Special Schemes for Promotion of Export in India

Introduction

India’s export promotion ecosystem operates through a sophisticated framework of schemes designed to enhance the competitiveness of domestic manufacturers and service providers in global markets. These schemes function under the Foreign Trade Policy, which derives its authority from the Foreign Trade (Development and Regulation) Act, 1992 [1]. The legislative framework empowers the government to develop and regulate foreign trade by facilitating imports and augmenting exports from India. The Foreign Trade Policy 2023, launched on March 31, 2023, represents a paradigm shift from an incentive-based regime to a remission and entitlement-based system focused on collaboration, technology integration, and ease of doing business.

Legal and Regulatory Framework

The primary legislation governing export promotion in India is the Foreign Trade (Development and Regulation) Act, 1992. This Act provides the statutory foundation for formulating and implementing foreign trade policies and schemes. Under Section 3 of this Act, the Central Government is empowered to make provisions for the development and regulation of foreign trade, including the formulation of export and import policy. The Directorate General of Foreign Trade (DGFT), operating under the Ministry of Commerce and Industry, serves as the principal administrative authority responsible for implementing these export promotion schemes and monitoring compliance.

The Foreign Trade Policy 2023 is built on four fundamental pillars: incentive to remission, export promotion through collaboration, ease of doing business, and emerging areas including e-commerce and streamlining of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) policy [2]. Unlike previous policies that focused heavily on direct incentives, the current framework emphasizes tax remission, automated IT systems with risk management, and reduction in transaction costs, particularly benefiting Micro, Small and Medium Enterprises.

Remission of Duties and Taxes on Exported Products (RoDTEP)

The RoDTEP scheme represents the cornerstone of India’s WTO-compliant export promotion framework. Implemented from January 1, 2021, this scheme replaced the earlier Merchandise Exports from India Scheme which had been declared non-compliant with World Trade Organization norms [3]. The scheme addresses the fundamental principle that taxes and duties should not be exported, ensuring that all embedded central, state, and local taxes that were previously non-refundable are now remitted to exporters.

The legal basis for RoDTEP derives from notifications issued by the Department of Commerce and implemented by the Department of Revenue through the Central Board of Indirect Taxes and Customs. The scheme covers duties and taxes including mandi tax, coal cess, central excise duty on fuel, and various other levies incurred during the manufacture and distribution of exported products. These refunds are issued as transferable electronic scrips maintained in an electronic ledger through the Indian Customs Electronic Gateway (ICEGATE) portal.

The RoDTEP rates vary between 0.5 percent to 4.3 percent of Free on Board value, with the government having notified rates for 10,342 export items under 8-digit tariff lines as of December 2022 [4]. The scheme was expanded significantly on December 15, 2022, to include pharmaceuticals, organic and inorganic chemicals, and articles of iron and steel under chapters 28, 29, 30, and 73 of the ITC (HS) schedule. The benefits have also been extended to exports from Domestic Tariff Area units, Export Oriented Units, and Special Economic Zone units, creating a unified framework for duty remission.

Exporters claiming RoDTEP benefits must make a declaration in their shipping bill at the time of export. Once the Export General Manifest is filed, customs authorities process the claim and generate a scroll with individual shipping bills showing admissible amounts. These amounts are then made available in the exporter’s account at ICEGATE, where they can create a RoDTEP credit ledger account. The electronic scrips can be utilized for payment of basic customs duty on imports or transferred electronically to other Importer Exporter Code holders who maintain a RoDTEP ledger account.

Advance Authorization Scheme

The Advance Authorization Scheme allows duty-free import of input materials that are physically incorporated into export products. This scheme is governed by Chapter 4 of the Foreign Trade Policy and the Handbook of Procedures issued by DGFT. The authorization permits manufacturers and merchant exporters to import inputs without payment of basic customs duty and integrated goods and services tax, subject to fulfillment of export obligations within a specified timeframe.

The scheme’s legal framework requires exporters to fulfill their export obligation within 12 months from the date of authorization issuance. The export obligation is calculated based on the value of export products to be produced and exported, with inputs imported under the scheme being consumed in the production of export goods. Exporters may fulfill their obligations through exports of goods manufactured from the authorized inputs or through exports made from other sources or trading, subject to conditions specified in the policy.

The Foreign Trade Policy 2023 has streamlined this scheme through process re-engineering and automation. The Director General of Foreign Trade has implemented rule-based automatic approval systems using business analytics tools on a pilot basis for Advance Authorization extension and revalidation applications. The application fee has been reduced significantly, particularly benefiting MSMEs who constitute approximately 55 to 60 percent of exporters utilizing this scheme [5]. The entire lifecycle of authorization, including redemption applications, has been made paperless, with digital processing replacing manual interventions.

Export Promotion Capital Goods Scheme

The EPCG Scheme permits duty-free import of capital goods including machinery, equipment, and accessories required for manufacturing export products. This scheme is designed to facilitate technological upgradation of domestic industry while promoting exports. Under the scheme’s provisions, exporters can import capital goods at zero customs duty, subject to fulfillment of export obligations calculated at six times the duty saved amount over a period of six years from the date of authorization issuance.

The legal framework for EPCG is established through notifications issued under Section 25 of the Customs Act, 1962. The scheme allows import of various categories of capital goods including plant, machinery, equipment, and accessories required for manufacture or production either directly or indirectly of goods or for rendering services. This encompasses equipment for testing, research and development, quality control, and pollution control, as well as capital goods used in manufacturing, mining, agriculture, aquaculture, floriculture, and service sectors.

The export obligation under EPCG must be fulfilled through exports of goods manufactured or services rendered using the authorized capital goods. The obligation is reckoned with reference to actual duty saved in case of direct imports, while for domestic sourcing, it is calculated based on notional customs duties saved on factory outlet value. Authorization holders must maintain an Average Export Obligation equal to their export performance in the preceding three years, alongside the Specific Export Obligation of six times the duty saved. Half of the export obligation must be fulfilled in the first four years, with the remaining half in the final two years.

Failure to fulfill export obligations attracts payment of customs duties along with interest at 15 percent per annum from the date of clearance of capital goods. However, the Foreign Trade Policy provides mechanisms for extension of the export obligation period in exceptional circumstances where exporters can demonstrate that factors beyond their control prevented fulfillment of obligations. The scheme also permits transfer of capital goods from one unit to another within the same company, subject to conditions including mention of both addresses in the Importer Exporter Code and Registration cum Membership Certificate, along with submission of fresh installation certificates.

Export Oriented Units Scheme

Export Oriented Units represent a specialized category of enterprises established with the objective of exporting their entire production. The EOU Scheme, governed by Chapter 6 of the Foreign Trade Policy, provides significant duty exemptions and fiscal incentives to units undertaking to export their entire goods and services. These units enjoy exemption from payment of basic customs duty under Notification No. 52/2003-Customs dated March 31, 2003, as subsequently amended by Notification No. 59/2017-Customs dated June 30, 2017.

The regulatory framework requires EOUs to maintain a minimum investment of one crore rupees in plant and machinery, though this condition does not apply to units engaged in software technology, hardware technology, biotechnology, information technology and services, agriculture, animal husbandry, handicrafts, and certain other specified sectors. The Development Commissioner oversees the performance and compliance of individual EOUs, while the Department of Revenue implements the scheme through notifications, circulars, and instructions.

Under the goods and services tax regime, imports by EOUs are exempted from integrated tax and compensation cess pursuant to Notification No. 78/2017-Customs dated October 13, 2017, issued following the GST Council’s recommendation in its meeting held on October 6, 2017. For domestic procurements, supplies from registered persons to EOUs are treated as deemed exports under Section 147 of the Central Goods and Services Tax Act, 2017, with refunds of tax paid on such supplies being claimable either by the recipient or supplier.

EOUs are permitted to make limited clearances in the Domestic Tariff Area, subject to payment of applicable customs duties and taxes. The judicial interpretation of these provisions was clarified in Commissioner of Central Excise, Visakhapatnam-II v. NCC Blue Water Products Limited, where the Supreme Court held that unauthorized DTA sales by EOUs without Development Commissioner approval attract duties under the main charging provision of Section 3(1) of the Central Excise Act, 1944, rather than the concessional proviso [6]. This judgment emphasized the necessity of obtaining proper permissions before engaging in DTA sales to avail duty exemptions.

Special Economic Zones Framework

Special Economic Zones constitute geographically delineated areas treated as foreign territory for trade operations, customs, and tariff purposes. The SEZ Act, 2005, provides a distinct legal framework with overriding effect over other laws to the extent of any inconsistency. Units established within SEZs enjoy substantial tax benefits including 100 percent income tax exemption on export income under Section 10AA of the Income Tax Act for the first five years, 50 percent exemption for the next five years, and 50 percent exemption on ploughed back export profit for a further five years.

The customs duty regime for SEZs differs fundamentally from that applicable to EOUs. SEZ units receive exemption from customs and export duties, along with exemption from integrated goods and services tax under the IGST Act, 2017, which treats supplies to SEZs as zero-rated. The legal distinction between DTA-to-SEZ movements and exports was conclusively settled in Union of India v. Adani Power Ltd., where the Supreme Court held that export duty is not leviable on goods supplied from the Domestic Tariff Area to SEZ units or developers [7]. The Court reasoned that the definition of export under Section 2(18) of the Customs Act, 1962, means taking goods out of India to a place outside India, and since SEZs are deemed to be outside the customs territory of India for specified purposes, movements to SEZs do not constitute exports attracting export duty.

SEZ developers receive income tax exemption under Section 80-IAB of the Income Tax Act for income derived from business of development of SEZs in a block of 10 years within 15 years from the date of notification of the SEZ. They are also exempted from customs and excise duties for development of SEZs for authorized operations approved by the Board of Approval. The framework provides for single window clearance for central and state level approvals, substantially reducing administrative complexities.

Duty Drawback and Related Mechanisms

The Duty Drawback Scheme, administered by the Department of Revenue under Section 75 of the Customs Act, 1962, allows rebate of customs and central excise duties paid on imported or indigenous inputs used in the manufacture of export goods. This scheme operates independently of other export promotion schemes and provides refunds based on all-industry rates notified by the government or brand rates determined for specific exporters based on actual duty incidence.

The legal framework excludes integrated goods and services tax and compensation cess from duty drawback calculations, as these are addressed through separate refund mechanisms under GST laws. Exporters can claim duty drawback through electronic filing of shipping bills, with the customs authorities processing claims based on pre-determined rates or actual documentary evidence of duty payment on inputs consumed in export production.

The scheme coexists with RoDTEP, though exporters must choose between the two for any specific export consignment. While duty drawback addresses customs and excise duties on inputs, RoDTEP covers embedded central, state, and local taxes that were otherwise not being rebated or refunded. The complementary nature of these export promotion schemes ensures that exporters receive relief from the entire spectrum of duties and taxes that would otherwise remain embedded in export products.

Emerging Initiatives and Digital Integration

The Foreign Trade Policy 2023 introduces several innovative measures aligned with emerging trade patterns. A dedicated chapter on e-commerce exports brings such exporters under the ambit of various export promotion schemes, with the consignment-wise cap on courier exports raised from five lakh rupees to ten lakh rupees. The integration of courier and postal exports into ICEGATE enables e-commerce exporters to claim benefits under the Foreign Trade Policy, simplifying access to export incentives for digital-first businesses and new entrants.

The Districts as Export Hubs initiative represents a decentralized approach to export promotion, identifying products with export potential in each district and addressing bottlenecks through State Export Promotion Committees and District Export Promotion Committees. This initiative creates institutional mechanisms to strategize exports at the grassroots level, with district-specific export action plans outlining strategies to promote identified products and services.

The Towns of Export Excellence Scheme recognizes clusters with export potential, with four new towns namely Faridabad, Mirzapur, Moradabad, and Varanasi designated as Towns of Export Excellence in addition to 39 existing towns [8]. These towns receive priority access to export promotion funds under the Market Access Initiatives Scheme, with Common Service Providers entitled to authorization under the EPCG Scheme, enabling increased competitiveness without requiring individual exporters to own all infrastructure for converting inputs to final export products.

Monitoring, Compliance, and Enforcement under Export Promotion Schemes

The regulatory framework establishes stringent compliance requirements to prevent misuse of export promotion schemes. The DGFT maintains a comprehensive monitoring system through automated IT platforms, with risk management systems enabling selective physical verification of exporters’ records. The entire lifecycle of authorizations under schemes like Advance Authorization and EPCG has been digitized, creating audit trails and reducing opportunities for manipulation.

The enforcement mechanism includes provisions for penalties and confiscation in case of violations. Exporters failing to fulfill export obligations under time-bound schemes become liable to pay applicable customs duties along with interest. The DGFT and customs authorities conduct regular audits and inspections to verify compliance with scheme conditions, with provisions for recovery of undue benefits availed through misrepresentation or suppression of facts.

The one-time Amnesty Scheme introduced in the Foreign Trade Policy 2023 provided exporters an opportunity to regularize pending cases of default in export obligations by paying customs duties exempted in proportion to unfulfilled obligations. This scheme, available for a limited period until September 30, 2023, aimed to relieve exporters burdened by accumulated duty and interest costs while allowing them to start afresh with a clean slate.

Conclusion

India’s export promotion architecture represents a carefully calibrated balance between facilitating trade and ensuring fiscal discipline. The export promotion schemes operate within a robust legal framework derived from the Foreign Trade (Development and Regulation) Act, 1992, and implemented through detailed policies, notifications, and guidelines. The transition from incentive-based mechanisms to remission-based schemes reflects India’s commitment to WTO compliance while maintaining support for domestic exporters.

The judicial pronouncements by the Supreme Court and various High Courts have provided clarity on critical aspects of scheme implementation, particularly regarding the distinction between EOUs and SEZs, the applicability of duties on unauthorized transactions, and the interpretation of export for customs purposes. These judgments form an important part of the jurisprudence governing export promotion, guiding both administrative authorities and exporters in proper implementation of scheme provisions.

The future trajectory of export promotion in India will likely witness greater emphasis on technology integration, collaboration between central and state governments, and alignment with international best practices. The export promotion schemes continue to evolve in response to changing trade dynamics, with regular revisions to address emerging challenges and opportunities in the global marketplace. For exporters, understanding the legal framework and compliance requirements remains essential to maximizing benefits while ensuring adherence to regulatory obligations.

References

[1] Foreign Trade (Development and Regulation) Act, 1992, available at https://www.eximguru.com/exim/dgft/acts-and-rules/foreign-trade-development-and-regulation-act-1992.aspx 

[2] Press Information Bureau, Government of India, “Foreign Trade Policy 2023 announced” (March 31, 2023), available at https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1912572 

[3] Directorate General of Foreign Trade, “RoDTEP Scheme,” available at https://www.dgft.gov.in/CP/?opt=RODTEPARR 

[4] Press Information Bureau, Government of India, “Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme gets extended to Chemicals, Pharmaceuticals and Articles of Iron & Steel” (December 7, 2022), available at https://www.pib.gov.in/PressReleasePage.aspx?PRID=1881602 

[5] India Brand Equity Foundation, “Uncover the Secrets of Foreign Trade Policy 2023 and Boost Your Business,” available at https://www.ibef.org/economy/foreign-trade-policy-2023 

[6] Commissioner of Central Excise, Visakhapatnam-II v. NCC Blue Water Products Limited, (2010) 10 SCC 505

[7] Union of India v. Adani Power Ltd., Civil Appeal No. 4489 of 2023 (Supreme Court of India, August 28, 2025)

[8] Drishti IAS, “Foreign Trade Policy 2023,” available at https://www.drishtiias.com/daily-updates/daily-news-analysis/foreign-trade-policy-2023 

[9] ClearTax, “Foreign Trade Policy of India 2023: Objectives, Highlights and Impact,” available at https://cleartax.in/s/foreign-trade-policy-2023