketplace actually handles
For specified transactions, EU rules can treat an online marketplace as the deemed supplier for VAT. That does not mean a platform takes responsibility for every sale it facilitates. The result is transaction-specific, so check the applicable platform terms and settings alongside the buyer, stock location, dispatch route and seller-of-record details. Do not assume that a marketplace’s checkout display or VAT collection settles your own registration and reporting duties. EU VAT Directive rules on deemed suppliers
Account for the 2026 customs-duty change separately
A European Commission notice dated 16 June 2026 says that the EUR 150 customs-duty exemption threshold was abolished from 1 July 2026. It describes 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 measure, separate from VAT; do not present EUR 3 as an EU VAT charge or as the destination VAT amount. Commission notice and guidance
The same notice says a Union handling fee is applicable from November 2026 at the earliest. As of 7 October 2026, that is announced timing, not confirmation that the fee is already operative. Check current Commission guidance before quoting or charging such a fee.
Choose and document the Indian GST export route
CBIC describes exports as zero-rated supplies under India’s GST system. For eligible exports, its guidance identifies two broad routes: pay IGST and claim a refund, or export under a bond or Letter of Undertaking (LUT) without payment of IGST and seek a refund of eligible accumulated input tax credit. The route and refund availability depend on the exporter’s circumstances and current law. CBIC sectoral FAQ CBIC guidance on IGST and exports
CBIC materials identify export invoices, shipping bills, export manifests or reports, returns and supporting refund records as relevant. The invoice endorsement must match the route used—export on payment of IGST or under bond/LUT without payment—subject to current rules. Some CBIC FAQ wording reflects earlier procedures, so confirm the applicable process with an Indian GST professional or customs broker rather than treating a general FAQ as a complete current filing instruction. CBIC GST invoice rules
Indian zero-rating concerns Indian GST; it does not make the sale VAT-free in the EU. It also does not determine EU import VAT, customs duty, tariff classification, product conformity, labelling or other import restrictions.
Use this checklist before pricing or dispatch
- Classify the sale as business-to-consumer or business-to-business, and identify the seller of record.
- Map the physical route: dispatch country, any EU stock location, destination Member State and importer of record.
- Establish the intrinsic value of each consignment and whether the goods are excise-controlled; check customs duty separately from VAT.
- For direct eligible low-value consumer shipments, verify IOSS eligibility, intermediary requirements, destination VAT rate, marketplace role, monthly filing and secure transmission of the IOSS number.
- For goods held in the EU, check local registration and return duties, then determine whether Union OSS covers any qualifying cross-border consumer sales.
- Agree the Indian GST export route with an adviser and reconcile the invoice, shipping bill, manifest or report, returns and refund evidence.
- Before committing to a landed price, verify the destination rate, tariff classification, product rules and local obligations for the specific goods and route.
The exact registration answer and landed cost cannot be determined from “Indian MSME” alone. They require the product and classification, destination, stock location, buyer type, order value, marketplace and delivery terms. Confirm those facts against current official rules with an EU VAT adviser or customs broker, and separately validate the Indian export process.
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