The Directorate General of Foreign Trade (DGFT) has revised India’s export policy and prescribed detailed conditions for each product to facilitate ease of doing business in the country.
On January 13, 2025, the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry of India notified an update to the export policy for all products and specified detailed conditions for each item.
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The updated Schedule II (Export Policy) is in line with the Finance Act, 2024, notified on August 16, 2024. The revised schedule includes current export policies for all ITC (HS) codes, as well as certain mandatory conditions. Satisfied. Previously, certain policy terms only applied to products with restrictions or special regulations.
ITC-HS (Indian Trade Classification (Harmonized System)) is a coding system used to identify and classify goods imported and exported in India. The ITC HS code consists of the Harmonized System (HS) code used worldwide, plus two additional digits for clarity.
Previous description-based approaches to classifying goods referred to methods of classifying exported goods based on textual descriptions or narratives rather than numerical codes. Although this system classified products using a detailed description of the product itself, interpretations can vary and the 8-digit ITC-HS code provides a globally recognized standardized It lacked structure.
One drawback of this approach was that similar goods could be described differently in different situations, making the export control process more complex.
By switching to 8-digit ITC-HS codes, DGFT complies with an internationally recognized system, ensuring clear classification and streamlined trade processes.
Overview of Schedule II in India’s export policy
Schedule II of India’s Export Policy, outlined in ITC (HS) 2022, specifies regulations governing the export of various goods from India. This schedule classifies items into different classifications and items that are permitted through State Trading Enterprises (STEs). The policy aims to streamline export controls and provide clarity to stakeholders by complying with the latest 8-digit tariff codes notified under the Finance Act, 2024.
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In November 2024, DGFT proposed a harmonized Schedule II based on these 8-digit ITC-HS codes, replacing the previous description-based approach. This initiative aims to strengthen export control processes and provide clearer guidelines to 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 the conditions specified for each entry. Restricted Item: An item that has specific procedures or conditions that must be followed and that requires an export license. Prohibited Goods: Items that are not permitted to be exported. Export licenses are generally not granted for these items. State Trading Enterprise (STE): Items that can only be exported through a designated STE, subject to certain conditions.
Additionally, this policy includes provisions for Special Chemicals, Biologicals, Materials, Equipment, and Technology (SCOMET) items controlled by specific regulations.
Although export policies provide a framework for export control, it is important to note that certain items may also be subject to conditions established by other or existing laws. The policy aims to facilitate trade while ensuring compliance with national and international regulations.
How does ITC-HS code work in India?
ITC-HS codes are used to classify products into groups or subgroups. This includes information about the import and export policy for each item.
India uses the 8-digit ITC-HS code to meet national trade requirements. In this 8-digit EXIM (export/import) code, the first two digits represent the chapter, and there are 98 chapters, each covering a specific product category. The next two digits correspond to the heading, and the next two digits correspond to the subheading. The last two digits are developed based on the Indian common classification system for items.
DGFT is responsible for changing the ITC-HS code.
What does the ITC-HS code include?
The ITC HS code is divided into two schedules: Schedule 1 and Schedule 2.
Schedule 1: Contains import policy rules and guidelines.
Schedule 2: Contains export policy rules and guidelines.
Prohibited items: Items that are prohibited for export. Export licenses: Prohibited categories of goods are generally not granted export licenses. Import exemption: Some items, such as donations to the Defense Fund and the Indian Red Cross Society, are exempt from customs duty.
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