What Is DGFT? Functions, Services, & Role in Exports

You’ve closed a deal with an overseas client. The invoice is raised. Now your bank asks for an IEC (Importer-Exporter Code), and your accountant mentions SOFTEX (Software Export Declaration). Every search about DGFT leads to pages filled with government jargon that feels suitable for goods exporters, but not service businesses.

Most exporters slow down here, as the process isn’t explained clearly anywhere. This guide closes that gap, explaining DGFT in a comprehensive way that service exporters would find contextual. Check out how it fits into your workflow, key aspects that matter, and areas where mistakes commonly happen. 

What is DGFT?

DGFT stands for Directorate General of Foreign Trade. It works under the Ministry of Commerce and Industry and oversees the regulation of exports and imports in India. It is responsible for setting the rules and providing the systems exporters use to operate legally.

Today, DGFT is used not just for large exporters. Many service exporters assume DGFT is only for physical goods. That is not true. If you are earning in foreign currency, you are already part of the DGFT ecosystem. You are still part of the same system even if you are:

DGFT is responsible for issuing the registration, documentation, and approvals needed to export and receive foreign payments properly.

What is the Role of DGFT in Export & Import?

DGFT is the starting point for all export businesses. This is where you create your export identity before proceeding to payments, compliance filings, and incentives.

Businesses must understand the different roles of DGFT in export and import comprehensively, as explained below.

Creating and Managing Trade Policy

DGFT implements the Foreign Trade Policy of India. The current cycle is FTP 2023.

This policy decides:

You may not deal with the policy in your daily operations, but it defines the rules that apply to your exports.

Issuing IEC (Importer Exporter Code)

This is the most important function of DGFT. A DGFT IEC is a 10-digit code linked to your PAN. Without it:

For instance, a freelancer in Bengaluru invoices a US client for $3,000. Without IEC, the bank may hold the payment or ask for additional documentation before releasing funds. That is why IEC is always the first step.

Managing Product Classification 

DGFT is also responsible for managing the HS code system, also known as ITC-HS.

These codes:

Even for service exporters, classification is important. For instance, an IT consulting firm may use a service accounting code integrated with software or consulting exports. If the classification is wrong, it may experience reporting mismatches later during compliance checks.

Issuing Licenses and Authorisations

Not all exports are “free”, as some require approvals. This is where different types of DGFT licenses come in. Some of these are:

Most service exporters may not require these in regular operations. However, they are necessary when dealing with restricted items or certain export schemes.

Managing Export Schemes and Incentives

DGFT is also used to manage export-related schemes, such as the RoDTEP (Remission of Duties and Taxes on Exported Products), which is meant for exporters of goods. Earlier, service incentives such as SEIS (Service Exports from India Scheme) were also administered by DGFT.

DGFT also oversees certain export approvals and types of licenses, like Advance Authorization and EPCG (Export Promotion Capital Goods), along with controls for restricted categories under frameworks like SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies).

Many schemes today have been formulated for goods. However, an update in policy may still affect service exporters, particularly considering compliance and reporting.

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What Services are Offered by DGFT?

Besides acting as a regulator, DGFT also provides systems and services that exporters use regularly. 

Online DGFT Portal

The main platform is dgft.gov.in, where you can:

Everything is digital now. There is no need for physical visits in most cases.

eBRC and Export Documentation

DGFT maintains a connection with banks. It tracks export payments through eBRC, or the electronic Bank Realisation Certificate.

For instance, your client sends $5,000, and the receipt is confirmed by your bank. This transaction gets recorded and is linked to your export data. Considering compliance and incentives, this role is crucial.

Certificate of Origin 

The DGFT COO validates the place where your goods or services come from. This feature comes in handy for goods exporters. However, if you export services, you may still find this in some contracts or compliance cases.

For instance, a business exporting software bundled with hardware may require the COO to confirm the place of origin of the physical component.

Niryat Bandhu Scheme

The Niryat Bandhu Scheme has been launched for free mentoring and handholding for new or small exporters. Particularly, this helps new exporters by providing them with training sessions and basic guidance, besides cultivating export awareness. So, if you’re just starting and need methodical support, DGFT can prove handy.

Grievance and Support System

In case something goes wrong, businesses can turn to the DGFT portal for online grievance submission. It also provides regional support at offices. This helps exporters resolve issues like:

Now, exporters must try to avoid the common errors while dealing with DGFT.

Common DGFT Mistakes Exporters Make and How to Avoid Them

In most cases, businesses encounter export issues due to small mistakes that usually go unnoticed early. Have a look at the common errors that you must avoid.

Incorrect Purpose Code or Bank Details

The correct purpose code has to be used when you receive payments. In case the purpose code is wrong, the records with the bank won’t match the trade DGFT data. Moreover, eBRC may not generate properly.

So, if a SaaS company chooses the wrong purpose code for a subscription payment, the bank will process it, but there might be a mismatch in reporting. This can amount to issues later on.

IEC Not Updated

Sometimes, exporters forget to update the IEC annually. It may get deactivated, eventually blocking export transactions.

eBRC Mismatches

When there’s a mismatch between the invoice value, amount received, or reported value of exports, your compliance filings may be delayed. 

For instance, you raise an invoice of $10,000 but after deductions, you receive $9,800. These reporting issues might show up if the records are not aligned.

Wrong Classification Codes

In case an exporter uses the wrong DGFT HS code or service classification, it can lead to errors during reporting or compliance delays.

For service exporters, it’s important to select the correct SAC (Service Accounting Code) based on what they offer. For example, IT services, software development, or consulting services fall under the 998313 code. If there’s a mismatch between the classification and the nature of the service, it might create issues in eBRC, RBI reporting, or export documentation.

Now, check out the common mistakes businesses make while using these codes, and understand how you can fix them.

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The Role of Digital Signature Certificates (DSC) in DGFT

As all the processes associated with DGFT are fully digital, exporters need a Class 3 Digital Signature Certificate. A DSC is a digital identity that is used to sign applications and submit documents online.

The purpose of DGFT is to verify the authenticity of information and prevent misuse of data. It streamlines paperless processing for exporters. Unless businesses obtain the DSC, they cannot complete IEC applications, place any request for a license, or make any kind of modifications.

You can obtain a DSC from certified providers like eMudhra, Sify, and nCode. For DGFT filings, a Class 3 Digital Signature Certificate is required. It ensures secure and authenticated submissions. The DSC usually remains valid for 2-3 years. The cost of a Class 3 DSC in India typically ranges from ₹1,000 to ₹3,500. The exact cost depends on validity, provider, and whether a USB token is included.

A DSC is necessary for service exporters, too. So, even if you are a freelancer or running a small agency, you would need it if you are handling the filings yourself.

For instance, a freelancer applying for IEC or filing eBRC independently needs to use DSC to submit the application and verify it.

By now, you have understood how IEC, purpose codes, and compliance help in receiving your export payments seamlessly. Once you complete your DGFT setup, the next challenge lies in handling payments without delays, hidden charges, or constantly following up with your bank. Platforms like Skydo can help exporters in these situations. 

How Does Skydo Help After Your DGFT Compliance Is Sorted?

DGFT may help exporters get started, but it won’t handle your payment flow. A platform like Skydo can help you manage your incoming payments and documentation efficiently. It offers the following features.

Think of it this way: DGFT gives you the ability to export. Then, Skydo helps you receive and manage the money that comes in.