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 

The post Special Schemes for Promotion of Export in India appeared first on Bhatt & Joshi Associates.

Export licensing constitutes a fundamental pillar of India’s international trade architecture, serving as the primary mechanism through which the government regulates cross-border movement of goods, services, and technology. The system operates at the intersection of economic policy, national security, and international obligations, requiring businesses to navigate a complex web of statutes, policies, and administrative procedures. For any entity seeking to participate in export activities from India, understanding the export licensing framework in India is not merely a compliance requirement but a strategic necessity that can determine the success or failure of international business ventures.

The regulatory landscape governing export licenses draws its authority primarily from two parent legislations: the Foreign Trade (Development and Regulation) Act, 1992, and the Customs Act, 1962. These statutes, supplemented by the Foreign Trade Policy and various notifications, create a structured system that balances trade facilitation with regulatory oversight. The framework has evolved significantly over the past three decades, moving from a license-centric regime to a more liberalized approach that emphasizes self-certification and ease of doing business while maintaining stringent controls over sensitive items.

Legislative Framework Governing Export Licensing in India

Foreign Trade (Development and Regulation) Act, 1992

The Foreign Trade (Development and Regulation) Act, 1992 (FT(D&R) Act) represents the cornerstone legislation governing all export and import activities in India [1]. This Act, which received presidential assent on August 7, 1992, replaced the earlier Imports and Exports (Control) Act, 1947, marking a fundamental shift in India’s approach to foreign trade regulation. The primary objective of the FT(D&R) Act, as articulated in its preamble, is “to provide for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from, India and for matters connected therewith or incidental thereto.”

The Act empowers the Central Government with sweeping powers to regulate foreign trade through notifications and orders published in the Official Gazette. Under the provisions of the FT(D&R) Act, the government can make provisions for the development and regulation of foreign trade by facilitating imports and increasing exports. More significantly, the Act authorizes the government to prohibit, restrict, or otherwise regulate the import or export of goods, services, or technology in all cases or in specified classes of cases, subject to such exceptions as may be made by or under the order.

A critical provision of the FT(D&R) Act establishes that all goods covered by orders restricting or prohibiting exports shall be deemed to be goods prohibited under the Customs Act, 1962. This linkage between the two statutes creates a unified enforcement mechanism whereby violations of the Foreign Trade Policy can be prosecuted under the more stringent provisions of customs law, including confiscation and penalty provisions.

The FT(D&R) Act also established the office of the Director General of Foreign Trade (DGFT), vesting this authority with the power to grant licenses, authorizations, and the Importer-Exporter Code. The DGFT functions as the principal regulatory authority for implementing the Foreign Trade Policy and operates through regional offices across India to ensure accessibility and efficient administration.

Customs Act, 1962

The Customs Act, 1962 provides the complementary legal framework for export regulation by controlling the physical movement of goods across India’s borders [2]. While the FT(D&R) Act establishes the policy framework, the Customs Act provides the enforcement mechanism. The provisions relating to prohibited and restricted goods establish the operational framework for export licensing. The Act empowers the Central Government to issue notifications declaring the export of any goods as prohibited either absolutely or subject to specified conditions.

Goods whose export is prohibited or restricted under the FT(D&R) Act or any other law automatically fall within the ambit of prohibited goods under the Customs Act. This seamless integration ensures that policy restrictions translate into enforceable border controls. The Act prescribes severe penalties for attempting to export prohibited or restricted goods without the necessary authorization, including confiscation of goods under relevant provisions and monetary penalties that can extend up to five times the value of the goods.

The Importer-Exporter Code: Gateway to International Trade

Mandatory Requirement

The Importer-Exporter Code (IEC) represents the foundational requirement for any entity seeking to engage in export activities from India [3]. As established under the FT(D&R) Act, no person shall make any export except under an IEC unless specifically exempted. This ten-digit code, issued by the DGFT, serves as the primary business identification number for all export transactions. The IEC is mandatory for customs clearance, accessing export benefits under the Foreign Trade Policy, and facilitating international payments through banking channels.

The requirement of an IEC applies universally to all forms of business entities, whether proprietorships, partnerships, limited liability partnerships, limited companies, trusts, Hindu Undivided Families, or societies. However, there are specific exemptions carved out for certain categories of exports. Government departments and ministries conducting official exports, exports of personal effects for non-commercial purposes, and exports below specified value thresholds to neighboring countries like Nepal and Myanmar are exempt from the IEC requirement. Additionally, service exporters who are not availing benefits under the Foreign Trade Policy are not required to obtain an IEC, though most service providers opt to secure one to maintain flexibility in their business operations.

Application Process and Validity

The process of obtaining an IEC has been substantially streamlined through digitization and integration with the Goods and Services Tax (GST) system. Following the implementation of GST, the IEC number issued corresponds to the Permanent Account Number (PAN) of the entity, though the DGFT continues to issue the IEC separately through an online application process. Applicants must possess a valid PAN, a bank account in the name of the firm, and a verifiable business address before initiating the application.

The application process is conducted entirely online through the DGFT portal. Applicants must register on the portal, fill out the prescribed application form, upload required documents including PAN details, bank account information, and address proof, and pay the nominal application fee. Upon successful verification, which typically occurs within two working days, the IEC is issued electronically and sent to the registered email address. The IEC, once issued, has lifetime validity provided the holder complies with the annual updating requirement.

One distinctive feature of IEC management is the annual updating mandate. Between April and June each year, IEC holders must update their details on the DGFT portal to prevent deactivation. This updating process serves multiple purposes including verification of continued business activity, updating of contact information, and maintenance of accurate databases for trade analysis and policy formulation. Failure to complete the annual update results in deactivation of the IEC, though it can be reactivated upon subsequent updating.

Export Authorization and Licensing Categories in India

Free Exports

Under India’s liberalized trade regime, the majority of goods are freely exportable without requiring specific licenses or authorizations [4]. The Foreign Trade Policy operates on the principle that all goods are free for export unless specifically restricted or prohibited. This negative list approach significantly reduces the compliance burden on exporters and facilitates ease of doing business. Exporters of freely exportable goods need only possess a valid IEC and comply with applicable customs procedures to effect shipments.

The free export category encompasses the vast majority of manufactured goods, agricultural products, and services. However, even for freely exportable goods, exporters must ensure compliance with quality standards, labeling requirements, and any sector-specific regulations that may apply. Additionally, certain freely exportable goods may require certificates from designated agencies verifying compliance with health, safety, or environmental standards.

Restricted Exports

Certain categories of goods are designated as restricted for export, meaning they can be exported only after obtaining the necessary license or authorization from the DGFT or other competent authority [5]. Restrictions are typically imposed for reasons including ensuring adequate domestic availability, preventing environmental degradation, protecting endangered species, maintaining food security, or complying with international treaty obligations.

The list of restricted items is published in the ITC (HS) Classification of Export and Import Items, which is regularly updated through notifications. Restricted items include certain chemicals and pharmaceuticals, seeds and plant materials, minerals and ores, certain food items during periods of shortage, and items subject to export control regimes. Exporters seeking to export restricted goods must apply for an export license from the DGFT, demonstrating compliance with applicable conditions such as minimum export price, quantity restrictions, or end-use certificates.

Prohibited Exports

Prohibited goods represent the most stringent category, encompassing items whose export is completely forbidden under law [6]. The prohibition may be absolute or may apply except under specific circumstances defined by law. Examples of prohibited exports include beef and beef products in most states, wildlife products covered under the Wildlife Protection Act, antiquities and art treasures protected under the Antiquities and Art Treasures Act, and certain strategic materials and technologies unless authorized under exceptional circumstances.

The distinction between prohibited and restricted goods carries significant legal implications. While restricted goods can be exported with proper authorization, prohibited goods cannot be exported under any ordinary circumstances. Attempts to export prohibited goods attract the harshest penalties under both the Customs Act and the FT(D&R) Act, including mandatory confiscation and substantial monetary penalties.

Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET)

The SCOMET regime represents India’s commitment to international non-proliferation norms and export control obligations [7]. As a responsible member of the global community, India participates in several multilateral export control regimes including the Missile Technology Control Regime, the Wassenaar Arrangement, and the Australia Group. The SCOMET list consolidates items that are subject to export controls due to their potential for military applications or use in weapons of mass destruction.

Export of SCOMET items requires specific authorization from the DGFT, which conducts a careful evaluation of each application considering factors including the nature of the item, the destination country, the end-user, and the end-use. The Foreign Trade Policy 2023 has streamlined the SCOMET licensing procedure by introducing general authorizations for certain categories of items to specified countries, reducing processing times while maintaining the integrity of controls. However, exporters must exercise extreme caution when dealing with SCOMET items, as unauthorized exports can result in severe penalties and criminal prosecution.

Export Incentive Schemes and Authorizations

Advance Authorization Scheme

The Advance Authorization Scheme allows exporters to import inputs required for export production at zero customs duty, subject to fulfillment of export obligations [8]. This scheme addresses the challenge of duty incidence on inputs, which can erode the competitiveness of Indian exports. Under this scheme, exporters can obtain an authorization permitting duty-free import of inputs based on standard input-output norms or self-declared norms subject to post-export verification.

The scheme is available to manufacturer exporters, merchant exporters tied to supporting manufacturers, and exporters making deemed exports to specified categories. The authorization specifies the quantity of inputs permitted for import, the export obligation to be fulfilled within a specified timeframe, and any conditions applicable to the specific product or sector. Failure to fulfill export obligations results in recovery of duty foregone along with interest and potential penalties.

Export Promotion Capital Goods (EPCG) Scheme

The EPCG Scheme permits importation of capital goods for pre-production, production, and post-production at concessional rates of customs duty, subject to an export obligation [9]. This scheme facilitates technological upgradation and capacity enhancement by reducing the capital cost burden on exporters. Under the scheme, exporters can import capital goods at zero duty in most cases, with an obligation to achieve specified export performance over a defined period, typically six to eight years.

Recent judicial developments have clarified critical aspects of the EPCG Scheme’s operation. Courts have established that the classification of goods by the DGFT under an EPCG authorization is binding on customs authorities, preventing disputes over tariff classification and ensuring certainty for exporters. Additionally, the Supreme Court has upheld the validity of pre-import conditions imposed under the scheme, affirming the DGFT’s authority to prescribe specific procedures for effective administration of the scheme.

Recent Developments in Foreign Trade Policy 2023

The Foreign Trade Policy 2023, which came into effect from April 1, 2023, represents a paradigm shift in India’s approach to export regulation [1]. Unlike previous iterations that operated on a five-year cycle, the FTP 2023 adopts a dynamic approach without a fixed end date, allowing for continuous updates in response to evolving trade dynamics. This flexibility enables the government to respond swiftly to changing global conditions, emerging opportunities, and new challenges.

The FTP 2023 is built on four foundational pillars: incentive to remission, export promotion through collaboration, ease of doing business and emerging areas, and process re-engineering. Under the incentive framework, the policy shifts emphasis from direct incentives to duty remission schemes like the Remission of Duties and Taxes on Export Products (RoDTEP), which neutralizes the incidence of embedded central, state, and local duties and taxes.

The policy introduces several innovative provisions including the amnesty scheme for regularization of defaults under Advance Authorization and EPCG schemes, allowance of merchanting trade whereby Indian intermediaries can facilitate shipments between two foreign countries without goods touching Indian ports, and expanded recognition under the Towns of Export Excellence Scheme. The FTP 2023 also places significant emphasis on streamlining the SCOMET policy and developing districts as export hubs through coordinated action at the state and local government levels.

Judicial Interpretations and Case Law

Procedural Lapses and Substantive Rights

The judiciary has played a crucial role in interpreting export licensing provisions and balancing procedural compliance with substantive rights of exporters. A landmark ruling came in the case of M/s Shah Nanji Nagsi Exports Pvt. Ltd. v. Union of India, decided by the Supreme Court on August 19, 2025 [8]. This case addressed the denial of benefits under the Merchandise Exports from India Scheme (MEIS) due to a clerical error in shipping bills where the customs broker incorrectly marked the intent to claim benefits as “No” instead of “Yes.”

The Supreme Court held that beneficial export schemes must be interpreted liberally and that procedural lapses, when duly corrected under statutory authority, cannot defeat substantive rights to claim benefits. The Court observed that the amendment of shipping bills had been carried out in accordance with provisions of the Customs Act, and the exporter’s substantive entitlement could not be frustrated by system limitations or technical issues. The Court directed the DGFT and the Central Board of Indirect Taxes and Customs to upgrade their technology systems to ensure that genuine exporters are not deprived of legitimate benefits due to rectifiable clerical errors.

Prohibited Goods and Customs Enforcement

In another significant ruling, the Supreme Court in Union of India v. Agricas LLP clarified the scope of prohibited goods under the Customs Act in relation to DGFT notifications [2]. The Court held that goods imported or exported in violation of DGFT notifications fall within the category of prohibited goods under the Customs Act, making them liable for absolute confiscation. The Court rejected arguments that such goods should be treated as merely restricted, holding that when the DGFT imposes quantitative restrictions and exporters exceed those limits, the excess quantities constitute prohibited goods.

The Court emphasized that when personal business interests of importers or exporters clash with public interest, particularly concerning national economy and farmers’ interests, the former must give way to the latter. However, the Court did provide limited relief by permitting re-export of the goods on payment of redemption fine and discharge of other statutory obligations, recognizing that absolute confiscation without any avenue for mitigation could be disproportionately harsh in certain circumstances.

Penalties and Enforcement Mechanisms

The enforcement architecture for export licensing violations operates through multiple statutory frameworks in India, creating a robust deterrent against non-compliance. Under the FT(D&R) Act, violations can result in suspension or cancellation of the IEC, imposition of monetary penalties, and initiation of criminal proceedings in serious cases. The Act authorizes adjudicating authorities to conduct inquiries, summon witnesses, and examine records to determine violations.

The Customs Act provides for more stringent enforcement measures. Attempted export of prohibited or restricted goods without authorization can result in confiscation of goods, confiscation of any conveyance used for transportation, and imposition of penalties up to five times the value of goods. For prohibited goods, adjudicating authorities have discretion to order absolute confiscation without the option of redemption on payment of fine. Additionally, persons involved in such violations can face prosecution under criminal provisions, with potential imprisonment and fines.

Recent amendments have strengthened enforcement capabilities by empowering settlement commissions to regularize export obligation defaults under specified circumstances, providing a pathway for exporters who genuinely face difficulties in meeting obligations to settle their cases by payment of duties, interest, and penalties without facing protracted litigation.

Compliance Best Practices

Effective compliance with export licensing in India requirements demands a proactive approach that goes beyond mere regulatory adherence to encompass strategic planning and operational excellence. Exporters should establish robust internal systems for classification of goods, ensuring accurate determination of whether items fall under free, restricted, or prohibited categories. Misclassification can lead to serious consequences including seizure of goods, penalties, and potential criminal liability.

Regular monitoring of policy changes is essential given the dynamic nature of the Foreign Trade Policy and frequent notifications amending export conditions. Exporters should designate compliance officers responsible for tracking regulatory updates, conducting periodic internal audits, and ensuring staff training on compliance requirements. Maintenance of accurate documentation is critical, as authorities may demand evidence of compliance months or years after shipments have been effected.

When dealing with restricted or SCOMET items, exporters should engage with the DGFT proactively, seeking clarifications where necessary and ensuring that license applications are complete and accurate. The importance of engaging qualified customs brokers and freight forwarders cannot be overstated, as these professionals serve as the frontline interface with regulatory authorities and their competence directly impacts compliance outcomes.

Conclusion

Export licensing in India represents a carefully calibrated system that seeks to promote legitimate trade while safeguarding national interests and international obligations. The legal framework, anchored in the FT(D&R) Act and the Customs Act, has evolved significantly over three decades to accommodate the changing needs of India’s export sector. The shift toward liberalization, digitization, and process simplification under successive Foreign Trade Policies reflects the government’s commitment to facilitating ease of doing business while maintaining necessary controls over sensitive items.

Judicial interpretations have played a constructive role in ensuring that export licensing in India operates fairly, with courts consistently emphasizing that procedural requirements should not be weaponized to deny substantive rights to genuine exporters. The recent Supreme Court ruling directing systemic reforms to prevent genuine exporters from suffering due to technical glitches exemplifies the judiciary’s supportive approach toward legitimate trade.

For exporters, success in navigating the licensing framework requires not just understanding the letter of the law but appreciating its spirit and objectives. Compliance should be viewed not as a burden but as an investment in business sustainability and reputation. As India aspires to become a major global exporter with ambitious targets, a well-functioning licensing system that balances facilitation with regulation will remain central to achieving these objectives.

References

[1] Foreign Trade Policy 2023, Directorate General of Foreign Trade. Available at: https://www.dgft.gov.in/CP/?opt=ft-policy 

[2] The Foreign Trade (Development and Regulation) Act, 1992. Available at: https://www.indiacode.nic.in/handle/123456789/1947 

[3] DGFT IEC Profile Management. Available at: https://www.dgft.gov.in/CP/?opt=iec-profile-management 

[4] India Filings, Foreign Trade Policy 2023. Available at: https://www.indiafilings.com/learn/foreign-trade-policy-2023/ 

[5] Invest India, Foreign Trade Policy 2023. Available at: https://www.investindia.gov.in/foreign-trade-policy-2023 

[6] The Customs Act, 1962. Available at: https://www.indiacode.nic.in/handle/123456789/2475

[7] Lexology, Export Controls in India. Available at: https://www.lexology.com/library/detail.aspx?g=9736bb5d-25c0-4915-bbb3-3fcfe1686791 

[8] M/s Shah Nanji Nagsi Exports Pvt. Ltd. v. Union of India, Supreme Court, August 2025. Available at: https://www.livelaw.in/supreme-court/supreme-court-directs-dgft-cbic-to-update-tech-systems-to-ensure-genuine-exporters-dont-lose-benefits-over-clerical-errors-302059 

[9] ClearTax, Foreign Trade Policy 2023. Available at: https://cleartax.in/s/foreign-trade-policy-2023 

Authorized and published by Dhrutika Barad

The post Export licensing in India: Legal Framework and Regulatory Compliance appeared first on Bhatt & Joshi Associates.

Export trade has emerged as a critical component of India’s economic growth strategy, contributing significantly to the nation’s foreign exchange reserves and industrial development. The process of identifying products for export requires exporters to navigate through a complex web of legal frameworks, regulatory classifications, and compliance requirements. This systematic approach ensures that Indian exports maintain international standards while adhering to domestic trade policies. Understanding the legal architecture governing export product identification has become essential for businesses seeking to participate in global value chains and capitalize on international trade opportunities.

The identification of export products in India operates within a structured regulatory framework designed to facilitate legitimate trade while preventing misuse of export privileges. This framework encompasses multiple layers of classification systems, licensing requirements, and compliance mechanisms that work together to create a transparent and efficient export ecosystem.

The Legislative Foundation: Foreign Trade Development and Regulation Act, 1992

The cornerstone of India’s export regulation system rests upon the Foreign Trade (Development and Regulation) Act, 1992, which replaced the restrictive Imports and Exports (Control) Act, 1947 [1]. Enacted on August 7, 1992, this legislation marked a paradigm shift from a control-oriented approach to one focused on development and facilitation of foreign trade. The Act provides the Central Government with comprehensive powers to formulate and implement foreign trade policies through orders published in the Official Gazette.

Under Section 3 of the Foreign Trade (Development and Regulation) Act, 1992, the Central Government is empowered to make provisions for the development and regulation of foreign trade by facilitating imports and increasing exports [1]. This provision enables the government to prohibit, restrict, or otherwise regulate the import or export of goods in specified classes of cases. The legislative framework establishes that all goods subject to orders under this section are deemed to be goods whose import or export has been prohibited under Section 11 of the Customs Act, 1962, thereby integrating customs and trade regulations.

The Act introduced the concept of the Importer-Exporter Code Number under Section 7, which mandates that no person shall make any import or export except under such a code number granted by the Director General of Foreign Trade or authorized officers [1]. This requirement serves as the first step in product identification for export, creating a database of legitimate exporters and establishing accountability in the export process. The Director General of Foreign Trade, appointed under Section 6 of the Act, holds the responsibility for advising the Central Government on export policy formulation and ensuring its implementation across the trade ecosystem.

Customs Act, 1962: The Foundation of Product Classification

The Customs Act, 1962, provides the statutory framework for product classification and valuation in export transactions. Section 2 of the Customs Act defines critical terms including “export” as taking out of India any goods by land, sea, or air [2]. The Act establishes the assessment mechanism under which customs authorities determine the dutiability of goods and applicable rates based on tariff classification, valuation, and eligibility for exemptions or concessions.

Product classification under the Customs Act follows the Harmonized Commodity Description and Coding System, which provides a standardized method for identifying goods in international trade. The assessment process, as defined in the Act, requires determination of tariff classification in accordance with the Customs Tariff Act, 1975, and valuation of goods based on transaction value or other prescribed methods. For exports, Section 16 of the Customs Act specifies that the rate of duty and tariff valuation applicable to export goods shall be determined as per the provisions in force at the time of export.

Section 50 of the Customs Act mandates that exporters must make entry of goods for exportation by presenting a shipping bill for goods exported by vessel or aircraft, or a bill of export for goods exported by land [2]. This requirement ensures proper documentation and classification of export products before they leave Indian territory. The shipping bill or bill of export must contain accurate information about the nature, quantity, and value of goods, forming the basis for product identification in the export process.

Indian Trade Classification (Harmonized System) Code Structure

The Indian Trade Classification based on Harmonized System, commonly known as ITC-HS code, represents India’s primary method for classifying items in trade and import-export operations [3]. The Directorate General of Foreign Trade issues these codes, which consist of an eight-digit alphanumeric system representing specific classes or categories of goods. This classification system enables exporters to identify applicable regulations, duty rates, and policy restrictions for their products.

The ITC-HS code structure builds upon the international six-digit Harmonized System maintained by the World Customs Organization, with India adding two additional digits to meet national trade requirements [4]. The first two digits represent the chapter covering a broad category of goods, the next two digits indicate the heading within that chapter, followed by two digits for the sub-heading, and finally two digits developed under India’s national classification system for specific items. This hierarchical structure allows for precise product identification while maintaining alignment with global classification standards.

Schedule 1 of the ITC-HS classification lays down the import policy regime, while Schedule 2 details the export policy regime [5]. These schedules categorize goods into different classifications including free items, restricted items, prohibited items, and items exportable only through State Trading Enterprises. The classification determines whether an exporter needs special licenses or authorizations to export particular products. On January 13, 2025, the Directorate General of Foreign Trade updated the export policy under Schedule II, aligning it with the Finance Act 2024, to cover all ITC-HS codes with item-specific conditions using the globally accepted eight-digit system [3].

Foreign Trade Policy 2023: The Current Export Framework

The Foreign Trade Policy 2023, which came into effect on April 1, 2023, establishes the current operational framework for export product identification and promotion [6]. This policy document builds upon four foundational pillars: incentive to remission, export promotion through collaboration, ease of doing business, and emerging areas including e-commerce and districts as export hubs. The policy emphasizes process re-engineering and automation to facilitate ease of doing business for exporters while maintaining robust controls on sensitive and dual-use items.

The Foreign Trade Policy 2023 introduces several mechanisms to assist exporters in product identification and classification. The policy streamlines the Advance Authorization and Export Promotion Capital Goods schemes, enabling duty-free import of inputs and capital goods for export-oriented production [6]. These schemes require accurate product identification to ensure that imported materials correspond to the intended export products. The policy also extends recognition to new Towns of Export Excellence, including Faridabad, Mirzapur, Moradabad, and Varanasi, focusing on specific product categories like handlooms, handicrafts, and carpets.

A significant feature of the Foreign Trade Policy 2023 involves the promotion of e-commerce exports by bringing such exporters under the ambit of various export promotion schemes [7]. This development requires exporters to properly classify digital and physical products sold through e-commerce channels, ensuring compliance with both traditional export regulations and emerging digital trade requirements. The policy increases the value limit for exports through couriers to one million rupees per consignment, necessitating accurate product declaration and classification for customs clearance.

Product Classification and Compliance Requirements

Exporters must determine whether their products fall under free, restricted, or prohibited categories before initiating export transactions. Free items can be exported without restrictions under the Open General License provisions, while restricted items require specific licenses or authorizations from the Directorate General of Foreign Trade. Prohibited items cannot be exported except in extraordinary circumstances approved by competent authorities. The classification of products into these categories depends on various factors including national security considerations, environmental protection requirements, and international treaty obligations.

Special Chemicals, Organisms, Materials, Equipment, and Technologies, commonly known as SCOMET items, constitute a distinct category requiring careful identification and special export authorizations [8]. These dual-use items have potential applications in both civil and military sectors, including weapons of mass destruction. The SCOMET list organizes items under eight categories, and their export requires authorization from the Directorate General of Foreign Trade, Department of Atomic Energy, or Department of Defense Production depending on the specific item and end-use. On September 2, 2024, the Directorate General of Foreign Trade issued an updated SCOMET list with changes effective from October 2, 2024, providing transition time for businesses to comply with new requirements [8].

Exporters must also consider quality certification requirements when identifying products for export. The Bureau of Indian Standards establishes quality standards for imported and exported goods, operating product certification schemes under an Act of Parliament [9]. Certain products require mandatory compliance with specified Indian quality standards and Bureau of Indian Standards certification before export. These requirements ensure that Indian exports meet international quality benchmarks and maintain the country’s reputation in global markets.

Documentation and Procedural Requirements

Accurate product identification forms the foundation for preparing essential export documentation. The commercial invoice must contain detailed information about the goods sold, including descriptions, quantities, and values. The packing list provides information about packaging dimensions and weights, while the certificate of origin proves the geographical origin of goods, enabling exporters to claim benefits under various trade agreements. The shipping bill or bill of export serves as the primary declaration document to customs authorities, incorporating the ITC-HS code classification and detailed product specifications [2].

Exporters must also prepare inspection certificates where required, ensuring that products meet quality standards and specifications demanded by importing countries. The bill of lading or airway bill serves as evidence of dispatch and establishes the contract with the carrier for goods transportation. All these documents rely on accurate product identification and classification to ensure customs clearance and compliance with applicable regulations.

The goods and services tax framework adds another layer to export documentation requirements. While exports are zero-rated under the GST structure, meaning no tax applies to exported products, exporters can claim refunds on input tax credit for GST paid during the manufacturing process [7]. This refund mechanism requires proper product classification and documentation to establish the connection between inputs consumed and export products manufactured.

Remission and Exemption Schemes for Export Products

The Remission of Duties and Taxes on Exported Products scheme, operational since January 1, 2021, provides refunds for taxes and duties that are not otherwise exempted or refunded under existing schemes [7]. Product identification plays a crucial role in determining eligibility under this scheme, as specific rates apply to different product categories based on their ITC-HS classification. With effect from December 15, 2022, previously uncovered sectors including pharmaceuticals, organic and inorganic chemicals, and articles of iron and steel were brought under the scheme, expanding the scope of products eligible for duty remission.

The Advance Authorization Scheme permits duty-free import of inputs required for manufacturing export products, with quantities determined based on Standard Input-Output Norms for specific export products [9]. Accurate product identification enables the Directorate General of Foreign Trade to establish these norms, considering the materials physically incorporated in export products and the fuel, oil, and catalysts consumed during production. The scheme operates on both pre-export and post-export bases, providing flexibility to different categories of exporters.

The Export Promotion Capital Goods scheme enables duty-free import or indigenous sourcing of capital goods for technology upgrading, subject to fulfillment of export obligations [6]. Products classified under this scheme must be clearly identified and linked to specific export commitments. The Foreign Trade Policy 2023 reduces application fees under this scheme to benefit micro, small, and medium-sized enterprises, which constitute approximately fifty-five to sixty percent of exporters.

Regulatory Authorities and Their Roles

The Directorate General of Foreign Trade functions as the principal regulatory authority for export product identification and policy implementation. Established under the Foreign Trade (Development and Regulation) Act, 1992, the Directorate General advises the Central Government on export policy formulation and carries responsibility for implementing trade policies [1]. The organization maintains regional offices across India and processes applications for Importer-Exporter Code numbers, export licenses, and authorizations under various schemes.

The Central Board of Indirect Taxes and Customs, operating under the Ministry of Finance, handles customs clearance and classification verification for export products. Customs officers assess export declarations, verify product classifications, and ensure compliance with applicable laws and regulations [2]. The Board also implements risk management systems to identify potential violations while facilitating legitimate trade through automated clearance mechanisms.

The Bureau of Indian Standards plays a specialized role in quality certification and standards compliance for export products. The organization develops and implements standards for various product categories and operates certification schemes to verify compliance with these standards [9]. For products under compulsory certification requirements, exporters must obtain Bureau of Indian Standards approval before initiating export transactions.

Emerging Trends in Export Product Identification

Digital transformation initiatives under the Foreign Trade Policy 2023 are revolutionizing product identification and classification processes. The implementation of automated information technology systems with risk management capabilities enables faster processing of applications and approvals under various export schemes [6]. The Directorate General of Foreign Trade has introduced rule-based automatic approval systems using business analytics tools, initially implemented on a pilot basis for Advance Authorization extension and revalidation applications.

The Common Digital Platform for Certificate of Origin represents another technological advancement facilitating product identification in the context of Free Trade Agreement utilization [7]. This platform enables self-certification of certificates of origin and automatic approval where feasible, reducing processing times and compliance burdens for exporters. The initiative also contemplates electronic exchange of certificate of origin data with partner countries, enhancing transparency and reducing documentation requirements.

The Districts as Export Hubs initiative focuses on identifying products with export potential at the district level, creating tailored strategies for promoting specific products and services [7]. This approach requires detailed product mapping and identification of local manufacturing capabilities, addressing infrastructure and logistics bottlenecks that impede exports. District Export Action Plans outline specific strategies to promote identified products, converging with existing schemes to support export-oriented ecosystems.

Conclusion

Identifying products for export in India requires navigation through a sophisticated legal and regulatory framework encompassing multiple statutes, classification systems, and compliance requirements. The Foreign Trade (Development and Regulation) Act, 1992, establishes the legislative foundation, while the Customs Act, 1962, provides the classification and assessment framework. The ITC-HS code system offers the technical mechanism for product identification, and the Foreign Trade Policy 2023 sets current operational guidelines.

Successful export product identification depends on understanding the interplay between these legal instruments and regulatory mechanisms. Exporters must accurately classify their products using the eight-digit ITC-HS code system, determine applicable restrictions or prohibitions, obtain necessary licenses and certifications, and prepare comprehensive documentation supporting their export declarations. The digital transformation of trade processes and emphasis on ease of doing business are making product identification more accessible to exporters, particularly micro, small, and medium-sized enterprises.

The regulatory framework continues evolving to address emerging challenges in international trade, including e-commerce exports, dual-use technology items, and environmental considerations. Exporters must remain vigilant about policy updates and classification changes to ensure ongoing compliance and optimize benefits available under various export promotion schemes. With India targeting significant export growth in coming years, robust product identification systems will remain essential to achieving trade objectives while maintaining regulatory integrity and international commitments.

References

[1] The Foreign Trade (Development and Regulation) Act, 1992. Ministry of Commerce and Industry, Government of India. Available at: https://www.commerce.gov.in/wp-content/uploads/2021/06/Foreign_Trade_Development__Regulation_Act_1992.pdf 

[2] The Customs Act, 1962. India Code. Available at: https://www.indiacode.nic.in/handle/123456789/2475 

[3] India Briefing. (2025). Import and Export Procedures in India. Available at: https://www.india-briefing.com/news/import-export-procedures-india-19125.html/ 

[4] Wise. ITC HS Code List India. Available at: https://wise.com/in/import-duty/itchs-code 

[5] GST India. Indian Trade Classification (Harmonised System) of Exports and Imports. Available at: https://www.gstindia.biz/ftp-content-short-title.php?id=czoyOiI3MSI7 

[6] ClearTax. (2025). Foreign Trade Policy of India 2023: Objectives, Highlights and Impact. Available at: https://cleartax.in/s/foreign-trade-policy-2023 

[7] Press Information Bureau, Government of India. (2023). Government takes various export promotion initiatives like New Foreign Trade Policy. Available at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=1988823 

[8] ELP Law. (2024). SCOMET Update 2024: Amendment in Appendix 3. Available at: https://elplaw.in/wp-content/uploads/2024/09/SCOMET-Update-2024-SCOMET-Updates-2024-Amendment-in-Appendix-3-SCOMET-items-to-Schedule-2-of-ITC-HS-Classification-of-Export-and-Import-Items-2018.pdf 

[9] U.S. Trade.gov. India – Import Requirements and Documentation. Available at: https://www.trade.gov/country-commercial-guides/india-import-requirements-and-documentation 

Authorized and Published by Aaditya Bhatt

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