An Overview of Directorate General of Foreign Trade (DGFT) License

With the latest developments in today's global economy, any business house willing to export or import products needs to follow a range of rules and regulations. The main forerunners facilitating this in India are the Directorate General of Foreign Trade. The Directorate General of Foreign Trade (DGFT) is a government agency of the Indian government under the Ministry of Commerce and Industry that regulates and promotes foreign trade. It is concerned with formulating and putting in place policies that would enhance the competitiveness of trade and administering export-import licenses. DGFT also advises on trade-related regulations, incentives, subsidies, etc., and engages with the stakeholders toward the rationalization of trade procedures and increasing India's share in world trade.

What Is A DGFT (Directorate General Of Foreign Trade) License?

DGFT License is an official document allowing permission to companies or any person to conduct international trade from the Government of India. The license shall be administered by the Directorate General of Foreign Trade and hence shall, therefore, be a consideration of paramount value to the company concerned with the import and export of goods. The DGFT comes under the Department of Commerce of the Ministry of Commerce and Industry and formulates policies and guidelines on foreign trade in regulation and promotion.

This license thus becomes crucial for any business entity to export and import products legally and claim several other trade benefits, including duty exemption and FTP incentives. The DGFT license requires the applicant to meet certain criteria and submit documents regarding proof of registration of his or her business and payment of all applicable taxes. It assists in smoothing extra trade activities and making a business compliant with national and international trade laws.

Types of DGFT Licenses

DGFT issues different types of licenses, which help business enterprises conduct international trade. These licenses and services provide support to business firms about cost reduction, technology up gradation, and risk management in trading across borders. Here is the overview of some of the most common licenses:

Import-Export Code (IEC): This is the fundamental, perhaps the first, essential license for any business intending to import or export goods from India. This ten-digit number is issued by DGFT. A business cannot engage in international trade without this.

Advance Authorization: This is the license allowing businesses to import materials that would be used to make products bound for export without the payment of any customs duties. It helps trim down production costs, hence making them competitive in the global market.

Duty-Free Import Authorization (DFIA): Under this scheme, a company can import its goods without the Payment of duty, only when those goods are to be used in making export products. It is predominantly for goods of any single export item.

Export Promotion Capital Goods (EPCG): This license facilitates the imports of machinery and equipment by businesses with reduced or nil customs duty for the production of export goods. It encourages companies to spend on better technology.

Special Advance Authorization: This is an upgraded version of Advance Authorization, as now, a wide range of materials can be imported duty-free.

Export Credit Guarantee Corporation (ECGC): This is not any license, but insurance and financial guarantees are given to the exporter. This cover protects against the risks in international trade.

Who Is Eligible To Apply For A DGFT License?

Citizens of India and Companies: Any Citizen of India or any entity registered as a Company, Partnership, or Proprietorship concerned in India can apply for the DGFT License.

Exporter/Importer: Any business concern/exporter dealing with the export of products or goods or involved in the import of goods must mandatorily obtain the DGFT license to avail benefits accruing under various Export Promotion Schemes and also for compliance purposes.

Manufacturers: Those involved in the manufacturing of products intended for export. Since manufacturers are often required to have licenses to assist export transactions and are provided incentives, they qualify.

Service Providers: Any person offering a service deemed export promotion-oriented or regulated by international trade can apply.

Special Economic Zone Units: Any business in a special economic zone can apply, in consideration of their unique needs and advantages related to international trade.

E-commerce Exporters: With the growth in e-commerce, any business associated with cross-border online sales can also apply for licenses from DGFT.

What Are The Products For Which A DGFT License Is Required?

Category	Products
Handmade Carpets & Floor Coverings	Handmade woolen carpets and other floor coverings
Handicrafts	Handicraft items
Dairy & Animal Products	Dairy produce, honey, edible products of animal origin
Fruits & Nuts	Edible fruits and nuts, peels of fruits
Cereals	Cereals
Milling Industry Products	Products of the milling industry (e.g., malt, starch, wheat gluten)
Oil Seeds & Fodder	Oil seeds and fruits, straw, and fodder
Gums & Resins	Gums, resins, vegetable saps, and extracts
Edible Fats & Oils	Prepared edible fats and vegetable and animal fats
Sugar & Confectioneries	Sugar and sugar confectioneries
Food Industry By-products	Residues and wastes from the food industry and prepared animal fodder
Minerals & Building Materials	Salt, sulphur, earth and stones, plastering materials, lime, and cement
Organic Chemicals	Organic chemicals
Pharmaceuticals	Pharmaceutical products
Fertilizers	Fertilizers
Tanning & Dyeing Agents	Tanning and dyeing agents and their derivatives
Essential Oils & Cosmetics	Essential oils, perfumes, cosmetics, and toiletry preparations
Wood Products	Wood, wood pulp, and wooden products
Fibers	Cotton, Jute, and their derivatives

Documents Required For DGFT License

ANF-1 Form
This is an Application Form for the Importer Exporter Code and it is very essential to those who are involved in overseas trade. It needs to be filled up correctly with the details of the applicant, his business, and the nature of export activities.

ANF-2N Form
This is the form for applying for an export license for restricted items. Fill in this form with the details of the restricted items that will be exported, specifying their HS codes, quantity, and other details.

Purchase Order
A copy of the purchase order from the buyer or the importer. This document serves to prove that there has been a transaction and proves to have a ready buyer for the products.

Online Payment Proof
Proof of remittance of the declared amount of the application fee online. This shall be in the form of a receipt or confirmation of payment made through DGFT's online portal or any other mode designated by them.

PAN Card
Permanent Account Number card of applicant or businessThis is required for identification and verification purposes. It should be a valid PAN issued by the Income Tax Department of India.

Identity and Address Proof
Documents verifying the identity and address of the applicant. This would include any one or more of the combination of documents as mentioned below:
Any Passport
Voter ID
Aadhaar Card
Utility bills, which are not more than two months old, relating to the place where the Business is situated; can be Electricity Bills, Water Bills, etc.

Rent agreement or property documents

Cancelled Cheque
A canceled cheque from the applicant's bank account. This is for verifying the bank account details in which any refunds or transactions relating to the license may take place. The cheque must be stamped "CANCELLED" and contain account details with the bank's name.

Additional Documents
Certificate of Incorporation: Proof of legal entity of the business.
IEC Number: Importer Exporter Code issued by DGFT.
Bank Statement: Recent bank statement to verify financial stability.