Paragraphs 2 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Paragraph 2.34 of the Policy says that no specific permission of DGFT is needed to import lease financed capital goods. Paragraph 2.35 says that wherever an import is allowed without payment of duty, the importer executes a Legal Undertaking, Bank Guarantee or Bond with Customs before the goods are cleared, and with the Regional Authority before sourcing from an indigenous supplier. The Handbook adds the endorsements and documents.
This article is based on the chapter-wise text of the Foreign Trade Policy, 2023 published on the DGFT website, as consulted on 2 October 2026; the copy carries no "updated up to" date. The procedure is taken from Chapter 2 of the Handbook of Procedures, 2023 as published on the DGFT website (file of July 2026), consulted on 2 October 2026. Later Notifications and Public Notices should be checked.
Lease financed capital goods need no specific permission of DGFT (paragraph 2.34 of the Policy). Where an import is allowed without payment of duty, or where the Policy otherwise says so, the importer executes a Legal Undertaking (LUT), Bank Guarantee (BG) or Bond with Customs before clearance, and with the Regional Authority for indigenous sourcing (paragraph 2.35). A status holder or public sector unit may offer a Corporate Guarantee instead (paragraph 2.29(c) of the Handbook).
What the Policy says
Paragraph 2.34: lease financing
The paragraph has one sentence. No specific permission of DGFT is required for import of lease financed capital goods. It does not say that every lease financed import is allowed; it says that leasing, as a mode of financing, does not on its own need a DGFT permission. Whether the goods themselves need an authorisation is decided by their entry in ITC(HS) and by the other paragraphs of the Policy, such as those on second-hand goods in our article on paragraph 2.31 on second hand goods. If you are unsure which paragraph governs a lease financed import, a short legal consultation before signing the lease saves rework later.
Paragraph 2.35: LUT, Bank Guarantee or Bond
Paragraph 2.35 has two sub-paragraphs.
- (a) With Customs. Wherever import without payment of duty is allowed, or where otherwise specifically stated, the importer executes a Legal Undertaking (LUT), a Bank Guarantee (BG) or a Bond with the Customs Authority, as prescribed, before clearance of the goods.
- (b) With the Regional Authority. In case of indigenous sourcing, the authorisation holder furnishes an LUT, BG or Bond to the Regional Authority before sourcing material from an indigenous supplier or a nominated agency, as prescribed in Chapter 2 of the Handbook.
The Policy does not say how much a guarantee must be or how long it runs. The amount and form come from the scheme paragraph and the Customs notification. Customs bonds themselves are covered in our article on sections 143 to 143AA of the Customs Act, 1962 on bonds for import or export, and this article does not explain them.
The paragraphs rest on policy made under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 and procedure issued under paragraph 2.04 of the Policy; no other section is named. See our article on section 5 of the FTDR Act, and, for the Handbook, section 6 of the FTDR Act.
What the Handbook requires
Paragraph 2.29: endorsement and who gives which guarantee
Paragraph 2.29 is headed as covering a BG or Legal Undertaking for Advance Authorisation and EPCG Authorisation.
| Sub-paragraph | What it provides |
|---|---|
| (a) | Before clearance through Customs, the authorisation holder executes a BG or LUT with Customs. The Regional Authority endorses on the authorisation that a BG or LUT, as applicable, is to be executed with the concerned Customs Authorities |
| (b) | For indigenous sourcing, the holder gives a BG or LUT to the Regional Authority in terms of Customs Circular 58/2004 dated 31.10.04, as amended from time to time |
| (c) | A status holder or a public sector unit may give a Corporate Guarantee in place of a Bank Guarantee or LUT, in terms of the relevant Customs circular |
Under paragraph 2.29(b), if the firm has already executed a BG or LUT for the full value of the authorisation, covering the items procured indigenously, and gives the Regional Authority proof, no BG or LUT need be executed with the Regional Authority. The Regional Authority then endorses on the authorisation that Customs will release or redeem the BG or LUT only after receiving a No Objection Certificate or Export Obligation Discharge Certificate from the Regional Authority concerned, and sends a copy with a forwarding letter to Customs at the port of registration. The Customs circular is named only as printed; this article does not explain it.
A firm that wants the Corporate Guarantee route should check the Customs circular and the status or public sector unit position before relying on it.
Paragraph 2.30: advance payment
Where payment is received in advance and export or deemed export takes place later, an application for an authorisation is filed within the specific period following the month in which the export or deemed export is made, unless otherwise specified. The paragraph states no number of days or months. That period is the one prescribed for the scheme concerned; read it from that scheme's paragraph.
Paragraph 2.31: lease financing again
Paragraph 2.31 of the Handbook says that import under lease financing is available under the EOU and SEZ schemes. Domestic supply of capital goods to the eligible categories of deemed exports stays eligible for deemed export benefits as in paragraph 7.03 of the Policy, even where the supplies are under lease financing. It does not repeat the statement of paragraph 2.34 of the Policy and neither paragraph describes lease terms.
Paragraph 2.32: certified copies
Wherever original documents were submitted to a different Regional Authority or nominated agency, or to a different division of the same Regional Authority, the applicant may furnish a photocopy certified by him in place of the original.
A worked example
Bhavani Engineering Private Limited, an invented firm, holds an Advance Authorisation and buys part of its inputs from a domestic supplier. Before the Customs clearance of its imports it executes a BG with Customs; the Regional Authority has endorsed that on the authorisation (paragraph 2.29(a) of the Handbook). For the indigenous purchase it would give a guarantee to the Regional Authority, but because it has already executed a BG with Customs for the full value covering the indigenous items, it files proof and is not asked for another one (paragraph 2.29(b)). If Bhavani were a status holder, paragraph 2.29(c) would allow a Corporate Guarantee in place of the Bank Guarantee, in terms of the Customs circular.
Need help with guarantees and undertakings?
The right form of security depends on the scheme, the Customs notification and the status of the firm. Our team can read the authorisation conditions with you and plan the paperwork through our legal consultation service.
Key takeaways
- No specific DGFT permission is needed for lease financed capital goods (paragraph 2.34).
- An LUT, Bank Guarantee or Bond is executed with Customs before clearance (paragraph 2.35(a)) and with the Regional Authority for indigenous sourcing (paragraph 2.35(b)).
- Status holders and public sector units may give a Corporate Guarantee (Handbook paragraph 2.29(c)).
- A guarantee already given to Customs for the full value can serve for indigenous items on proof (Handbook paragraph 2.29(b)).
- Certified copies may replace originals already lodged elsewhere (Handbook paragraph 2.32).
Read next
- Paragraph 2.31 of the Foreign Trade Policy, 2023: import policy for second hand goods
- Paragraphs 2.36, 2.37 and 2.51 of the Foreign Trade Policy, 2023: bonded warehouses for imports and exports
- FTP 2023: the legal framework, and FTP against HBP
- Section 25 of the Customs Act, 1962: power to grant exemption from duty
Disclaimer: Based on the chapter-wise text of the Foreign Trade Policy, 2023 and the Handbook of Procedures, 2023 published on the DGFT website, and on the later Notifications named in this article, as consulted on 2 October 2026. The copies carry no "updated up to" date. Notifications, Public Notices, Trade Notices, the ITC(HS) schedules, Appendices and forms change often; the current text on the DGFT website should be checked before acting. This article is general information, not legal advice; check the official text before acting.