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.12 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 2020, the FTP was extended for one year to continue to provide relief under various export promotion schemes in view of the novel COVID-19 pandemic.13
Some key features of the current FTP are mentioned below:14
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 based on criterion such as 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.
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 Governments16. 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, Central Sales Tax, etc17. The government has decided to extend the benefits of both the MEIS and SEIS reward schemes to units located in SEZs as well.
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 BioTechnology 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 units18.
With the intention to encourage manufacturing and exports under the 100% EOU/EHTP/STPI/BTP schemes, these units have been provided with a fasttrack 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.
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.
The World Trade Organisation (WTO) panel in its report has held that India's export promotion schemes viz. MEIS, SEZ, EHTP, BTP, etc. are inconsistent with the agreement on Subsidies and Countervailing Measures (SCM) and accordingly should be withdrawn. The report, which was issued on 31 October 2019, gave India a time limit of around 90 to 120 days for the withdrawal of these schemes. The report has already been challenged by the Indian government before the appellate forum and is pending adjudication.
Meanwhile, the Indian government is also in advanced stages of issuing a new WTO-compliant Remission of Duties or Taxes on Export Products (RoDTEP) scheme to replace the existing MEIS and other export promotion schemes. The scheme intends 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.
The introduction of a new comprehensive scheme such as RoDTEP involves various complexities and requires the collection of comprehensive data from exporters to arrive at fair rates of incentives. The onset of the COVID-19 pandemic and the subsequent lockdown announced by the government resulted in severe business disruption in India. In this backdrop, the validity of the FTP 2015-20 and the various existing incentive schemes (which are under dispute before the WTO appellate authority) has been extended up to 31 March 2021.
In view of the COVID-19 pandemic, the government has also announced various relaxations in the compliance and procedural aspects associated with the incentive schemes such as extension in time limits for application under MEIS and SEIS, extension in validity of expiring licenses, and Letter of Permission (LOP) in case of EPCG, EOUs, etc.
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.
The Central Board of Excise and Customs (CBEC) deals with the formulation of policy concerning the levy and collection of customs and central excise duties and service tax, prevention of smuggling and administration of matters relating to customs, central excise, service tax, and narcotics to the extent under CBEC's purview.19 The customs/import tariff for various goods can be viewed on the CBEC website, www.cbic.gov.in.