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 2015–2020 (FTP) announced on 1 April 2015, provides a framework for foreign trade in goods and services as well as employment generation and increasing value addition.¹⁴ 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.

On 31 March 2022, the FTP was extended for another six months (upto 30 September 2022) to continue to provide relief under various export promotion schemes in view of the novel COVID-19 pandemic.¹⁵

Some key features of the current FTP are mentioned below:¹⁶

• The Merchandise Exports from India Scheme (MEIS)¹⁷ for the export of goods has now been replaced by the Remission of Duties and Taxes on Exported Products (RoDTEP) and the Rebate of State & Central Taxes and Levies (RoSCTL) schemes wherein exporters are eligible to claim export incentives in the form of fully transferrable duty credit e-scrips as a percentile of the FOB value. The schemes were introduced to be streamlined with WTO guidelines. The schemes intend to provide exporters with incentives against the tax cost embedded in the supply chain. Such tax costs usually include electricity duty, excise duty on petrol, etc. which have not been subsumed under GST and thus, remain a cost in the supply chain.
• Applications for the Services Exports from India Scheme (SEIS) for the export of notified services were last accepted for FY 2019-20. Exporters are looking forward to the introduction of a new scheme/permission to apply for subsequent years.
• The number of mandatory documents required for exports and imports has been reduced to three, which is comparable to international standards.
• Measures have been taken to boost exports of defense and hi-tech items.
• Manufacturers (who are status holders) are able to self-certify their manufactured goods in phases, as originating from India with a view to qualify for preferential treatment under bilateral and regional trade agreements. This 'Approved Exporter System' will help manufacturing exporters get quicker access to international markets.
• MSME clusters have been identified for focused interventions to boost exports.
• Several steps are being taken to move towards a paperless, digital environment. A robust Electronic Data Interchange (EDI) system has been set up to facilitate the overall ease of exports and good governance. Various documentationrelated activities, including import and export authorizations, which require interacting with other administrative departments, such as Customs, banks, and Export Promotion Councils (EPCs), can be done online. This has reduced the physical interaction of exporters and importers with the government and will help bring greater transparency and reduce transaction costs
• The Council for Trade Promotion and Development was constituted to make the states active partners in boosting India's exports and create an environment conducive to international trade¹⁸. The Board of Trade was reconstituted in order to have continuous discussion and consultation with trade and industry, and advise the government on policy measures to boost India's trade.

Free Trade Agreements (FTAs) are an important element of India's trade strategy. The Indian Trade Portal, www.indiantradeportal.in, provides the mostfavored 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 FTAs with UAE and Australia.

Export incentives

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 Governments¹⁹. 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.

During Union Budget 2022, the government set the tone to bring effective policy changes to SEZs that would transform them into an enterprise which attract greater foreign investments in India, generate employment, and enhance competitiveness at par with SEZs in other parts of the world.

The SEZ law is set to be replaced with a new legislation that will enable States to become partners in ‘Development of Enterprise and Service Hubs’. This would cover existing and new industrial enclaves to optimally utilize the available infrastructure and enhance the competitiveness of exports.

The Customs administration of SEZs would be fully automated and function on a Customs National Portal with a focus on higher facilitation and risk-based checks.

This reform is set to be implemented from 30 September 2022.

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 units²⁰.

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.

The Export Promotion Capital Goods (EPCG) scheme allows import of capital goods for pre-production, production, and post-production at zero customs duty. Measures have been adopted to increase procurement of capital goods from indigenous manufacturers under this scheme by reducing the specific export obligation from 90% to 75% of the normal export obligation.

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 dutyfree 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 purview²¹. The customs/import tariff for various goods can be viewed on the CBEC website, www.cbic.gov.in.

• 14.Foreign Trade Policy 2015-2020, Directorate General of Foreign Trade, https://www.dgft.gov.in/CP/?opt=ft-policy ,as accessed on 13 May 2022
• 15. Foreign Trade Policy 2015-2020 extended for one year; Other immediate relief measures also announced, Press Information Bureau, https://pib.gov.in/PressReleasePage.aspx?PRID=1609704, as accessed on 13 May 2022
• 16. Not available for exports made with effect from 1 January 2021
• 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 13 May 2022
• 18. Advisory Board, Ministry of Commerce and Industry, https://commerce.gov.in/about-us/department-of-commerce/advisory-board/, as accessed on 13 May 2022
• 19. About us, Introduction, Special Economic Zones in India http://sezindia.nic.in/cms/introduction.php, as accessed on 13 May 2022
• 20. Foreign Trade Policy 2015-2020, Directorate General of Foreign Trade, https://www.dgft.gov.in/CP/?opt=ft-policy, as accessed on 13 May 2022
• 21. Who We Are, Central Board of Indirect Taxes and Customs, https://www.cbic.gov.in/htdocs-cbec/whoweare/whoweare, as accessed on 13 May 2022