Trade Policy and Import and Export Controls

In India, exports and imports are regulated by the Foreign Trade (Development and Regulation) Act, 1992, and the Foreign Trade Policy (FTP). The Department of Commerce, Ministry of Commerce and Industry, formulates, implements, and monitors the policy.

The Directorate General of Foreign Trade (DGFT) runs various schemes for trade promotion and facilitation. The current policy, which is in effect from 1 April 2023, provides a framework for foreign trade in goods and services as well as employment generation and increasing value addition. It aims to link the rules, procedures, and incentives for exports and imports with other initiatives such as Make in India and Digital India to create an 'Export Promotion Mission', which will provide an institutional framework to work with State Governments to boost India's exports. The focus of the policy is to support both the manufacturing and services sectors with a special emphasis on improving the ease of doing business in India.

Foreign Trade Policy 2023 ¹⁴

The government announced FTP 2023 with a vision to increase India’s exports to USD 2 trillion by 2030. The policy places a special emphasis on process re-engineering and automation for facilitating ease of doing business for exporters.

The policy is built upon four critical pillars:

• Incentive to remission
• Export promotion through collaboration - exporters, states, districts, Indian missions
• Ease of doing business, reduction in transaction cost, and e-initiative
• Emerging Areas – e-commerce developing districts as export hubs and streamlining SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) policy

As a whole, FTP 2023 aims to strengthen India’s position in exports by manifesting automation in approvals, collaboration with multiple authorities, creating a welcoming environment for MSMEs and other businesses, and establishing India as a global leader in the export industry.

Free Trade & Preferential Trade Agreements:

Free Trade Agreements (FTAs) are an important element of India's trade strategy. The Indian Trade Portal, www.indiantradeportal.in, provides the most- favored nation and preferential tariff rates, rules of origin, sanitary and phytosanitary (SPS) standards, and Technical Barriers to Trade (TBT) under the various FTAs signed by India. It also captures the trade flows from major trading partners, among other resources. A comprehensive list of India's FTAs can be viewed on the Department of Commerce's website, www.commerce.gov.in. Such FTAs and Preferential Trade Agreements (PTAs) provide customs duty exemption benefits to importers subject to compliance with the Rules of Origin.

In a move to curb the practice of abuse of the benefits, Indian customs officers have the power to deny the customs duty exemption benefit if they are satisfied that the criteria laid down in the relevant FTAs and PTAs have not been met in relation to any import shipment.

India has recently signed a FTA with European Free Trade Association (EFTA) consisting of Iceland, Liechtenstein, Norway and Switzerland.

Export Initiatives:

Special Economic Zones (SEZs) and Export Oriented Units (EOUs): The SEZ Act, 2005, aims at attracting larger foreign investments into India by providing quality infrastructure complemented by an attractive fiscal package at the center and the state level, with minimal regulations. This Act, along with the SEZ Rules, drastically simplified procedures and provided single- window clearance on matters related to the Central and State Governments¹⁵. Incentives provided to units in an SEZ differ from state to state but may include duty-free imports of specified goods, exemptions from income tax (if an existing SEZ unit set up prior to April 2020 is acquired), zero-rating of GST, etc.

Units that export their entire production of goods and services may be set up under the EOU scheme, Electronics Hardware Technology Park (EHTP) scheme, Software Technology Park (STP) scheme, or Bio-Technology Park (BTP) scheme for the manufacture of goods, including repair, re-making, reconditioning, re-engineering, rendering of services, agriculture, etc. For such units, 100% FDI is permitted through the automatic route, similar to SEZ units¹⁶.

With the intention to encourage manufacturing and exports under the 100% EOU/EHTP/STPI/BTP schemes, these units have been provided with a fast-track clearance facility. These units are also allowed to share infrastructure, transfer goods and services between units, set up warehouses near the port of export, and use duty-free equipment for training.

Duty deferment scheme:

To promote India as a global manufacturing hub and showcase its commitment towards ease of doing business, the government is allowing import of raw materials and capital goods without payment of customs duty for manufacturing and other operations in a bonded manufacturing facility.

Under this scheme, viz., MOOWR, the customs duty, except Integrated GST (IGST), payable on raw materials is deferred until the finished goods are cleared into the domestic market. Similarly, import duty on capital goods is to be paid if and when such capital goods are cleared into the domestic market. Where the imported inputs are utilized for exports and / or the capital goods are re-exported after usage, the deferred duty is exempted.

Duty exemption schemes:

The duty exemption scheme enables duty-free import of inputs for export production. These include Advance Authorization and Duty-Free Import Authorization (DFIA). A duty remission scheme enables post-export replenishment / remission of duty on inputs used in export products and includes the Duty Drawback (DBK) scheme.

Similarly, the Export Promotion Capital Goods (EPCG) scheme allows import of capital goods for pre-production, production and post-production at zero customs duty, including exemption from IGST and Compensation Cess.

The imports under both the schemes, viz. duty exemption scheme as well as EPCG scheme are subject to an Export Obligation.

Customs regulations:

The Customs Act, 1962 provides for the levy and collection of customs duty on imports and exports, import/export procedures, prohibitions on the trade of certain goods, penalties, offenses, etc. The Central Government levies customs duty on the import and export of goods at the rates and on the basis of the classification under the Customs Tariff Act, 1975.

Tax Administration – Central Board of Indirect Taxes and Customs:

Central Board of Indirect Taxes and Customs (erstwhile Central Board of Excise & Customs) is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the tasks of formulation of policy concerning levy and collection of Customs, Central Excise duties, Central Goods & Services Tax, and IGST, prevention of smuggling and administration of matters relating to Customs, Central Excise, Central Goods & Services Tax, IGST and Narcotics to the extent under CBIC's purview¹⁷. The customs/import tariff for various goods can be viewed on the CBIC website, www.cbic.gov.in.

• 14.Foreign Trade Policy 2015-2020, Directorate General of Foreign Trade, http://dgftcom.nic.in/ exim/2000/FTP-2017//ftp17-051217.pdf
• 15. About us, Introduction, Special Economic Zones in India, https://sezindia.gov.in/introduction
• 16. Foreign Trade Policy 2023, Directorate General of Foreign Trade, https://www.dgft.gov.in/ CP/?opt=ft-policy
• 17. About Us, Central Board of Indirect Taxes & Customs, https://www.cbic.gov.in/entities/who-we-are