Advance Authorisation, EPCG and RoDTEP: Duty-free Imports and Export Incentives Under the Foreign Trade Policy

The Foreign Trade Policy offers schemes that cut the cost of exporting, mainly by letting exporters import inputs and machinery without paying duty, and by refunding taxes built into exported products. They can make a real difference to an exporter's margins, but most come with export obligations that have to be met and tracked. This guide covers the three schemes exporters use most.

Advance Authorisation

Advance Authorisation lets an exporter import inputs that go into its export products without paying customs duty.

• What it covers: raw materials, components, fuel, packing materials and other inputs physically used in making the export product.
• How the quantity is set: by standard input-output norms for the product, or by norms fixed for the applicant where no standard norm exists.
• The export obligation: the exporter must export the specified products, of the specified value, within the set period, generally 18 months from the date the authorisation is issued, extendable in some cases.
• Conditions: the imported inputs are generally for the holder's own use and can't be sold.

If the export obligation isn't met, the duty saved has to be paid back with interest.

EPCG: Capital Goods

The Export Promotion Capital Goods (EPCG) scheme lets exporters import machinery and other capital goods at zero customs duty, to produce goods or services for export.

• The export obligation: exports worth six times the duty saved, within six years from the date the authorisation is issued.
• Exports must be in addition to the exporter's average past exports of the same products, in most cases.
• Capital goods can be imported or bought domestically, with benefits for domestic sourcing.

EPCG is useful for exporters planning to upgrade or expand capacity, but the six-year obligation needs careful planning and tracking.

RoDTEP: Rebate of Duties and Taxes

The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme refunds taxes and duties that are built into the cost of exported goods but aren't refunded under GST, such as duties on fuel and electricity.

• The rebate is a percentage of the export value, set for each product, often with a cap per unit.
• It's claimed in the shipping bill at the time of export.
• It's credited as transferable electronic scrips, which can be used to pay customs duty or sold to other importers.

Apparel and made-ups have a similar scheme, RoSCTL, for state and central taxes and levies.

Who Can Use These Schemes

• An exporter with a valid IEC, and usually a valid RCMC from the relevant export promotion council.
• Manufacturer exporters, and in some cases merchant exporters linked to supporting manufacturers.
• The exporter must be in good standing, without outstanding defaults under earlier authorisations.

Applications for authorisations are made online on the DGFT portal.

Meeting and Proving the Obligation

• Track exports against each authorisation, using the right shipping bills.
• Keep evidence of realisation of export proceeds.
• When the obligation is met, apply to the DGFT for redemption, which closes the authorisation and releases the bond or guarantee given to customs.
• If an obligation can't be met in time, apply for an extension before the deadline, or regularise it by paying duty and interest.

Common Mistakes

• Importing more inputs than the norms allow, or using them for domestic sales.
• Missing export obligation deadlines.
• Not applying for redemption after meeting the obligation, which leaves bonds and guarantees outstanding.
• Forgetting to claim RoDTEP in the shipping bill.

Getting Help

Think Filing helps exporters apply for Advance Authorisation and EPCG, tracks export obligations, handles redemption, and makes sure RoDTEP is claimed on every eligible shipment.

Sources

• Foreign Trade Policy 2023 and the Handbook of Procedures.
• Customs notifications on Advance Authorisation, EPCG and RoDTEP.