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. 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 Foreign Trade Policy 2023 (FTP) announced on 31 March 2023, provides a framework for foreign trade in goods and services as well as employment generation and increasing value addition.¹⁶ 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 (FTP) 2023 ¹⁷

The Government has recently announced FTP 2023, effective from 1 April 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.

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 Governments¹⁸. Incentives provided to units in an SEZ differ from state to state but may include duty-free imports of specified goods, exemptions from 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 units¹⁹.

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 payable on raw materials is deferred until the finished goods are cleared to the domestic market. Import duty on capital goods is to be paid if and when the capital goods are cleared to the domestic market. If these imported inputs are utilized for exports, the deferred duty is exempted.

Duty exemption schemes

The duty exemption scheme enables the 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.

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.

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 purview²⁰. The customs/import tariff for various goods can be viewed on the CBIC website, www.cbic.gov.in.

• 16.Foreign Trade Policy 2015-2020, Directorate General of Foreign Trade, https://www.dgft.gov.in/CP/?opt=ft-policy, as accessed on 17 July 2023
• 17. Foreign Trade Policy 2015-2020, Directorate General of Foreign Trade, http://dgftcom.nic.in/exim/2000/FTP-2017//ftp17-051217.pdf, as accessed on 17 July 2023
• 18. About us, Introduction, Special Economic Zones in India http://sezindia.nic.in/cms/introduction.php, as accessed on 17 July 2023
• 19. Foreign Trade Policy 2023, Directorate General of Foreign Trade, https://www.dgft.gov.in/CP/?opt=ft-policy, accessed 16 July 2023
• 20.About Us, Central Board of Indirect Taxes & Customs, https://old.cbic.gov.in/htdocs-cbec/about-us, accessed 16 July 2023