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Indirect Tax Laws and Practice · Export Promotion Schemes under Foreign Trade Policy

Foreign Trade Policy under the FT(D&R) Act, 1992

Updated 11 October 2026 · Fact-checked

The Foreign Trade Policy is the Central Government's policy for exports and imports, notified in the Official Gazette under section 5 of the FT(D&R) Act, 1992. The DGFT advises on it and carries it out. To solve questions, identify the power (sections 3, 5, 6), then check compliance and penalty under section 11.

Understand Foreign Trade Policy under FT(D&R) Act, 1992

India regulates exports and imports through the Foreign Trade (Development and Regulation) Act, 1992. Section 3 lets the Central Government, by Order in the Official Gazette, make provision for developing and regulating foreign trade by facilitating imports and increasing exports. It can also prohibit, restrict or regulate imports and exports of goods, services or technology.

The Foreign Trade Policy (FTP) is the policy document. Under section 5, the Central Government may, from time to time, formulate and announce the policy by notification in the Official Gazette, and may amend it in the same way. For Special Economic Zones, the Government may direct by notification that the policy applies to goods, services and technology with specified exceptions, modifications and adaptations.

The Director General of Foreign Trade (DGFT) is appointed by the Central Government under section 6. The DGFT advises the Government in formulating the policy and is responsible for carrying out it. The Government may also, by Order, let the DGFT or a subordinate officer exercise its powers under the Act. The exceptions are the powers under sections 3, 5, 15, 16 and 19.

The Act gives the policy legal force. Under section 11(1), no export or import may be made except in accordance with the Act, the rules and orders made under it, and the foreign trade policy in force. Breach attracts penalty, confiscation and other consequences.

The Handbook of Procedures is the companion document to the policy. It sets out the procedures for applying the policy, such as how to apply for authorisations and schemes. The text supplied to you does not cover it, so know it in general terms: the policy states the benefits and the Handbook states how to claim them. For the salient features of a particular policy period, rely on your ICMAI study material.

Key rules to remember

Section 5: policy notification
Central Government → formulates, announces and amends FTP → by notification in the Official Gazette
Special Economic Zones: the policy may apply with exceptions, modifications and adaptations as notified.
Section 3: Orders on trade
Order in Official Gazette → develop and regulate foreign trade; prohibit, restrict or regulate imports and exports
Goods covered by a section 3(2) Order are deemed prohibited under section 11 of the Customs Act, 1962. Services or technology are covered only if the provider avails FTP benefits or deals in specified services or technologies.
Section 3(4): no licence by default
No permit or licence needed for import or export, and no goods prohibited, except as required under the Act, rules or orders
Freedom to trade is the general rule; restrictions are the exception.
Section 6: DGFT
DGFT = appointed by Central Government; advises on FTP; carries out FTP
Delegated powers exclude sections 3, 5, 15, 16 and 19.
Section 11(2): penalty for contravention
Penalty = not less than ₹10,000 and not more than 5 × value of goods/services/technology, whichever is more
Applies to making, abetting or attempting an export or import in contravention.
Section 11(3): false documents
Penalty: not less than ₹10,000 or more than 5 × value, whichever is more
Applies to forged, tampered or materially false declarations submitted to the DGFT or an authorised officer.
Section 11(7)-(9): other consequences
IEC may be suspended until penalty is paid; goods and conveyances liable to confiscation; release on redemption charges equal to market value
The Adjudicating Authority acts in each case.

How to solve Foreign Trade Policy under FT(D&R) Act, 1992 questions

Use this method for any question on the legal basis of the policy or the consequences of breaching it.

  1. 1Identify what is asked: who makes the policy, who runs it, or what happens on breach.
  2. 2For making or amending the policy, cite section 5: Central Government, notification in the Official Gazette.
  3. 3For administration, cite section 6: the DGFT advises and carries out the policy, and delegation excludes sections 3, 5, 15, 16 and 19.
  4. 4For restrictions or prohibitions, cite section 3 and note the deemed Customs Act link and the services/technology condition.
  5. 5For breach, apply section 11: state the penalty range, the false document rule, confiscation, redemption and IEC suspension as relevant.
  6. 6For procedural queries, say that the Handbook of Procedures gives the procedure to claim policy benefits.
  7. 7Give a clear conclusion on liability and the amount, if figures are given.

Quickest way: Section map: 3, 5, 6, 11

When to use it: Use this for MCQs and short case questions where you must pick the right provision fast.

  1. Think 3 = Orders to regulate trade; 5 = policy notified; 6 = DGFT; 11 = breach.
  2. Match the keyword in the question: 'notification' points to 5, 'advises' to 6, 'penalty' or 'confiscation' to 11.
  3. For a penalty sum, compute 5 × value, compare with ₹10,000 and take the higher figure as the maximum.
  4. Remember the minimum is ₹10,000 whatever the value.

Common mistakes in Foreign Trade Policy under FT(D&R) Act, 1992

  • Saying the DGFT formulates the policy.

    The DGFT is the face of the policy, so students assume it makes it.

    Fix: Section 5 gives the power to the Central Government. Section 6 makes the DGFT an adviser and implementer.

  • Believing the Central Government can delegate every power to the DGFT.

    Students recall that delegation exists but miss the carve-out.

    Fix: Remember that powers under sections 3, 5, 15, 16 and 19 cannot be delegated under section 6(3).

  • Stating the section 11(2) penalty as a fixed ₹10,000 or as exactly five times the value.

    Students remember only one part of the range.

    Fix: State both: minimum ₹10,000; maximum five times the value, whichever is more.

  • Missing that section 3(4) removes the need for a licence by default.

    Students assume trade is restricted unless permitted.

    Fix: Remember that no permit or licence is needed unless required under the Act, rules or orders.

  • Treating the Handbook of Procedures as a part of the Act.

    Both are mentioned together with the policy.

    Fix: The Act is the statute; the policy and Handbook are administrative documents that give effect to it. Do not give a section number for the Handbook.

Worked examples

Example 1

Rohan Exports Ltd. of Surat exports goods worth ₹8,00,000 in contravention of the foreign trade policy. State the range of penalty under section 11(2) of the FT(D&R) Act, 1992.

Show the solution
  1. Section 11(2) sets a minimum of ₹10,000.
  2. The maximum is five times the value of the goods: 5 × ₹8,00,000 = ₹40,00,000.
  3. The maximum is the higher of ₹10,000 and ₹40,00,000, which is ₹40,00,000.

Answer: The penalty is not less than ₹10,000 and not more than ₹40,00,000.

Example 2

Explain who may notify the Foreign Trade Policy and what the DGFT's role is. Can the Central Government authorise the DGFT to exercise its power under section 5?

Show the solution
  1. Under section 5, the Central Government may formulate and announce the policy, and amend it, by notification in the Official Gazette.
  2. Under section 6(1)-(2), the Central Government appoints the DGFT, who advises it on the policy and is responsible for carrying it out.
  3. Under section 6(3), the Central Government may direct that its powers under the Act be exercised also by the DGFT or a subordinate officer, but not the powers under sections 3, 5, 15, 16 and 19.
  4. Section 5 is excluded, so the power to notify the policy cannot be delegated to the DGFT in this way.

Answer: The Central Government notifies the policy; the DGFT advises on it and implements it. The section 5 power cannot be delegated under section 6(3).

Exam tips

  • Learn the four sections 3, 5, 6 and 11 with one line each. MCQs usually test one fact from them.
  • In penalty sums, show the 5 × value working and the ₹10,000 minimum.
  • Write 'by notification in the Official Gazette' when answering on section 5.
  • Do not quote salient features of a specific policy period unless your study material gives them. Stick to the legal framework you can state with certainty.

Practice questions from Export Promotion Schemes under Foreign Trade Policy

Foreign Trade Policy under FT(D&R) Act, 1992 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Foreign Trade Policy under FT(D&R) Act, 1992: frequently asked questions

Under which section is the Foreign Trade Policy notified?

Section 5 of the FT(D&R) Act, 1992. The Central Government may formulate, announce and amend the policy by notification in the Official Gazette.

What is the role of the DGFT?

The DGFT is appointed by the Central Government under section 6. The DGFT advises it in formulating the policy and is responsible for carrying it out. The DGFT may also exercise delegated powers, except those under sections 3, 5, 15, 16 and 19.

What is the Handbook of Procedures?

It is the companion document to the policy and sets out the procedures to claim policy benefits. It is not part of the Act, so do not cite a section for it.

What happens if someone exports in breach of the policy?

Under section 11, a penalty of not less than ₹10,000 and not more than five times the value applies, whichever is more. The goods and conveyances may also be confiscated, and the IEC may be suspended if a penalty remains unpaid.