Exporting from India: DGFT, Duty Drawback & RoDTEP Benefits for Foreign Companies

Why Export Incentives Matter for Foreign Companies in India

India exported goods worth over USD 437 billion in FY 2024-25, and the government continues to deploy a robust framework of incentive schemes to keep Indian exports competitive globally. For foreign companies with Indian subsidiaries or manufacturing units, these schemes represent a direct reduction in production costs and a significant boost to export margins.

Three mechanisms dominate the landscape: the Import Export Code (IEC) issued by the Directorate General of Foreign Trade (DGFT), the Duty Drawback scheme administered by Customs, and the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme. Together, these can recover 2-8% of your export FOB value in embedded taxes and duties that would otherwise erode competitiveness.

This guide provides a practical, step-by-step framework for foreign companies looking to leverage every available export benefit from their Indian operations.

Understanding the DGFT and Its Role

The Directorate General of Foreign Trade (DGFT) operates under the Ministry of Commerce and Industry and is the primary regulatory body governing India's foreign trade policy. For any foreign company planning to export from India, the DGFT is your first point of engagement.

IEC Registration: The Mandatory First Step

No entity can export from India without an Importer-Exporter Code (IEC). This 10-digit code is issued by the DGFT and is mandatory for all export and import transactions. The process is straightforward:

• Apply online at the DGFT portal (dgft.gov.in) with the entity's PAN, bank account details, and a Class 3 Digital Signature Certificate (DSC)
• Fee: INR 500 (non-refundable)
• Processing time: 1-2 working days for standard applications
• Validity: Lifetime, but requires annual updating between April and June on the DGFT portal. Failure to update may result in deactivation

For a wholly-owned subsidiary or a branch office of a foreign company, the IEC is obtained in the name of the Indian entity. The entity must have a valid PAN card and an active Indian bank account before applying.

Foreign Trade Policy 2023: Key Provisions

The Foreign Trade Policy (FTP) 2023, effective from April 1, 2023, governs India's export-import framework. Key provisions relevant to foreign companies include:

• Advance Authorisation: Duty-free import of inputs used in export products, with an export obligation to be fulfilled within 18 months
• Export Promotion Capital Goods (EPCG) Scheme: Import of capital goods at zero customs duty, subject to an export obligation of 6 times the duty saved over 6 years
• Special Economic Zones (SEZs): Tax holidays and duty exemptions for units manufacturing within designated zones
• Status Holder Benefits: Exporters achieving specified thresholds (starting at USD 3 million cumulative exports) receive recognition and procedural benefits

Duty Drawback Scheme: Recovering Customs and Excise Duties

The Duty Drawback scheme, governed by Sections 74 and 75 of the Customs Act, 1962, allows exporters to claim refunds on customs duties paid on imported inputs used in the manufacture of exported goods. This is one of the oldest and most widely used export incentive mechanisms in India.

Two Types of Duty Drawback

The scheme operates through two distinct rate mechanisms:

All Industry Rates (AIR)

The Central Board of Indirect Taxes and Customs (CBIC) publishes the All Industry Rates schedule annually. These rates represent the average incidence of customs duties, central excise duties, and service tax on inputs used in the manufacture of specific export products. The latest rates were revised through Notification No. 26/2025 dated April 17, 2025. For precious metals, for example, rates were increased: tariff item 711301 went from INR 335.50 to INR 405.40 per unit.

Brand Rate Fixation

If the AIR compensates less than 80% of the actual customs duties suffered on your inputs, you can apply for a Brand Rate. The process involves:

1. Filing an application with the Jurisdictional Principal Commissioner/Commissioner of Customs within 2 months of export
2. Providing detailed documentation of input costs, duty paid challans, and manufacturing records
3. Customs verifies the actual duty incidence and fixes a specific rate for your products
4. The rate is typically fixed within 2 months of application

There is also a Special Brand Rate for cases where no AIR exists at all for the exported product.

Key Restrictions

• No drawback if the market price of the exported goods is less than the drawback amount claimed
• Minimum claim threshold of INR 50 per individual shipment
• Claims must be filed within 4 years of shipping the goods
• Drawback under Section 75 is not available if CENVAT credit has been taken on the inputs

RoDTEP Scheme: The WTO-Compliant Export Incentive

The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme replaced the earlier MEIS scheme from January 1, 2021. The shift was driven by a WTO ruling that found MEIS to be a prohibited subsidy under the Agreement on Subsidies and Countervailing Measures (SCM Agreement).

How RoDTEP Works

RoDTEP reimburses embedded central, state, and local taxes and levies that are not refunded through any other mechanism (such as GST input tax credit or Duty Drawback). These include:

• Central excise duty on fuel used in transportation
• Mandi tax on agricultural products
• Electricity duty and charges levied by states
• Stamp duty on export documentation
• Toll taxes and road freight charges
• Property tax on factories and warehouses

The benefit is issued as transferable duty credit e-scrips that can be used to pay customs duties on imports or sold on the DGFT's online platform.

Current RoDTEP Rates and Recent Changes

The Union Budget 2025-26 allocated INR 18,232 crore (approximately USD 2.05 billion) to the RoDTEP scheme, up from INR 16,000 crore in FY 2024-25. However, a significant rationalisation occurred in February 2026:

• DGFT Notification No. 60/2025-26 (dated February 23, 2026) reduced RoDTEP rates to 50% of previously notified rates for all products outside ITC HS Chapters 1-24
• Value caps were also reduced to 50% of earlier limits
• Exception: Agricultural and food products (ITC HS Chapters 1-24) were exempted from the rate cut. The DGFT restored full rates for agriculture, dairy, meat, and marine products the day after the initial notification

RoDTEP rates typically range from 0.5% to 4.3% of FOB value, depending on the product category. For example, textiles and garments have traditionally received higher rates, while engineering goods receive rates in the 0.5-1.5% range.

Eligibility and Claim Process

The RoDTEP scheme is available to all exporters irrespective of their status. To claim benefits:

1. Declare intent to claim RoDTEP in the shipping bill at the time of export
2. Ensure your GST registration is active and all returns are filed
3. After customs clearance, the DGFT generates e-scrips credited to your DGFT account
4. Use the scrips for customs duty payment or transfer them through the DGFT portal

RoDTEP vs Duty Drawback: When to Use Each

Advance Authorisation and EPCG: Duty-Free Imports for Exporters

Beyond Duty Drawback and RoDTEP, foreign companies manufacturing in India can access two powerful schemes for duty-free imports:

Advance Authorisation

This scheme permits duty-free import of inputs (raw materials, components, consumables) that are physically incorporated into export products. Key parameters:

• Export obligation: Must export a minimum value (typically 15-25% value addition) within 18 months, extendable by 6 months
• Duties exempted: Basic Customs Duty, Additional Customs Duty, IGST, and Compensation Cess
• Application: Online through the DGFT portal with estimated import and export quantities
• Transferability: Not transferable (inputs must be used by the authorisation holder)

Export Promotion Capital Goods (EPCG) Scheme

Foreign companies setting up or expanding manufacturing facilities in India benefit significantly from EPCG:

• Benefit: Zero customs duty on import of capital goods (plant, machinery, equipment)
• Export obligation: 6 times the duty saved, to be fulfilled over 6 years from authorisation date
• Eligible exporters: Manufacturer-exporters and merchant-exporters tied to supporting manufacturers
• Average savings: 10-15% of capital goods cost (basic customs duty typically ranges from 7.5% to 15%)

Practical Steps: Setting Up Your Export Operation

For a foreign subsidiary or branch office looking to begin exports from India, here is the recommended sequence:

Step 1: Obtain the IEC (Week 1)

Apply on the DGFT portal with the Indian entity's PAN, bank details, and DSC. Processing takes 1-2 working days. Cost: INR 500.

Step 2: Register on ICEGATE (Week 1-2)

Register on the Indian Customs Electronic Gateway (ICEGATE) for electronic filing of shipping bills, bills of entry, and duty drawback claims. This is separate from the DGFT registration.

Step 3: Identify Applicable Incentive Schemes (Week 2-3)

Work with a tax advisor to map your export products to applicable schemes. Most exporters can simultaneously claim:

• Duty Drawback (AIR or Brand Rate)
• RoDTEP benefits
• Advance Authorisation (if importing raw materials)
• EPCG (if importing capital goods)

Step 4: Appoint a Customs Broker (Week 2-3)

A licensed customs broker handles shipping bill preparation, customs clearance, and drawback claim filing. Choose one with experience in your product category.

Step 5: Configure Shipping Bill Declarations (Ongoing)

Ensure every shipping bill correctly declares:

• Intent to claim Duty Drawback (with applicable AIR tariff item number)
• Intent to claim RoDTEP (with the RoDTEP flag set to "Y")
• Correct HS Code classification (misclassification leads to rejected claims)

Common Mistakes Foreign Companies Make

Based on our experience assisting foreign companies with FDI advisory and export setup, the following mistakes are most common:

• Not claiming both Duty Drawback and RoDTEP: These schemes are complementary, not alternatives. Many exporters leave money on the table by claiming only one
• Failing to update IEC annually: The April-June annual update window is mandatory. A deactivated IEC blocks all export transactions
• Wrong HS Code classification: Each product has a specific 8-digit HS code that determines both the Duty Drawback rate and RoDTEP rate. Misclassification can result in zero benefits or penalties
• Missing Brand Rate application deadline: You have only 2 months from the date of export to apply for Brand Rate fixation. Miss this window and you are stuck with the AIR, even if it covers less than 80% of actual duties
• Ignoring state-level incentives: Several Indian states offer additional export incentives including freight subsidies, quality certification reimbursement, and investment-linked export incentives
• Not maintaining proper documentation: Customs authorities require detailed records of duty-paid inputs, manufacturing processes, and input-output ratios. Poor documentation leads to rejected Brand Rate applications

Cost-Benefit Analysis: What Can You Actually Recover?

Here is a realistic estimate of export incentive recovery for a typical manufacturing exporter from India:

For a company exporting goods worth INR 100 crore annually with imported raw materials worth INR 40 crore, the combined benefit from Duty Drawback (2% of FOB = INR 2 crore) plus RoDTEP (1.5% of FOB = INR 1.5 crore) plus Advance Authorisation savings (12% of INR 40 crore = INR 4.8 crore) totals approximately INR 8.3 crore, or 8.3% of export value.

Transfer Pricing Considerations on Export Sales

Foreign companies exporting from India through their subsidiaries must ensure that intercompany export pricing complies with India's transfer pricing regulations under Sections 92A-92F of the Income Tax Act. The Transfer Pricing Officer (TPO) scrutinises export transactions between associated enterprises to ensure that the Indian entity is not under-pricing exports to shift profits out of India.

Arm's Length Pricing Methods for Exports

The most commonly used method for benchmarking intercompany export prices is the Comparable Uncontrolled Price (CUP) method, where the export price is compared to prices charged in comparable transactions between unrelated parties. If comparable transactions are not available, the Transactional Net Margin Method (TNMM) is used, benchmarking the operating margin of the Indian entity against comparable companies.

Key documentation requirements include maintaining a contemporaneous transfer pricing study under Section 92D, filing Form 3CEB certified by a Chartered Accountant by November 30 of the assessment year, and retaining detailed records of how the intercompany price was determined.

GST Zero-Rating on Exports

Exports from India are zero-rated under GST. Exporters have two options for managing GST on exports:

• Export under Letter of Undertaking (LUT): No IGST is charged on the export. The exporter files for refund of input tax credit accumulated on domestic purchases. The LUT is filed annually on the GST portal using Form GST RFD-11 and does not require a bank guarantee for exporters with a clean compliance record.
• Export with IGST payment: IGST is charged on the export invoice at the applicable rate and subsequently refunded to the exporter. This route involves a cash flow impact during the refund processing period (typically 30-60 days).

Most experienced exporters prefer the LUT route to avoid the working capital impact of paying IGST and waiting for refunds.

FEMA Compliance on Export Proceeds

Under FEMA regulations, export proceeds must be realised and repatriated to India within 9 months from the date of export. Failure to realise proceeds within this timeframe can result in penalties under FEMA and may also affect eligibility for export incentive schemes.

The RBI monitors outstanding export receivables through the Export Data Processing and Monitoring System (EDPMS). Exporters must file EDPMS declarations through their authorised dealer bank, and habitual defaulters face enforcement action. For foreign companies, this is particularly important to manage because intercompany receivables from the parent entity must also comply with the 9-month realisation requirement.

Key Takeaways

• Start with IEC registration on the DGFT portal (INR 500, 1-2 days) and annual updates between April and June are mandatory to keep it active
• Claim both Duty Drawback and RoDTEP on every export shipment -- they are complementary schemes covering different tax components
• RoDTEP rates were halved in February 2026 for non-agricultural products (DGFT Notification No. 60/2025-26), but agricultural exports retain full rates
• Apply for Brand Rate within 2 months of export if the AIR compensates less than 80% of actual duties paid on inputs
• Combine with Advance Authorisation and EPCG for duty-free import of raw materials and capital goods, potentially recovering 8-10% of total export value