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Economic, Commercial and Intellectual Property Laws · Foreign Trade Policy and Procedure

Export Promotion Schemes and Authorisations under Foreign Trade Policy

Updated 11 October 2026 · Fact-checked

Export promotion schemes are benefits announced in the Foreign Trade Policy under section 5 of the FTDR Act, 1992. Advance Authorisation allows duty-free import of inputs for export products. EPCG allows capital goods import at concessional duty against an export obligation. RoDTEP refunds embedded taxes. SEZ units get benefits under the SEZ Act, 2005.

Understand Export Promotion Schemes and Authorisations

Exporters compete in world markets. Taxes and duties paid on inputs, machinery and inland costs raise their prices. Export promotion schemes remove or refund these costs so that Indian goods and services are not exported with taxes embedded in them.

The legal base is the Foreign Trade (Development and Regulation) Act, 1992. Under section 5, the Central Government may from time to time formulate and announce the Foreign Trade Policy by notification in the Official Gazette, and may amend it in the same way. The schemes sit inside that policy, not in the Act itself. The Act gives the power; the policy and its procedures give the detail.

The main schemes are these:

  • Advance Authorisation: you import inputs that are physically incorporated in an export product, free of customs duty, and you must export the resulting product within a fixed period. It is an input-based, export-linked scheme.
  • EPCG (Export Promotion Capital Goods): you import capital goods for pre-production, production or post-production at a concessional (generally zero) customs duty rate, and you undertake to meet an export obligation linked to the duty saved. It is a machinery-based scheme.
  • RoDTEP (Remission of Duties and Taxes on Exported Products): it refunds taxes and duties embedded in exports that are not refunded under any other mechanism. It is a remission scheme, paid on the export, and rates are notified product-wise.
  • SEZ benefits: units in a Special Economic Zone get duty-free import and other concessions under the Special Economic Zones Act, 2005.

Every scheme depends on a valid Importer-Exporter Code Number. Section 7 says no person shall make any import or export except under an IEC granted by the Director General or the authorised officer. For services or technology, the IEC is necessary only when the provider takes benefits under the foreign trade policy or deals with specified services or technologies. So if a service exporter wants scheme benefits, the IEC becomes mandatory.

Benefits come with conditions. Section 11(1) says no export or import shall be made except in accordance with the Act, the rules and orders, and the foreign trade policy in force. Breach of scheme conditions can lead to penalty, confiscation and suspension of the IEC. This is why exam answers must link the benefit to its obligation.

Key rules to remember

Source of power to announce schemes
Section 5, FTDR Act: Central Government may formulate, announce and amend the Foreign Trade Policy by notification in the Official Gazette
Schemes such as Advance Authorisation, EPCG and RoDTEP are part of the policy and procedures made under this power.
IEC requirement
Section 7: no import or export except under an IEC
For services or technology, the IEC is needed only if the provider takes benefits under the policy or deals with specified services or technologies.
Compliance with the policy
Section 11(1): no export or import except in accordance with the Act, rules, orders and the policy in force
Scheme conditions form part of the policy, so breach is a contravention.
Penalty for contravention
Section 11(2): not less than ₹10,000 and not more than five times the value of the goods, services or technology, whichever is more
Applies to a person who makes, abets or attempts an export or import in contravention.
Penalty for false documents
Section 11(3): not less than ₹10,000 or more than five times the value concerned, whichever is more
Applies when a declaration or document is submitted to the DGFT knowing it is forged, tampered with or false in a material particular.
Confiscation and redemption
Section 11(8) and (9): goods, packages and conveyances liable to confiscation; release on payment of redemption charges equal to market value
Confiscation is by the Adjudicating Authority.
Scheme comparison
Advance Authorisation = duty-free inputs; EPCG = concessional duty on capital goods; RoDTEP = refund of embedded taxes; SEZ = concessions under SEZ Act, 2005
Remember the object of each scheme: inputs, machinery, embedded taxes, zone-based benefits.

How to solve Export Promotion Schemes and Authorisations questions

Use this method for any question on export promotion schemes, whether it asks you to explain, compare or advise.

  1. 1Identify what the question asks: explain one scheme, compare two, or advise on a fact situation.
  2. 2State the legal base first: section 5 of the FTDR Act, 1992 empowers the Central Government to announce the Foreign Trade Policy by Gazette notification.
  3. 3Define the scheme in one line by its object: duty-free inputs, concessional capital goods, refund of embedded taxes, or zone-based concessions.
  4. 4Add the key conditions: IEC under section 7, an export obligation or export of the product, and compliance with the policy under section 11(1).
  5. 5For a fact situation, test each condition against the facts: is there an IEC, was the export made, were documents true?
  6. 6State the consequence of default: penalty under section 11(2) or (3), confiscation under section 11(8), IEC suspension under section 8 or section 11(7).
  7. 7Close with a clear conclusion that answers the question asked.
  8. 8For SEZ units, say that import and export are governed by the SEZ Act, 2005, as the proviso to section 2(e) states.

Quickest way: Object-Obligation-Consequence check

When to use it: Use it when you have little time or the question asks for a short note or a comparison.

  1. Object: write what the scheme gives (inputs duty-free, machinery at concessional duty, refund of embedded taxes, zone concessions).
  2. Obligation: write what you must do in return (export the product, meet the export obligation, hold an IEC, follow the policy).
  3. Consequence: write the result of default (penalty, confiscation, IEC suspension).
  4. Add the legal anchor: section 5 for the policy, section 7 for the IEC, section 11 for contravention.

Common mistakes in Export Promotion Schemes and Authorisations

  • Saying the schemes are written in the FTDR Act itself.

    Students mix the Act with the policy.

    Fix: Say the Act gives power under section 5, and the schemes are announced in the Foreign Trade Policy and its procedures.

  • Treating EPCG as a scheme for raw materials.

    Both Advance Authorisation and EPCG involve duty-free or low-duty imports, so they blur together.

    Fix: Link Advance Authorisation to inputs used in the export product and EPCG to capital goods or machinery.

  • Calling RoDTEP a duty-free import scheme.

    The word 'duties' in the name misleads.

    Fix: RoDTEP is a remission or refund of embedded duties and taxes on exported products, not an import concession.

  • Saying a service exporter always needs an IEC.

    Students remember the general rule and miss the proviso to section 7.

    Fix: For services or technology, an IEC is needed only when the provider takes benefits under the policy or deals with specified services or technologies.

  • Stating the section 11(2) penalty as a fixed ₹10,000.

    Only the lower limit is remembered.

    Fix: State both limits: not less than ₹10,000 and up to five times the value, whichever is more.

  • Applying the FTDR Act to SEZ imports and exports without qualification.

    The proviso to section 2(e) is overlooked.

    Fix: Say that import and export regarding an SEZ or between two SEZs are governed by the SEZ Act, 2005.

Worked examples

Example 1

Explain the difference between Advance Authorisation and EPCG under the Foreign Trade Policy. State the legal basis and the consequence of breach.

Show the solution
  1. Provision: under section 5 of the FTDR Act, 1992, the Central Government may announce and amend the Foreign Trade Policy by notification in the Official Gazette. Both schemes are part of that policy.
  2. Advance Authorisation: it permits import of inputs that go into an export product free of customs duty. The holder must export the resulting product.
  3. EPCG: it permits import of capital goods at a concessional duty rate. The holder undertakes an export obligation linked to the duty saved.
  4. Difference: the first relates to raw materials and inputs consumed in making export goods; the second relates to machinery used in production.
  5. Common condition: the importer needs an IEC under section 7, and must act within the policy as section 11(1) requires.
  6. Breach: a contravention attracts a penalty under section 11(2) of not less than ₹10,000 and up to five times the value, whichever is more. Goods may be confiscated under section 11(8).

Answer: Advance Authorisation gives duty-free import of inputs for export products. EPCG gives concessional duty import of capital goods against an export obligation. Both operate under the Foreign Trade Policy announced under section 5, and breach attracts penalty and possible confiscation under section 11.

Example 2

Aarav Textiles Ltd., an exporter, submits to the DGFT a document claiming scheme benefits. It later emerges that the document was false in a material particular and the company knew this. The goods involved are valued at ₹8,00,000. Advise on the maximum penalty and other consequences.

Show the solution
  1. Provision: section 11(3) applies where a person signs or uses a document submitted to the DGFT, knowing or having reason to believe it is forged, tampered with or false in a material particular.
  2. Analysis: the facts show knowledge of falsity and submission to the DGFT, so section 11(3) is attracted.
  3. Penalty range: not less than ₹10,000 or more than five times the value of the goods, whichever is more.
  4. Upper limit: five times ₹8,00,000 = ₹40,00,000.
  5. Other consequences: under section 8(1)(a), the DGFT may, after notice and a reasonable opportunity to represent, suspend or cancel the IEC for contravention of the Act or policy. If the penalty is not paid, section 11(7) lets the Adjudicating Authority suspend the IEC until payment.
  6. After suspension or cancellation, section 8(2) bars import or export except under a special licence granted by the DGFT.

Answer: The company is liable to a penalty under section 11(3) of up to ₹40,00,000 (five times ₹8,00,000), and not less than ₹10,000. Its IEC may also be suspended or cancelled after notice and hearing, and it could then trade only under a special licence.

Exam tips

  • Always open with section 5 and say the schemes sit in the Foreign Trade Policy. This shows you know the legal base.
  • For comparison questions, use a short two-column style in bullet form: object, goods covered, obligation, nature of benefit.
  • In fact-based questions, quote the section number and the exact penalty limits, then calculate five times the value carefully.
  • Mention the IEC and section 7 whenever a scheme benefit is claimed. Examiners expect this link.
  • Do not quote scheme rates or periods from memory unless you are sure. Focus on object, conditions and consequences.

Practice questions from Foreign Trade Policy and Procedure

Export Promotion Schemes and Authorisations in other exams

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

Export Promotion Schemes and Authorisations: frequently asked questions

What is the difference between Advance Authorisation and EPCG?

Advance Authorisation covers inputs that are used in making the export product, imported duty-free. EPCG covers capital goods, imported at concessional duty against an export obligation. One is about raw materials, the other about machinery.

Is RoDTEP an import scheme?

No. RoDTEP refunds duties and taxes embedded in exported products that are not refunded under other mechanisms. It is claimed on exports, with product-wise rates notified.

Where does the law allow these schemes to be announced?

Section 5 of the FTDR Act, 1992 empowers the Central Government to formulate, announce and amend the Foreign Trade Policy by Gazette notification. The schemes are part of that policy.

Do SEZ units follow the FTDR Act for imports and exports?

Import and export regarding an SEZ or between two SEZs are governed by the Special Economic Zones Act, 2005, as the proviso to section 2(e) of the FTDR Act states. The policy may apply to SEZs with exceptions and modifications notified under the proviso to section 5.

What happens if an exporter breaks scheme conditions?

Section 11 makes any export or import outside the Act, rules, orders or policy a contravention. The penalty is not less than ₹10,000 and up to five times the value, whichever is more. Goods can be confiscated and the IEC may be suspended.