What are restricted, prohibited, and canalised goods under DGFT?

Under India's Foreign Trade Policy, every importable good is assigned one of four legal statuses in Schedule I of the ITC(HS): Free, Restricted, Prohibited, or Canalised. The status of the goods, not the importer's intent or the commercial terms of the transaction, determines whether the import is legally possible. Shipping restricted goods without a DGFT licence, importing prohibited goods under any rationale, or bypassing a canalisation channel is a statutory violation carrying penalties of up to five times the goods' value and mandatory confiscation.

What are restricted, prohibited, and canalised goods?

Under the Foreign Trade Policy 2023 to 2028, administered by DGFT under the Foreign Trade (Development and Regulation) Act, 1992, every entry in Schedule I of the ITC (HS) carries an import policy designation. There are four possible designations. Free means the goods may be imported without a DGFT licence, though other regulatory requirements from agencies such as BIS, FSSAI, or CDSCO may still apply. Restricted means the goods require an import licence from a DGFT Regional Authority before shipment. Prohibited means the goods cannot be imported into India under any circumstances. Canalised means the goods can only be imported through specific government-designated agencies.

Restricted goods cover a broad range of categories. As of FTP 2023 to 2028, the Restricted category includes certain live animals, human organs and tissues, hazardous chemicals listed under international conventions, certain radioactive materials, specific electronic and telecommunications equipment, and a range of agricultural products where import is permitted only under licence to protect domestic production. The licence requirement is pre-shipment.

Prohibited goods are those whose import the government has determined is contrary to public policy, national security, or India's international treaty obligations. Examples include ivory, certain narcotics, tallow from non-bovine animals not permitted under Indian law, and goods that violate the Convention on International Trade in Endangered Species (CITES). Prohibition is absolute: there is no licensing pathway, no ministerial waiver, and no regularisation procedure available.

Canalised goods occupy a middle position between Free and Prohibited. Importation is permitted but only through specific state-controlled entities. MMTC Limited is the designated canalising agency for certain commodities including gold in specific forms, silver, and some metals. The State Trading Corporation of India (STC) handles certain categories. The Food Corporation of India and NAFED are involved in specific agricultural commodity imports. Private sector entities, regardless of their size or import credentials, cannot import canalised goods directly.

Implications for businesses operating in India

For foreign exporters and manufacturers, understanding the restricted, prohibited, and canalised framework is a pre-condition for any realistic assessment of market access in India. A foreign manufacturer whose product falls in the Restricted category cannot complete a sale to an Indian private buyer without first ensuring the buyer has a valid DGFT import licence. If the goods are Prohibited, there is no sale to be made. If the goods are Canalised, the only customer for a private foreign exporter is a designated government agency. Foreign exporters who have not mapped their product lines against India's Schedule I before committing to supply arrangements will face contract failures that are entirely avoidable with early due diligence.

For Indian importers and traders, the Restricted and Canalised categories represent the highest compliance risk zones. An importer who identifies a commercial opportunity in a Restricted goods category must factor DGFT licence lead time, typically 30 working days for a complete application and often longer for categories requiring inter-ministerial consultation, into their supply chain planning. Importers who attempt to circumvent canalisation by importing a canalised good through a private channel, including by sourcing it through a third country, violate the FTP regardless of the intermediate transaction structure.

For Customs House Agents and freight forwarders, the Restricted, Prohibited and Canalised determination is the first question to answer when a client presents a new import opportunity. A CHA who accepts a Bill of Entry for Restricted goods without verifying the existence of a valid DGFT import licence is filing a document that is legally defective from the moment it is submitted.

How restricted, prohibited, and canalised goods compliance works

For Restricted goods, the compliance process begins with the import licence application to the DGFT Regional Authority that has jurisdiction over the importer's registered place of business. The application is filed through the DGFT portal at dgft.gov.in or accessindiaplatform.com using Form ANF 2M for most import licence categories under the Handbook of Procedures 2023. The application must include the importer's IEC, GST registration, a proforma invoice from the foreign supplier, technical specifications describing the goods in detail, a declaration of end use, and in certain categories a No Objection Certificate or clearance letter from the relevant technical ministry.

The DGFT Regional Authority reviews the application, verifies the IEC status, checks the end-use declaration for consistency with the goods, and may request additional information through a query letter. Applications for sensitive categories such as certain chemicals, radioactive materials, and dual-use goods are referred to inter-ministerial committees that include the Ministry of Defence, the Department of Atomic Energy, or the Ministry of Environment, as applicable. These references extend processing time significantly, sometimes to three to four months from the date of application.

The issued import licence specifies the goods by ITC (HS) code and description, the permitted quantity, the maximum CIF value, the country of supply, and a validity period of 24 months from the date of issue under FTP 2023 to 2028. The licence is presented to Customs at the time of import through the Bill of Entry, and Customs endorses the licence with each clearance to track utilisation against the permitted ceiling.

For Canalised goods, the importer's pathway is to approach the relevant canalising agency and place an order through that agency. The canalising agency is the legal importer of record. Attempting to import canalised goods directly, even with a DGFT import licence for a related category, does not substitute for the canalisation requirement. For Prohibited goods, there is no compliance pathway because the import is not permitted.

Legality and risks

The statutory framework for Restricted, Prohibited, and Canalised goods violations is found in the FT(DR) Act, 1992 and the Customs Act, 1962 operating in concert. Section 9A of the FT(DR) Act provides for a financial penalty of up to five times the value of goods imported in contravention of any condition of the Foreign Trade Policy. For Restricted goods imported without a licence, the adjudicating authority under Section 11 of the FT(DR) Act has discretion on penalty quantum, and confiscation of the goods is routinely ordered in addition to the financial penalty.

For Prohibited goods, confiscation is not discretionary. It is mandatory under both the FT(DR) Act and Section 111(d) of the Customs Act, 1962. No payment in lieu of confiscation is available for absolute prohibitions. Criminal prosecution under Section 135 of the Customs Act, 1962, which carries imprisonment of up to seven years for serious offences, applies where the value of goods exceeds Rs. 20 lakh and the goods are of a description prohibited under the law.

For Canalised goods imported outside the designated channel, the FTP treats the import as an unauthorised import equivalent to importing a Restricted good without a licence, with the same penalty exposure under Section 9A and the same risk of confiscation.

Word of counsel

Importers are advised that goods which were freely importable in a prior policy period are sometimes moved to Canalised status by a Public Notice issued mid-policy cycle, without advance warning to existing importers. DGFT does not send individual notices to affected importers. The change is effective from the date of the Public Notice in the Official Gazette, and any shipment that arrives at an Indian port after that date is subject to the new classification regardless of when the purchase order was placed. Importers are advised to check the current Schedule I status of their goods at the time of every purchase order, not at the beginning of a policy cycle.

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