Export Incentives in India: Which Scheme Should You Use?

Take a services exporter with INR 1 crore of exports a year. Under one GST refund route, the refund is INR 6.4 lakh. Under the other, it is INR 18 lakh. Same business, same year.

The scheme you pick matters as much as the price you quote. The right export incentive in India depends on whether you export goods, export services or import goods. Schemes fall into five groups: refund, exemption, deferment, deemed exports, and SEZ, EOU and STPI units. This guide compares GST refund on exports, RoDTEP, duty drawback and the MOOWR scheme, among others.

Most businesses miss MOOWR and deemed exports. A manufacturer importing machinery worth INR 10 crore can save about INR 60 lakh in interest cost over a 10-year asset life under MOOWR (at 6% cost of funds).

Export incentives in India for goods and services: refund schemes

RoDTEP

RoDTEP refunds taxes that do not get input tax credit, such as electricity duty and VAT on fuel. It covers all goods except textiles. You earn scrips at a fixed rate (1% to 3%) on the FOB value of exports, claimed through the shipping bill. Scrips pay Basic Customs Duty on future imports, or can be sold.

• Annual return: Required where scrips exceed INR 1 crore. Due by 31 March of the next year (extendable to 30 June, with late fees). Skipping it can mean denied claims and recovery of past benefits.
• Forex realization: If foreign exchange is not realized within 9 months, repay the scrips’ value with interest at 15% a year.

Duty drawback

• Section 74: Imported goods re-exported as they are. You can claim Basic Customs Duty, cess and IGST if the goods are identifiable, re-exported within 2 years and no IGST credit was claimed. Up to 98% is refundable, depending on the gap between import and re-export.
• Section 75: Imported materials used to make exported goods. You get back Basic Customs Duty and cess on those materials, as a percentage of FOB value. Two types of rates apply:
  • All Industry Rate: The standard rate notified by the Government, claimed through the shipping bill.
  • Brand Rate or Special Brand Rate: Apply within 3 months of export if no All Industry Rate is notified, or if it covers less than 80% of the duty you paid.

Drawback is not available on EOU and SEZ exports, or where export value is lower than the imported inputs used. Repay it if export proceeds are not realized within 9 months.

GST refund on exports

Section 16 of the IGST Act, Section 54 of the CGST Act and Rule 89 of the CGST Rules give every exporter of goods and services two options:

• Option 1: export under a Letter of Undertaking (LUT) without paying GST, then claim accumulated ITC. Refund = Net ITC × (Export turnover ÷ Total turnover). Only ITC on inputs and input services counts. Capital goods are excluded (expected to change from 1 April 2027, per the 57th GST Council meeting of 8 October 2026).
• Option 2: export paying GST, then claim that GST as refund. ITC on capital goods can be used to pay the tax. Not available for goods bought at the 0.1% merchant exporter rate or notified goods such as pan masala.

Illustration: A services exporter earns INR 1 crore from exports and INR 25 lakh from domestic services. ITC is INR 3 lakh on inputs, INR 5 lakh on input services and INR 7 lakh on capital goods.

• Option 1: (3 lakh + 5 lakh) × 1 crore ÷ 1.25 crore = INR 6.4 lakh.
• Option 2: GST on exports is INR 1 crore × 18% = INR 18 lakh, paid from INR 15 lakh of credit and INR 3 lakh in cash. The entire INR 18 lakh can be claimed as refund.

The better option depends on export ratio, accumulated ITC and capital goods ITC.

Exemption schemes: Advance Authorization and EPCG

Advance Authorization (AA)

AA (FTP 2023, Chapter 4) lets you import inputs for export goods free of Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping Duty, Countervailing Duty and Safeguard Duty, wherever applicable. Export the finished goods within 18 months of import, with at least 15% value addition. A shortfall means repaying proportionate duty with 15% interest a year.

EPCG

The Export Promotion Capital Goods scheme (FTP 2023, Chapter 5) allows duty-free import of capital goods, SEZ procurement and GST-free local purchase. Two export obligations apply:

• Specific Export Obligation (SEO): New exports of 6 times the duty saved, within 6 years.
• Average Export Obligation (AEO): The baseline you must maintain, your average yearly exports before EPCG.

SEO counts as met only when AEO is also met, so the total is (AEO × 6 years) + SEO.

Example: ABC Ltd exports INR 2 crore a year and saves INR 1 crore in duty through EPCG. SEO is INR 6 crore and AEO is INR 2 crore × 6 = INR 12 crore. It must export at least INR 18 crore over 6 years. A shortfall means repaying proportionate duty with 15% interest.

Deemed exports

A deemed export is a sale of goods manufactured in India to specified customers in India (Section 147 of the CGST Act; FTP 2023, Chapter 7).

GST law and the Foreign Trade Policy have separate rules. Under GST, supplies to AA or EPCG holders and to EOUs qualify. The supplier pays GST and claims a refund, or the recipient does. The FTP covers more: AA and EPCG holders, EOU, EHTP and STP units, and multilateral-funded projects. On these supplies you can buy inputs duty-free under AA or EPCG, and claim drawback.

MOOWR scheme: defer customs duty on imports

The Manufacture and Other Operations in Warehouse Regulations (MOOWR) scheme lets you import capital goods and raw materials without paying duty upfront. On raw materials, duty is deferred until finished goods are sold in India and exempted if exported. On capital goods, it is deferred to the end of their life and exempted if re-exported. MOOWR is interest-free and, unlike AA and EPCG, carries no export obligation.

Example: ABC Technologies got its MOOWR licence in 2023. Assume 6% cost of funds.

• Machinery (INR 1 crore): Normal duty is INR 10 lakh upfront. With MOOWR, nothing is paid upfront, saving INR 60,000 a year (INR 10 lakh × 6%), or INR 6 lakh over 10 years.
• Raw materials (INR 50 lakh): INR 10 lakh of duty is deferred for about 3 months, saving INR 15,000 per cycle (INR 10 lakh × 6% × 3/12).

SEZ, EOU and STPI units

These units import goods duty-free and must export more than they import.

• SEZ (goods and services): A zone treated as foreign territory (SEZ Act, 2005). Selling goods from the DTA to an SEZ counts as an export, so other incentives apply.
• EOU (mainly goods): Exports what it makes and imports duty-free, but cannot buy locally without GST. It can sell up to 50% of turnover in India.
• STPI (software and IT services): Duty-free import of eligible goods such as IT and networking equipment. STP units can be set up anywhere in India. From 1 October 2026, STPI remains a specified authority for software exports, along with AD banks.

Which export incentive scheme fits you?

FAQs on export incentives in India

What are the main export incentives in India?

Refunds (RoDTEP, drawback, GST refund), exemptions (Advance Authorization, EPCG), deferment (MOOWR), deemed exports, and SEZ, EOU and STPI units.

Is MOOWR better than Advance Authorization or EPCG?

MOOWR defers duty with no export obligation. AA and EPCG exempt duty but carry export obligations, and a shortfall attracts 15% interest. If you sell mainly in India, MOOWR usually fits.

Which GST refund option is better for exporters?

It depends on export ratio, accumulated ITC and capital goods ITC. In the illustration above, Option 2 gave INR 18 lakh against INR 6.4 lakh.

What if export proceeds are not realized?

RoDTEP scrips and drawback must be repaid if foreign exchange is not realized within 9 months. RoDTEP repayment carries 15% interest.

Not sure which scheme saves you most? Talk to Unnathi Partners: unnathipartners.com/contact.

This article is for general information only and is not legal advice.

Tags: export incentives India, RoDTEP, duty drawback, GST refund on exports, Advance Authorization, EPCG scheme, MOOWR scheme, deemed exports, SEZ EOU STPI