Duty Exemption Schemes explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Duty exemption schemes have long characterised India's Foreign Trade Policy: Advance Authorisation and its annual-requirement variant, DFIA, duty drawback, EPCG, exemptions for STPs, EHTPs, BTPs and EOUs, RoDTEP and the Interest Equalization Scheme — all continued into FTP 2023.
Exemption and remission — two different mechanisms
The handbook groups these under a single head, "Duty Exemption and Remission Schemes", and the distinction inside that phrase is the one to grasp first:
- Exemption means the duty is never paid — inputs come in duty free against an authorisation, on the strength of an export obligation to be discharged later;
- Remission means the duty is paid and then refunded or rebated after export — drawback and RoDTEP work this way.
The cash-flow consequence is large. Duty exemption schemes spare the exporter the outlay; remission schemes fund it first and return it later. For a working-capital-constrained exporter, that difference often matters more than the rate.
Advance Authorisation
"Under this scheme duty free imports of inputs are allowed, which shall go into the manufacture of the exported goods to the minimum extent of 15%."
The core bargain: import inputs without duty, use them in goods that are then exported, and discharge the export obligation. It is the most-used of the duty exemption schemes because it addresses the largest cost in most manufactured exports — imported raw material.
The handbook expresses the Advance Authorisation condition as inputs which "shall go into the manufacture of the exported goods to the minimum extent of 15%". Read literally that is a statement about input incorporation; read against the DFIA entry two lines later, which speaks of "minimum 20% value addition", it appears to be describing minimum value addition for Advance Authorisation. The two entries use different formulations for what is conventionally the same kind of condition. Check the minimum value addition requirement in the current FTP and Handbook of Procedures before applying either figure; nothing is asserted here beyond what is printed.
Advance Authorisation for annual requirements
For "exporters having past records and items having SION — Standard Input-Output Norms." This is the volume variant: rather than an authorisation per export order, an established exporter of SION-covered items takes one authorisation covering a year's requirement.
Duty Free Import Authorisation (DFIA)
"Permitted where there is minimum 20% of value addition by the imported products and are under SION."
DFIA and Advance Authorisation overlap heavily. The practical difference for an exporter is transferability and the point at which the authorisation is issued relative to export — which is why the choice between them turns on whether the exporter wants the flexibility to sell the authorisation or the wider input coverage.
Duty drawback
"Under this scheme products made out of duty paid inputs are first exported and then refunds of duty paid is obtained in 2 ways:
- All industry rates — as per schedule;
- Brand rates — as applicable on the basis of documents."
The two routes serve different exporters. All industry rates are published, standardised and require no proof of actual duty incidence — fast, but averaged. Brand rates are fixed for a particular exporter's particular product on documented incidence — slower, but accurate where the exporter's duty burden is above the schedule average.
Under GST, the handbook notes elsewhere, drawback survives only for customs duty paid on imported inputs and central excise on certain petroleum products used as fuel for captive power plants. That is a much narrower drawback than the pre-GST regime.
EPCG
The Export Promotion Capital Goods scheme "allows import of capital goods at zero Customs duty for export production." The handbook lists two forms:
- Zero duty EPCG scheme;
- Post export EPCG duty credit scrip scheme.
EPCG differs from the input-side duty exemption schemes in what it finances: not raw material for one order but plant and machinery for a stream of future exports. That is why it carries an export obligation measured over years, and why default on it was the subject of the one-time amnesty scheme notified with FTP 2023, which closed on 31 March 2024.
Park and unit exemptions
Duty exemption for:
- Software Technology Parks (STPs);
- Electronic Hardware Technology Parks (EHTPs);
- Bio-Technology Parks (BTPs);
- Export Oriented Units (EOUs).
These are status-based rather than transaction-based: the exemption attaches to the unit and its bonded operations rather than to a particular consignment.
RoDTEP
Remission of Duties and Taxes on Exported Products is the newest and conceptually the most important of the remission schemes. Its aim is "to neutralize the taxes and duties suffered by exported goods which are otherwise not credited, remitted or refunded in any manner and remain embedded in the export goods."
"This scheme provides for rebate of all hidden Central, State, and Local Duties, Taxes and Levies which have not been refunded under any other existing schemes. This scheme is being handled by the Central Board of Indirect Taxes."
The word doing the work is embedded. GST refunds relieve GST; drawback relieves customs duty on inputs. What neither reaches is the tax that never entered a credit chain — electricity duty, mandi tax, stamp duty on export documentation, fuel taxes on the transport leg, municipal levies. Those sit inside the cost of the exported good and are exported with it.
The principle that a country should not export its taxes is what makes a remission scheme WTO-compatible in a way that an incentive is not. That distinction — from incentive to remission — is the first of the four pillars of FTP 2023, and RoDTEP is its main instrument.
The Interest Equalization Scheme
Listed among the schemes as "providing subsidized finance to exporters". The handbook records the terms as: with effect from 1 April 2025, interest equalisation at 3% per annum for pre- and post-shipment rupee export credit for five years under 416 tariff line ITC(HS) codes for all manufacturer and merchant exporters, and 5% for MSME manufacturer exporters — "an increase from the earlier rates of 2% and 3% respectively."
The Interest Equalization Scheme has been extended, narrowed and allowed to lapse more than once, with the rates and the covered tariff lines changing at each iteration. The RBI's own instruction, which the handbook quotes in its finance chapter, is that equalisation is passed on "as per extant guidelines issued by RBI from time to time."
Confirm whether the scheme is currently operative, at what rates, and for which tariff lines, before pricing a facility on the assumption of a subsidy. Unlike the other duty exemption schemes in this chapter, this one is a budgetary support measure and is renewed rather than standing.
The duty exemption schemes in one view
| Scheme | Type | What it relieves | Condition |
|---|---|---|---|
| Advance Authorisation | Exemption | Duty on imported inputs | Inputs used in exported goods; export obligation |
| AA — annual requirement | Exemption | Same, over a year | Past record + SION items |
| DFIA | Exemption | Duty on imported inputs | Minimum 20% value addition; SION |
| Duty drawback | Remission | Customs duty on inputs already paid | Export first; all-industry or brand rate |
| EPCG | Exemption | Customs duty on capital goods | Export obligation over years |
| STP / EHTP / BTP / EOU | Exemption | Duties on unit operations | Unit status and bonding |
| RoDTEP | Remission | Embedded central, state and local levies | Not refunded under any other scheme |
| Interest Equalization | Subsidy | Interest on rupee export credit | Eligible sectors and tariff lines; scheme in force |
The handbook confirms continuity: "The Foreign Trade Policy (2023) has continued with these schemes as it is, based on principles of 'trust' and 'partnership' with exporters."
An RCMC is the gateway
One procedural point ties this chapter to the registration chapter. An RCMC is mandatory for "any other benefit or concession under the Foreign Trade Policy" — which means every scheme on this page. An exporter that has not taken an RCMC cannot access any of the duty exemption schemes, however well it qualifies on substance.
Common mistakes
- Choosing an exemption scheme without modelling the cash flow against a remission scheme, or vice versa.
- Taking all-industry drawback where the exporter's documented incidence would support a higher brand rate.
- Treating EPCG as an input scheme and mismanaging a multi-year export obligation.
- Assuming RoDTEP overlaps with GST refund — it reaches only levies no other scheme refunds.
- Pricing a facility on interest equalisation without confirming the scheme is in force for that tariff line.
- Applying for any of these without an RCMC.