What Are FTP & Customs Schemes?
FTP (Foreign Trade Policy) and Customs Schemes are government initiatives designed to support and promote exports from India. These schemes help businesses:
- Reduce or eliminate customs duties and taxes on inputs used for exports.
- Improve working capital and cash flow.
- Enhance global competitiveness.
- Simplify compliance and trade facilitation.
The Government of India, through DGFT (Directorate General of Foreign Trade) and CBIC (Central Board of Indirect Taxes and Customs), administers several export incentive schemes.
Broad Classification of Export Schemes
- Duty Exemption Schemes – Import inputs without paying customs duty.
- Duty Remission Schemes – Refund duties and taxes already paid.
- Duty Deferment Schemes – Postpone customs duty payment to a later stage.
1. Duty Exemption Scheme
These schemes allow exporters to import raw materials, inputs, or capital goods without paying customs duty, subject to fulfillment of export obligations.
1.1 Advance Authorisation (AA)
Advance Authorisation (AA) permits duty-free import of inputs that are physically incorporated in the export product.
Key Benefits:
- Duty-free import of raw materials and components.
- Reduces manufacturing cost.
- Applicable across multiple industries.
Condition:
Export obligation must be fulfilled within the prescribed period.
1.2 Export Promotion Capital Goods (EPCG)
The EPCG Scheme allows import of capital goods such as machinery, equipment, and spares at zero or concessional customs duty.
Key Benefits:
- Encourages technology upgradation.
- Reduces capital investment costs.
- Supports export-oriented manufacturing.
Condition:
Exporters must fulfill an export obligation equal to 6 times the duty saved within 6 years.
1.3 Export Oriented Unit (EOU)
EOUs are units established exclusively for exports and can import capital goods and raw materials duty-free.
Key Benefits:
- Duty-free procurement of inputs and capital goods.
- Customs bonding facility.
- Suitable for dedicated export manufacturers.
Condition:
Must achieve positive Net Foreign Exchange (NFE) earnings over a 5-year period.
1.4 Duty Free Import Authorisation (DFIA)
The DFIA Scheme allows duty-free import of inputs after export obligations have been fulfilled.
Key Benefits:
- Similar benefits to Advance Authorisation.
- Freely transferable after export obligation completion.
- Provides flexibility and commercial value.
2. Duty Remission Schemes
These schemes refund or remit duties and taxes paid on inputs used in exported products.
2.1 Duty Drawback Scheme (DBK)
The Duty Drawback Scheme provides refunds of duties and taxes paid on inputs used in manufacturing exported goods.
Key Benefits:
- Covers imported as well as locally sourced inputs.
- Reduces embedded tax burden.
- Available under:
- All Industry Rate (AIR)
- Brand Rate
Administered By:
CBIC
2.2 RoDTEP (Remission of Duties and Taxes on Exported Products)
RoDTEP was introduced to replace the MEIS Scheme and reimburses taxes not refunded through any other mechanism.
Eligible Embedded Taxes:
- VAT on fuel
- Electricity duty
- Mandi tax
- Other local and state levies
Key Benefits:
- Improves export competitiveness.
- Benefits issued as transferable electronic scrips through ICEGATE.
3. Duty Deferment Scheme
Unlike exemption or remission schemes, duty deferment schemes postpone duty payment to improve working capital.
3.1 MOOWR (Manufacturing and Other Operations in Warehouse Regulations)
MOOWR allows manufacturing and processing activities within a Customs Bonded Warehouse.
Key Benefits:
- No upfront customs duty payment.
- Duty payable only when goods are cleared for domestic consumption.
- Exports remain duty-free.
- Significant working capital savings.
Why It Is Popular:
Many businesses now consider MOOWR as an alternative to EOU and Advance Authorisation due to its flexibility.
4. Status Accreditation Programmes
The Government recognizes compliant and high-performing exporters through accreditation programs that provide additional facilitation benefits.
4.1 Status Holder (SH)
Exporters achieving specified export performance thresholds are recognized as:
- One Star Export House
- Two Star Export House
- Three Star Export House
- Four Star Export House
- Five Star Export House
Benefits:
- Self-certification privileges.
- Priority processing.
- Reduced bank guarantee requirements.
4.2 Authorised Economic Operator (AEO)
The AEO Programme identifies trusted trade partners and provides Customs facilitation benefits.
Benefits:
- Faster Customs clearance.
- Reduced cargo examination.
- Deferred duty payment facilities.
- Recognition under international Mutual Recognition Agreements (MRAs).
Eligible Applicants:
- Importers
- Exporters
- Logistics service providers
- Customs brokers
4.3 Eligible Manufacturer Importer (EMI)
The EMI Scheme is a trust-based initiative introduced by CBIC to improve Ease of Doing Business.
Benefits:
- Immediate clearance of imported goods.
- Monthly customs duty payment cycle.
- Reduced dwell time at ports.
- Better working capital management.
Purpose:
Acts as a fast-track pathway for businesses aspiring to obtain AEO Certification.
Conclusion
India’s FTP and Customs framework offers multiple opportunities for exporters to reduce costs, improve cash flow, and strengthen their position in global markets.
Whether you are a first-time exporter, manufacturer-exporter, or an established export house, selecting the right combination of schemes such as AA, EPCG, EOU, DFIA, Duty Drawback, RoDTEP, MOOWR, AEO, and Status Holder Recognition can significantly enhance your competitiveness and compliance.
In upcoming articles, we will explore each scheme in detail, including:
- Eligibility criteria
- Application process
- Documentation requirements
- Compliance obligations
- Common mistakes to avoid
Central Illustration: A business team of four professionals collaborating around a conference table with a laptop, documents, and data dashboards. One professional points to a glass flowchart diagram showing “Decision making” and “A/B options”.
Need Help Choosing the Right Export Scheme?
Our team of Ex-Customs and DGFT Professionals can assess your business profile and recommend the most beneficial scheme combination for your export operations.