India’s Key Trade Schemes: A Quick Guide for Exporters & Importers

About India’s Foreign Trade Policy

India’s Foreign Trade Policy (FTP) serves as the cornerstone for the nation’s engagement with the global economy, outlining strategies and support mechanisms to enhance international trade. The current policy framework, FTP 2023, marks a significant shift, moving towards a dynamic, facilitation-focused approach that emphasizes remission of duties and taxes over direct incentives, aligning with global trade norms. With an ambitious goal of reaching USD 2 trillion in exports by 2030 , the policy leverages technology, collaboration, and targeted schemes to boost competitiveness.  

Key government schemes

For businesses engaged in international trade, understanding the key government schemes available is crucial for optimizing costs, enhancing competitiveness, and navigating the regulatory landscape. This guide provides a detailed overview of the major schemes currently supporting exporters and importers in India.

1. Remission of Duties and Taxes on Exported Products (RoDTEP)

• What is it? The RoDTEP scheme is a flagship initiative designed to refund various embedded central, state, and local duties, taxes, and levies that are incurred during the manufacturing and distribution of exported goods but are not rebated through other mechanisms like GST refunds or Duty Drawback. Its core objective is to ensure that taxes are not exported, thereby achieving zero-rating for exports and making Indian products more price-competitive globally. Importantly, RoDTEP was structured to be compliant with World Trade Organization (WTO) rules, replacing the earlier Merchandise Exports from India Scheme (MEIS).  
• Who is it for? This scheme targets exporters across various sectors who seek to enhance their global competitiveness by neutralizing the impact of domestic taxes embedded in their export products.  
• Key Benefits:
  • Reimburses previously unrefunded taxes like VAT on fuel used in transportation, electricity duty, and mandi tax.  
  • Refunds are issued as transferable duty credit e-scrips maintained in an electronic ledger.  
  • These e-scrips can be used to pay Basic Customs Duty (BCD) on imported goods or can be sold to other importers, providing liquidity.  
  • The entire process, from claim filing to credit issuance, is digitized and managed through the ICEGATE portal, ensuring transparency and faster processing.  
• Who Can Apply? The scheme is open to all exporters holding a valid Importer-Exporter Code (IEC). It applies only to specified goods exported to specified markets, with rates notified in Appendix 4R of the Handbook of Procedures. Exporters must indicate their intention to claim RoDTEP benefits on the electronic shipping bill at the time of export. Certain categories are typically excluded, such as exports from Special Economic Zones (SEZs) or Export Oriented Units (EOUs) , although an interim extension of RoDTEP benefits to SEZ/EOU/Advance Authorisation exports until February 5, 2025, has been notified.  

2. Advance Authorisation (AA)

• What is it? The Advance Authorisation scheme facilitates the duty-free import of inputs that are physically incorporated into the final export product, accounting for normal process wastage. It can also cover the duty-free import of fuel, oil, and catalysts consumed or utilized during the production process for exports.  
• Who is it for? This scheme is designed for exporters who want to reduce the cost of production for goods manufactured specifically for export markets by eliminating duties on required inputs.  
• Key Benefits:
  • Provides exemption from paying Basic Customs Duty (BCD), Additional Customs Duty, Education Cess, Anti-dumping Duty, Countervailing Duty, Safeguard Duty, IGST, and Compensation Cess on the import of specified inputs.  
  • Significantly lowers the input cost for export manufacturing.  
  • Exporters with a consistent export history can opt for an Advance Authorisation for Annual Requirement, simplifying regular imports.  
  • FTP 2023 introduced reduced application fees for MSMEs under this scheme.  
• Who Can Apply? The scheme is available to manufacturer exporters and merchant exporters who are tied to supporting manufacturers. Authorisations are typically issued based on Standard Input Output Norms (SION) or, where unavailable, ad-hoc norms based on self-declaration. Imports under AA are subject to an ‘actual user’ condition and a time-bound Export Obligation (EO), generally 18 months.  

3. Duty Drawback Scheme (DBK)

• What is it? Administered by the Department of Revenue (CBIC) , the Duty Drawback scheme provides a refund of Customs and Central Excise duties that were paid on inputs (whether imported or indigenous) used in the manufacture of goods subsequently exported.  
• Who is it for? This scheme is for exporters who have utilized duty-paid inputs in their export production process and seek reimbursement for those duties to ensure their products remain competitive internationally.  
• Key Benefits:
  • Refunds duties already paid on inputs, effectively neutralizing the tax component in the export cost.  
  • Enhances the price competitiveness of Indian goods in global markets.  
  • Drawback can be claimed either at pre-determined All Industry Rates (AIR) published in a schedule or through Brand Rate fixation based on actual duty incidence for specific products.  
• Who Can Apply? Any exporter who manufactures and exports goods using inputs on which applicable Customs or Central Excise duties have been paid can apply for Duty Drawback.  

4. Export Promotion Capital Goods (EPCG) Scheme

• What is it? The EPCG scheme aims to facilitate the import of capital goods (including machinery, equipment, components, computer systems, software integral to capital goods, spares, tools, moulds, etc.) at zero customs duty. This is intended to enhance the production quality of goods and services, thereby boosting India’s manufacturing capabilities and export competitiveness.  
• Who is it for? This scheme targets manufacturer exporters, merchant exporters tied to supporting manufacturers, and service providers who need to import capital goods to upgrade their production or service delivery capabilities for the export market.  
• Key Benefits:
  • Exemption from Basic Customs Duty (BCD) on the import of eligible capital goods.  
  • Exemption from the Integrated Goods and Services Tax (IGST) and Compensation Cess on these imports.  
  • Permits indigenous sourcing of capital goods, offering a concessional Export Obligation in such cases.  
  • FTP 2023 provides for reduced application fees for MSMEs and reduced obligations for units under PM MITRA parks.  
• Who Can Apply? Manufacturer exporters, merchant exporters tied to supporting manufacturers, and service providers (including sectors like hotels, travel operators, logistics, construction) are eligible. An EPCG license must be obtained from the DGFT prior to import. The scheme carries a significant Export Obligation (EO), requiring the export of goods/services worth six times the value of duties, taxes, and cess saved on the imported capital goods, to be fulfilled within six years. A reduced EO applies for specified Green Technology Products. Capital goods are subject to an ‘actual user’ condition until the EO is completed.  

5. Interest Equalisation Scheme (IES)

• What is it? The IES aims to enhance the competitiveness of Indian exports by making export credit more affordable. It provides an interest subvention (equalisation) on pre-shipment and post-shipment Rupee export credit availed by eligible exporters from banks.  
• Who is it for? This scheme is for exporters, particularly MSMEs, seeking to reduce their cost of borrowing for financing export-related activities.  
• Key Benefits:
  • Directly reduces the cost of borrowing by subsidizing the interest rate on export loans.  
  • The current applicable rates (subject to validity) are generally 3% subvention for MSME manufacturer exporters across all HS lines, and 2% for other specified manufacturers/merchant exporters.  
  • The benefit is credited to the exporter’s account by the lending bank.  
• Who Can Apply? The scheme primarily targets MSME manufacturer exporters and other manufacturers/merchant exporters in specified product categories. A crucial requirement is obtaining a Unique IES Identification Number (UIN) annually through the DGFT online portal and submitting it to the bank. Crucially, the scheme has seen several short-term extensions recently, applicable only to MSME manufacturer exporters. It is currently extended until December 31, 2024, for this category, but with a significant caveat: an aggregate fiscal benefit cap of Rs. 50 Lakhs per MSME (per IEC) for the financial year 2024-25 (up to December 2024). MSMEs exceeding this cap are ineligible for further benefits during this period. This pattern creates uncertainty for exporters.  

6. Districts as Export Hubs (DEH) Initiative

• What is it? A flagship initiative under FTP 2023, DEH aims to decentralize export promotion efforts to the district level. It involves identifying products and services with unique export potential within each district, developing tailored District Export Action Plans (DEAPs), and addressing specific infrastructure, logistics, and capacity-building gaps at the grassroots.  
• Who is it for? This is a collaborative initiative targeting a broad range of stakeholders including District Administrations, District Industries Centres (DICs), State Governments, local producers, MSMEs, artisans, farmer-producer organizations, and potential exporters at the grassroots level.  
• Key Benefits:
  • Aims to diversify India’s export basket by leveraging local specializations.  
  • Stimulates local economies, generates employment, and empowers MSMEs and artisans by connecting them to global markets.  
  • Facilitates targeted infrastructure development and strengthens collaboration between central, state, and district bodies.  
• Who Can Apply? This is not an application-based scheme for individual exporters but rather an initiative requiring active participation and collaboration between government agencies and local economic actors.  

7. Export Oriented Units (EOUs), Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs), and Bio-Technology Parks (BTPs)

• What is it? These schemes are designed to create dedicated zones or units focused entirely on exports. Units under these schemes operate within a largely duty-free environment for their inputs and capital goods, conditional on exporting their entire output (subject to certain permissible sales within the Domestic Tariff Area, DTA).  
• Who is it for? These schemes target units (manufacturers, service providers, software developers, biotech units, etc.) that commit to exporting their entire production of goods or services and seek benefits like duty exemptions and simplified operational norms.  
• Key Benefits:
  • Duty-free import and/or domestic procurement of raw materials, components, consumables, capital goods, and office equipment.  
  • Reimbursement of Central Sales Tax (CST) and exemption from Central Excise Duty on specified domestic procurements.  
  • Suppliers from the DTA to these units are eligible for deemed export benefits.  
  • Permission for 100% Foreign Direct Investment (FDI) through the automatic route.  
  • Extended period (nine months) for realization of export proceeds.  
  • Permission to retain 100% of export earnings in an Exchange Earners’ Foreign Currency (EEFC) account.  
• Who Can Apply? Units undertaking to export their entire production. Requires approval and a Letter of Permission (LoP) or Letter of Intent (LoI) from the relevant authority (Unit Approval Committee/Board of Approval for EOUs; Ministry of Electronics & IT for EHTPs/STPs; Department of Biotechnology for BTPs). A minimum investment in plant and machinery (generally Rs. 1 Crore) is usually required, with exceptions. A critical requirement is to achieve positive Net Foreign Exchange Earnings (NFE) calculated cumulatively over five years.  

Navigating the Schemes

The government schemes outlined above offer significant potential benefits for Indian exporters and importers. However, each scheme comes with specific objectives, detailed eligibility criteria, application procedures, and compliance requirements (like Export Obligations or Net Foreign Exchange earnings). The shift towards digitalization, while aiming for efficiency, also necessitates digital literacy and access.  

Furthermore, the dynamic nature of the FTP 2023 and the pattern of periodic updates or extensions for certain schemes (like IES ) mean businesses must stay informed through official channels like the Directorate General of Foreign Trade (DGFT) website (dgft.gov.in) and the Central Board of Indirect Taxes and Customs (CBIC) website (cbic.gov.in).  

Given the complexities, businesses are encouraged to:

• Stay Updated: Regularly check official government portals and notifications.  
• Assess Eligibility Carefully: Thoroughly understand the criteria and obligations before applying.
• Leverage Digital Platforms: Utilize online portals like DGFT and ICEGATE for applications and information.  

By strategically utilizing these government schemes and staying abreast of policy developments, Indian businesses can enhance their competitiveness, reduce operational costs, and contribute effectively to India’s growing role in global trade.

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Dhairya Chaniyara

Senior Associate | Financial Advisory | [email protected]

Focuses on direct tax and regulatory services with a specialization in GIFT IFSC. Brings experience from various industries, including manufacturing, FMCG, IT-ITES, and healthcare, to deliver impactful tax solutions.