Other BriefingsDGFT Updates Schedule II of India’s Export Policy
The Directorate General of Foreign Trade (DGFT) has revised India’s export policy, providing detailed conditions for each product to improve the ease of business in the country.
On January 13, 2025, India’s Directorate General of Foreign Trade (DGFT), which comes under the Union Ministry of Commerce and Industry, notified an update to the export policy for all products and specified detailed conditions for each item.
The updated “Schedule-II (Export Policy)” aligns with the Finance Act 2024, which was notified on August 16, 2024. The revised schedule includes the current export policy for all ITC (HS) codes, along with any specific conditions that must be met. Previously, specific policy conditions were only applied to goods with restrictions or special regulations.
ITC-HS, or Indian Trade Classification (Harmonized System), is a code system used to identify and categorize goods imported and exported in India. The ITC HS code is made up of the Harmonized System (HS) code, which is used worldwide, and two additional digits for clarity.
The previous description-based approach of classifying commodities referred to the method of categorizing goods for export based on textual descriptions or narratives rather than numerical codes. Under this system, products were classified using detailed descriptions of the goods themselves, which could vary in interpretation and lacked the standardized, globally recognized structure that the 8-digit ITC-HS codes provide.
One of the drawbacks of this approach was the possibility that similar goods might be described differently in various contexts, making the export control process more complex.
By switching to the 8-digit ITC-HS codes, the DGFT aligns with an internationally accepted system and ensures clear classification and streamlined trade processes.
Overview of Schedule II in India’s export policy
Schedule II of India’s Export Policy, as outlined in the ITC (HS) 2022, specifies regulations governing the export of various goods from India. This schedule categorizes items into different classifications and those allowed through State Trading Enterprises (STEs). The policy aims to streamline export controls and provide clarity to stakeholders by aligning with the latest 8-digit tariff codes notified under the Finance Act 2024.
In November 2024, the DGFT proposed a harmonized Schedule II based on these 8-digit ITC-HS codes, replacing the previous description-based approach. This initiative seeks to enhance the export control process and provide clearer guidelines for stakeholders. A draft version covering all chapters (01 to 98) was shared, and industry stakeholders were invited to submit comments by November 27, 2024.
The export policy outlines the following classifications:
- Free goods: Items that can be exported without a license, subject to any conditions specified against the respective entry.
- Restricted goods: Items that require an export license, with specific procedures or conditions that must be complied with.
- Prohibited goods: Items that are not permitted for export, and export licenses are generally not granted for these goods.
- State trading enterprises (STEs): Items that can be exported only through designated STEs, subject to specific conditions.
Additionally, the policy includes provisions for Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) items, which are governed by specific regulations.
It’s important to note that while the export policy provides a framework for export regulations, certain items may also be subject to conditions stipulated in other laws or acts in force. The policy is designed to facilitate trade while ensuring compliance with national and international regulations.
How does the ITC-HS code work in India?
The ITC-HS code is used to classify merchandise goods into groups or sub-groups. This includes information on import and export policies for each item.
India uses an eight-digit ITC-HS code to meet national trade requirements. In this eight-digit EXIM (Export-Import) Code, the first two digits represent the chapter, of which there are 98, each covering a specific category of goods. The next two digits correspond to the heading, followed by two digits for the sub-heading. The final two digits are developed under India’s common classification system for the item.
The DGFT is responsible for making changes to the ITC-HS code.
What’s included in the ITC-HS code?
The ITC HS code is divided into two schedules, i.e., Schedule 1 and Schedule 2.
Schedule 1: Includes rules and guidelines for import policies.
Schedule 2: Includes rules and guidelines for export policies:
- Prohibited items: Items that are not allowed to be exported.
- Export licenses: Goods in the prohibited category are not usually granted export licenses
- Import exemptions: Some items are exempt from customs duty, such as donations to the National Defence Fund or the Indian Red Cross Society.
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