Foreign Trade Policy - CA Study...Government of India Foreign Trade Policy 2015-2020 [5 year Policy & Annual Updation] Ministry of Commerce and Industry DGFT Handbook-1 CBEC RBI STATE

FTPForeign Trade Policy2015- 2020

FTPForeign Trade Policy2015- 2020By : CA Vishal Bhattad

09850850800

Legislation Governing Foreign Trade in

Content of FTP

Advance Authorization Scheme

Duty Free Import Authorization (DFIA)

MEIS and SEIS

Export Promotion CapitalGoods Scheme (EPCG)

EOU, EHTP, STP & BTP Schemes

Deemed Exports

Special Economic Zone (SEZ)

Miscellaneous Provisions

1.

2.

3.

4.

5.

6.

7.

8.

9

10.

FTP 1

FTP 3

FTP 7

FTP 9

FTP 12

FTP 14

FTP 16

FTP 20

FTP 22

FTP 23

Acronym Explanation

AA Advance Authorisation

ACC Assistant Commissioner

of Customs

ANF Aayaat Niryaat Form

BG Bank Guarantee

BIFR Board of Industrial and

Financial Reconstruction

BoA Board of Approval

BRC Bank Realisation Certificate

BTP Biotechnology Park

CBEC Central Board of Excise

and Customs

CCP Customs Clearance Permit

CEA Central Excise Authority

CEC Chartered Engineer Certificate

CIF Cost. Insurance & Freight

CVD Countervailing Duty

DC Development Commissioner

DFIA Duty Free Import Authorisation

DGCI&S Director General,

Commercial Intelligence & Statistics.

DGFT Director General of Foreign Trade

DoR Department of Revenue

DTA Domestic Tariff Area

EDI Electronic Data Interchange

EEFC Exchange Earners Foreign

Currency

EFC Exim Facilitation Committee

EFT Electronic Fund Transfer

EH Export House

EHTP Electronic Hardware

Technology Park

EIC Export Inspection Council

E0 Export Obligation

EOP Export Obligation Period

EOU Export Oriented Unit

EPC Export Promotion Council

EPCG Export Promotion Capital Goods

FDI Foreign Direct Investment

FIEO Federation of Indian

Export Organisation

FOB Free On Board

FT (D&R) Act Foreign Trade (Development &

Regulation) Act 1992

FTP Foreign Trade Policy

Acronym Explanation

GATS General Agreement on

Trade in Services

ICD Inland Container Depot

IEC Importer Exporter Code

ISO International Standards Organisation

ITC(HS) Indian Trade Classification (Harmonised

System) Classification for Export & Import

Items

ITPO India Trade Promotion Organisation

LoC Line of Credit

Lol Letter of Intent

LoP Letter of Permit

LUT Legal Undertaking

MEA Ministry of External Affairs

MEIS Merchandise Export from India Scheme

MoD Ministry of Defence

MoF Ministry of Finance

NC Norms Committee

NFE Net Foreign Exchange

NOC No Objection Certificate

PSU Public Sector Undertaking

R&D Research and Development

RA Regional Authority

RBI Reserve Bank of India

RCMC Registration-cum-Membership Certificate

S/B Shipping Bill

SEIS Service Export from India Scheme

SEZ Special Economic Zone

SION Standard Input Output Norms

SSI Small Scale Industry

STE State Trading Enterprise

STP Software Technology Park

TEE Town Export Excellence

VA Value Addition

Glossary (Acronyms)

8888388886www.vsmartacademy.com FTP 1V’Smart Academy

Legislation

Foreign Trade (D&R) Act

1992

Government of India

Foreign TradePolicy 2015-2020[5 year Policy &

Annual Updation]

Ministry of Commerce and

Industry

DGFT

Handbook-1

CBEC RBI STATE VAT DEPT.

Since VAT is payable on domestic goods but not on export goods, f o rma l i t i e s w i t h S ta te VAT departments assume importance in ensuring tax free exports.

FTP Formulated

Controlled

Supervised

Legislation Governing Foreign Trade in India

1. CBEC comes under Ministry of Finance

2. It has two Departments namely, Customs and Central Excise facilitate in implementing the provisions of the FTP.

3.Customs authorities follow the policy formed by the DGFT while clearing the goods.

4. Central Excise Department works as Customs Departments at various required places, and has a c ruc ia l ro le in the procedural aspects.

1. RBI is the nodal bank in the country which formulates the policies related to management of money, including payments a n d r e c e i p t s o f f o r e i g n exchange.

2. It also monitors the receipt and payments for exports and imports. RBI works under the Ministry of Finance.

(

Foreign Trade (Development &Rule) Act 1992

If provides development & regulations of foreign trade by - Faciliating import into or- augmenting export from India

Foreign TradePolicy

Meaning : Foreign Trade Policy is a set of guidelines or procedures orregulatory requirements issued or laid down by the Central Governmentin matters related to foreign trade viz. Import / Export of Goods or Services into, or from, India. General Provision 1. It is formulated by Union Ministry of Commerce & Industry with DGFT 2. It is announced in every five years with annual updation. 3. It is also called Export Import Policy. i.e. Exim Policy.

Administrationof Foreign Trade Policy

Guiding principles: The guiding principles of FTP 2015-2020 are as follows

l Generation of employment and increasing value addition in Country, in keeping with Make in India vision.

l Focus on improving „ease of doing business� and „trade facilitation� by simplifying procedures and extensive use of e-governance – move towards paperless working.

l Encouraging e-commerce exports of specified products.

l Steps to encourage manufacture and export by SEZ, EOU, STP, EHTP and BTP.

l Duty credit scrips to (a) encourage exports of specified products to specified markets (b) export of services.

l Special efforts to resolve quality complaints and trade disputes. The various measures taken in said direction include:

l The number of mandatory documents required for exports and imports of goods from/into India have been reduced to 3 each

l The facility of 24 X 7 Customs clearance on specified port

Guiding Principle of Foreign Trade Policy 2015-2020

NOTES

CBEC

RBI

STATE VAT DEPT.

Object of Foreign Trade Policy - Developing export Potential - Improving export performance - Encouraging foreign trade & creating favorable balance of payment

1. FTP Formulated

Controlled

Supervised } By

DirectorGeneral of Foreign Trade

2. DGFT is an attached office of Ministry of Commerce & Industry

3. Role of DGFT

a) Issue authorisation (license) for import or exportb) Grant IEC [ Import Export Code] [Import Export not permitted without IEC]

c) Order of DGFT is final & binding in respect- of interpretation of FTP- Classification of any item in ITC(175)

Other Authorities involved

DGFT

8888388886 www.vsmartacademy.com V’Smart Academy(FTP 2

Content of Foreign Trade Policy

Foreign Trade Policy2015-2020Notified by

Central Government

Schedule IIExport

Schedule IImport

containing various appendices and forms relating to import and export.

I t descr ibe the r u l e s a n d guidelines related to Import policies

Prohibited GoodsRestricted GoodsFree Goods

Most of goods are free goods except certain restriction on few goods

I t descr ibe the r u l e s a n d regulation related to Export policies.

1. (HBP 2015-2020) containing 9 chapters, covering procedural aspects of policy.

2. This has been notified by Director General of Foreign Trade on 01.04.2015.

3. It is amended from time to time as per requirements.

1. Standard Input-Output Norms (SION) of various products are notified from time to time.

2. Based on SION, exporters are provided the facility to make duty-free import of inputs required for manufacture of export products under the Duty Exemption Schemes like Advance Authorisation and DFIA.

1. The Export Import Policy regarding import or export of a specific item is given in the Indian Trade Classification Code based on Harmonized System of Coding [ITC(HS)].

2. ITC-HS Coding was adopted in India for import-export operations.

3. Indian custom uses eight digit ITC-HS Codes to suit the national trade requirements.

8888388886www.vsmartacademy.com FTP 3V’Smart Academy (

DGFT Committee Board of Trade (BOT)

Export PromotionCouncil (EPC)

Norms Committee

EPCGCommittee

Regional Authority

1.Authority competent to grant an Authorization under FT (D&R) Act

2. It working under the control of DGFT

It fixes/modify norms SION under all scheme. (SION = Standard Input & Output Norms)

It determines nexus of capital goods and benefit under EPCG

Board of Trade (BOT) has been constituted to advise Government on Policy measures for increasing

l Exports

l Review export

l Performance,

review policy

lProcedures for imports and exports

lExamine issues relevant for promotion of Indias foreign trade.

EPCs are non-profit autonomous organizations.

1) These have been set up to promote and develop export of the country.

2) They assist and guide exporters.

3) Their main aim is to project India’s image abroad as a reliable supplier of high quality goods and services.

Relationship between FTP and Indirect Tax Laws

The Foreign Trade Policy is closely knit with the Customs and Excise laws of India. However, the policy provisions per-se do not override tax laws. The exemptions extended by FTP are given effect to by issue of notifications under respective tax laws (e.g., Customs Tariff Act). Thus, actual benefit of the exemption depends on the language of exemption notifications issued by the CBEC. In most of the cases the exemption notifications refer to policy provisions for detailed conditions. Ministry of Finance/ Tax Authorities cannot question the decision of authorities under the Ministry of Commerce (so far as the issue of authorization etc. is concerned).

Authorities related to Foreign Trade

Registration Cum Membership Certificate [RCMC]

Exporter has to obtain RCMC from EPC or Commodity Board.

● Mandatory : If exporter intends to obtain export incentives, then RCMC is mandatory.

● Optional : If exporter does not intend to obtain export incentives, then RCMC is optional.


Some Important Concept

Import ExportCode (IEC)

Authorisation

State TradingEnterprises (STE)

Status Holder

1. It is a unique 10 digit code issued by DGFT to a person.

2. IEC is mandatory to export any goods out of India or to import any goods into India unless specifically exempt.

3. Permanent Account Number (PAN) is pre-requisite for grant of an IEC.

4. Only one IEC can be issued against a single PAN.

5. An application for IEC is to be made manually to the nearest RA (Regional Authority) of DGFT or alternatively, it can be filed online, in Form ANF 2A and shall be accompanied by prescribed documents.

6. In case of STPI/ EHTP/ BTP units, the Regional Offices of the DGFT having jurisdiction over the district in which the Registered/ Head Office of the STPI unit is located shall issue or amend the IECs.

Meaning - Permission to Import or export as per Provisions of FTP

Terms and Conditions of an authorization: Every Authorization shall be valid for prescribed period of validity and shall contain such terms and conditions as may be specified by Regional Authority (RA), which may include:

(a) Quantity, description and value of goods; (b) Actual User condition; (c) Export obligation;

(d) Minimum Value Addition to be achieved; (e) Minimum export/ import price; and

(f) Bank Guarantee/ Legal Undertaking/ Bond with Customs Authority/ RA.

(g) Validity period of import/export as specified in Handbook of Procedures

Authorization not a right: No person may claim an Authorization as a right and DGFT or RA shall have power to refuse to grant or renew the same in accordance with provisions of FT(D&R) Act, rules made there under and FTP.

1. STEs are governmental and non-governmental enterprises, including marketing boards. Which deal with goods for export and/or import.

2. Any goods, import or export of which is governed through exclusive or special privileges (grant of subsidy) granted to State Trading Enterprises [STE(s)], may be imported or exported by STE(s) as per conditions specified in ITC(HS).

3. DGFT may, however, grant an authorization to any other person to import or export any of these goods.

Examples of STE in India :

►The Food Corporation of India (exclusively authorized for import of most cereals)

►The State Trading Corporation of India Ltd (Govt of India enterprise)

Status of

1 Star Export House2 Star Export House3 Star Export House4 Star Export House5 Star Export House

30,00,0002,50,00,000

10,00,00,00050,00,00,000

200,00,00,000

Export performance FOB / FOR Value* (in US $ in Millions)(CY + Preceding 2 licensing years)

STATUS HOLDER1) Status Holders are business leaders who have excelled in international trade and have successfully

contributed to country foreign trade. 2. All exporters of goods, services and technology having an import-export code (IEC) number shall be eligible

for recognition as a status holder. 3. Status recognition depends upon export performance.4. An applicant shall be categorized as status holder upon achieving export performance during current and

previous two financial years, as indicated below:

Clubbing provisions for determining status : Holding Company exports and Subsidiary Company exports shall be clubbed. Exports of EoU unit/SEZ unit can be clubbed with its DTA units.

Privileges of Status Holders: Status holders are granted certain benefits like:

(a) Authorisation and custom clearances for both imports and exports on self-declaration basis.

(b) Fixation of Input Output Norms (SION) on priority i.e. within 60 days.

(c) Exemption from compulsory negotiation of documents through banks. The remittance receipts, however, would continue to be received through banking channels.

(d) Exemption from furnishing of Bank Guarantee in Schemes under FTP.


Standard InputOutput Norms (SION)

Value adition

(e) Two Star Export Houses and above are permitted to establish export warehouses.

(f) Three Star and above Export House shall be entitled to get benefit of Accredited Clients Programme (ACP) as per the guidelines of CBEC.

(g) Status holders shall be entitled to export freely exportable items on free of cost basis for export promotion subject to an annual limit of ` 10 lakh or 2% of average annual export realization during preceding 3 licensing years, whichever is higher.

Concept of SION (Standard Input Output Norms)1) It is standard norms which define the amount of input/inputs required to

manufacture unit of output for export purpose.2) Input output norms are applicable for the products such as electronics,

engineering, chemical, foods products including fish and marine products, handicraft, plastic and leather products etc.

3) SION is notified by DGFT in the Handbook (Vol.2).4) The Directorate General of Foreign Trade (DGFT) from time to time issue

notifications for fixation or addition of SION for different export products.

Value addition (VA): will be calculated as follows (except for gem and jewellery sector)–

Important points to be noted :1) If some items are supplied free of cost by foreign buyer, its notional value

will be added in the CIF value of import and FOB value of export for purpose of calculating value addition.

2) Exports to SEZ Units/ supplies to Developers/ Co-developers, irrespective of currency of realization, would also be covered.

Example : Calculate value addition from following information1) FOB Value of Export realised ` 40,00,0002) For Value of Sale to SEZ ` 10,00,0003) Value of Inputs - Under advance authorisation `25,00,000 - Under DBK Scheme ` 15,00,0004) Free material supplied by Foreign buyer ` 5,00,000 (Notional Value)

VA = [(A-B) x 100]/B

A = FOB value of export realised/FOR value of supply received.

B = CIF value of inputs covered by authorisation plus any other imported materials used on which benefit of duty drawback (DBK) is claimed or intended to be claimed.

Answer

Calculate value addition from following information

1) FOB Value of Export realised ` 40,00,000

2) For Value of Sale to SEZ ` 10,00,000

3) Free material supplied by Foreign buyer ` 5,00,000

(Notional Value)

A

3) Value of Inputs

- Under advance authorisation ` 25,00,000

- Under DBK Scheme ̀ 15,00,000

4) Free material supplied by Foreign buyer ` 5,00,000

(Notional Value)

B

Total (A) = 55,00,000

Total (B) = 25,00,000

VA = 55,00,000 - 45,00,000

45,00,000= 22.22%

NOTES


NOTES

Export Promotion Schemes

EXEMPTION SCHEMES EPCG SCHEME

REWARD SCHEMES

1. Advance AuthorizationScheme

2. Duty Free Import AuthorizationScheme (DFIA)

Dutyexemptionschemes

Dutyremission schemes

1. Duty Drawback(DBK) Scheme

2. Duty remissionschemes underCentral Excise Law

Merchandise Export From India Scheme

MEIS SEIS Service Export from India Scheme

EOU SCHEME

SEZ SCHEME

DEEMED EXPORTS

What is this Scheme?

May I know which duties exempted on imported material under this scheme

Under advance authorization scheme, INPUTS which are used in the export product can be imported without payment of customs duty.

The goods imported are exempt from basic customs duty, additional customs duty, education cess, anti-dumping duty and safeguard duty, unless otherwise specified.

1) Advance Authorisation shall be valid for 12 months from the date of issue of such Authorisation.

2) Advance Authorisation for Deemed Export shall be co-terminus with contracted duration of project execution or 12 months from the date of issue of Authorisation, whichever is more.

Validity

Period of fulfillment of export obligation under Advance Authorization is 18 months from the date of issue of Authorization or as notified by DGFT.

Export obligation

Export realization

Exports proceeds shall be realized in freely convertible currency except otherwise specified.

Categorization of goods to be imported/ exported

Goods are categorized into following 4 categories :

Categorization

Prohibited items

Items reserved forSTE (State Trading Enterprise)

[Canalized Goods]

Restricted Items

Free Goods

Import (Export)

Items prohibited for import (export)

Items reserved for import (export) bySTE (State Trading Enterprise)e.g. petroleum Products, Agricultural Subject

Items restricted for import (export)

Items freely importable (exportable)

Policy for Exports/Imports under Scheme

Import or Export of goods is strictly prohibited

Importer other than STE cannot import (export) suchgoods.

Items allowed to be imported (exported) subject to condition or licence

Advance Authorisation Scheme


Eligible Goods

Which goods allowed to be imported under this scheme?

Eligible Non Eligible

Inputs, which are physically incorporated in export product (making normal allowance for wastage).► F u e l , o i l , c a t a l y s t s w h i c h a r e

consumed/utilised to obtain export product.

► Mandatory spares which are required to be exported/supplied with resultant product permitted upto 10% of CIF value of Authorization.

► Specified spices only when used for activities like crushing/ grinding /sterilization/ manufacture of oils or oleoresins and not for simply cleaning, grading, re-packing etc.

► However, items reserved for imports by STES cannot be imported against advance authorization.

NOTES

Items which cannot be imported against advance Authorization:► Prohibited items mentioned in ITC (HS)► Energy► Items reserved for imports by STE (State

Trading Enterprise)

Who are eligible for advance authorization: Advance Authorization can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s).Such Authorization can also be issued for: (1) Physical exports (2) Intermediate supply (3) Supplies made to specified categories of deemed exports (4) Supply of, stores on board of foreign going vessel/aircraft provided there is specific

SION in respect of items supplied.

Advance Authorisation on basis of SION: 1) Advance Authorization is issued for inputs in relation to the resultant product on the basis of

SION. 2. If SION for a particular item is not fixed, Advance Authorisation can be issued by RA based on

self declaration by applicant, except certain specified products.

Actual user condition for Advance Authorisation: Advance Authorization and/ or materials imported thereunder will be with actual user condition.

3) Waste/scrap arising out of manufacturing process, as allowed, can be disposed off on payment of applicable duty even before fulfillment of export obligation.

1) It will not be transferable even after completion of export obligation.

2) However, Authorization holder will have an option to dispose off product manufactured out of duty free inputs once export obligation is completed. In case where CENVAT credit facility on inputs has been availed for the exported goods, even after completion of export obligation, the goods imported against Advance Authorization shall be utilized only in the manufacture of dutiable goods whether within the same factory or outside (by a supporting manufacturer).

1. Not Transferable

2. Disposal

3. Waste

Value Addition Target1) Minimum positive value addition is 15%,

except for physical exports for which payments are not received in freely convertible currency and some other specified export products.

2) For tea, minimum value addition required shall be 50%.

VA = [(A-B) x 100]/B

A = FOB value of export realised/FOR value of supply received.

B = CIF value of inputs covered by authorisation plus any other imported materials used on which benefit of dutydrawback (DBK) is claimed or intended to be claimed.

Example : xyz ltd. as imported input of CIF value ` 30,00,000/- . Determine export value of FP to achieve min. value addition under AA scheme.Assume No other inputs are used in processing.

Solution : General Value Addition (%) = 15%FOB value of Export = CIF value of all inputs + 15% = 30,00,000 + 15% = 33,00,000


Domestic sourcing of inputs: Holder of advance authorization has an option to procure the materials/ inputs from indigenous manufacturer/STE in lieu of direct import against Advance Release Order (ARO)/ Invalidation letter/ Back to Back Inland Letter of Credit. However, Advance Authorisation holder may obtain supplies from EOU/EHTP/BTP/STP/SEZ units, without obtaining ARO or Invalidation letter.

Annual Advance authorization: Advance Authorization can be issued for annual requirement also.

Admissibility of drawback: Drawback as per rate determined and fixed by Central Excise authority shall be available for duty paid inputs (both imported and indigenous) used in the export product.

NOTES

Anual AA limit

Criteria

Non Eligibility

Entitlement (in terms of CIF Value of Imports) shall beHigher of (a) ̀ 1 Crore or (b) 300% of FOB Value of Exports / FOR value of deemed export in

preceding financial year (PY)

Exporters having past export performance (in at least preceding two financial years) shall be entitled for Advance Authorization for Annual Requirement.

In respect of export product for which SION does not exit, no Advance Authorization for annual requirement shall be available.

Duty free Import Authorization (DFIA)

What is this Scheme?

May I know which duties exempted on imported material under this scheme

Under DFIA, INPUTS which are used in the export product can be imported without payment of customs duty.

The goods imported are exempt ONLY from basic customs duty. Additional customs duty/excise duty, being not exempt, shall be adjusted as CENVAT credit as per DoR rules.

Whether the provision of DFIA is similar to Advance Authorization Scheme?

Provisions applicable to Advanced Authorisation are broadly applicable in case of DFIA. Subject to following differences.

Eligible Goods

AA Scheme DFIA Scheme

Inputs which gets physicallyincorporated under the export productFuelOilCatalyst

Inputs required for production ofexport goodsOilCatalystConsumed/in the process of production of export goods

FTP 2015-20)Fuel cannot be Imported under the new DFIA

SION for DFIA

1) These Authorizations shall be issued only for products for which Standard Input and Output Norms (SION) have been notified.

2) DFIA shall be issued Pre export

Post export

No DFIA for Actual Úser condition inputs: No DFIA shall be issued for an export product where SION prescribes Actual User condition for any input.


NOTES

Value Addition Target1) Minimum positive value addition is 20%,

except for physical exports for which payments are not received in freely convertible currency and some other specified export products.

The applicant shall file an online application to RA concerned before starting exports under DFIA. Export shall be completed within 12 months from the date of online filing of application and generation of file number. While doing export/supply, applicant shall indicate file number on the export documents.

Validity

After completion of exports and realization of export proceeds, request for issuance of transferable DFIA may be made to concerned RA within a period of:(a) 12 months from the date of export or(b) 6 months (or additional time allowed by RBI for realization) from the date

of realization of export proceeds, whichever is later.l RA shall issue transferable DFIA with a validity of 12 months from the

date of issue.

Transferability

Export realization

Exports proceeds shall be realized in freely convertible currency except otherwise specified.

Domestic sourcing of inputs: Holder of DFIA has an option to procure the materials/ inputs from indigenous manufacturer/STE in lieu of direct import against Advance Release Order (ARO)/ Invalidation letter/ Back to Back Inland Letter of Credit. However, DFIA holder may obtain supplies from EOU/EHTP/BTP/STP/SEZ units, without obtaining ARO or Invalidation letter.

Admissibility of drawback: Drawback as per rate determined and fixed by Central Excise authority shall be available for duty paid inputs, whether imported or indigenous, used in the export product.

Difference between Advance Authorization (AA) & Duty Free Import Authorization (DFIA)

Duty Exemptionson Imported Goods

AA Scheme DFIA Scheme

Eligible Goods Inputs which gets physicallyincorporated under the export productFuelOilCatalyst

Inputs required for production ofexport goodsOilCatalystConsumed/in the process of production of export goods

FTP 2015-20)Fuel is not allowed to be Imported under the new DFIA

BCD, ACD, Education cess, Anti-dumping duty and Safeguard duty,

BCD, Note : ACD being not exempt, shall be adjusted as CENVAT credit.

SION Scheme is also applicable for goods for which SION norms is not fixed.

Scheme is only applicable for goods for which SION norms is fixed.

Transferability AA/ materials imported therein are non-transferrable.

If DFIA is on post-export basis, AA/materials imported therein are transferrable*. after fulfilling export obligations.

Type Pre-export [Pre-Export] as well [Post Export]

Application Form ANF-4A ANF-4H


DUTY DRAWBACK (DBK) SCHEMEAt present, this scheme is used to allow rebate of duties (central excise, customs and service tax) paid on inputs and input services used for exported final product. This scheme has been discussed in detail in Chapter-11-Duty Drawback.

DUTY REMISSION SCHEMES IN CENTRAL EXCISE LAWDuty remission/exemption is also granted under central excise law, through CENVAT credit scheme and rules 18 and 19 of Central Excise Rules, 2002. These schemes are discussed in Section A: Central Excise.

DUTY REMISSION SCHEMES NOTES


REWARD SCHEME

1) Reward schemes are the schemes which entitle the exporters to duty credit scrips subject to various conditions. 2) These scrips can be used for payment of

Customs duties on import of inputs/goods.

Payment of excise duties on domestic procurement of inputs/goods including capital goods.

Payment of service tax on procurement of services.

These scrips are transferable, i.e. they can be sold in market, if the holder of duty credit scrip does not intend to import goods against the scrips. Goods imported under the scrip are also freely transferable.

Following are two schemes for exports of merchandise and services:

(i) Merchandise Exports from India Scheme (MEIS)

(ii) Service Exports from India Scheme (SEIS)

Particulars MEIS SEIS

Objective The objective of MEIS scheme is to compensate infrastructural inefficiencies and associated costs involved in export of goods/products, which are produced/manufactured in India, especially goods having high export intensity, employment potential and thereby enhancing India�s export competitiveness.

The objective of SEIS scheme is to encourage export of notified services from India. The scheme applies to export of services made on or after 01.04.2015.However, only services provided in the manner / mode specified are eligible.►Supply of a ‘service’ from India to any other country

(Mode 1-Cross border trade);►Supply of a ‘Service’ from India to service consumers of

any other country (Mode 2- Consumption abroad)

Eligible Exporter(Claimant of Reward)

1) Exporter who has realised foreign exchange2) Supporting Manufacturer

1) Service Provider with (IEC) where net free foreign exchange earned in preceding F.Y. is

Note : Payment in Indian Rupees for service charges earned on specified services, shall be treated as receipt in deemed foreign exchange as per guidelines of Reserve Bank of India.

US $10,000

US $15,000

Individual service providers and sole proprietorship

Other serviceproviders

Notified Goods &Rate of Reward

Export of notified goods/ product to notified market e.g. scrip value is 2%, 3%, 5% of FOB value of notified goods exported to notified Countries

Percentage Rate specified under SEIS (illustrative)Service Percentage rateBusiness services 3 and 5Communication service 5Construction and related 5Engineering service Environmental Service 5Health-related and social service 5Tourism and travel-related service 3 and 5Recreational, cultural and sporting 5services (other than audiovisualservices)Transport services 5

% of Reward (Scrip value) based on

FOB value of export goods. Net foreign exchange earned. ( Refer note 1)

In-eligible Category

Supply based● Supplies made from DTA units to SEZ units.● Deemed Exports.Value based● Export products which are subject to minimum export price or

export duty.Product based● Red sanders and beach sand● Diamond gold, Silver, Platinum, other precious metal in any form

including plain and studded jewellery and other precious and semi- precious stones.

● Ores and concentrates of all types and in all formations.● Cereals of all types.● Sugar of all types and ll forms.● Crude/petroleum oil and crude/ primary and base products of all

types and all formulations.● Export of milk and milk products● Export of Meat and Meat Products. (Note : above list is just illustrative)

Service based●Service providers in Telecom Sector:●Export turnover relating to

► services of units operating under SEZ or►s upplies of services made to such units ;

Source based●Other sources of foreign exchange earnings such as equity or

debt participation, donations, receipts of repayment of loans etc. and any other inflow of foreign exchange, unrelated to rendering of service, would be ineligible.

Account based● Payments for services received from EEFC AccountGoods based● Exports of Goods


Utilisation of Scrip

Scrip can be utilised for purchase of ● domestic good without excise●Imported goods without Service Tax● Purchase of Services without Service Tax

Scr ip can be ut i l i sed for purchase of ● domestic good without excise● Imported goods wi thout Service Tax● Purchase of Services without Service Tax

Transferability Scrip / goods procured thereunder shall be freely transferable.

S c r i p / g o o d s p r o c u r e d thereunder shall be freely transferable.

Common Provisions for Exports from India Schemes (MEIS and SEIS)(i) CENVAT/ Drawback:● Additional Customs duty/excise duty/Service Tax paid in cash or through debit under Duty

Credit scrip shall be adjusted as CENVAT Credit or Duty Drawback as per DoR rules or notifications.

● Basic Custom duty paid in cash or through debit under Duty Credit scrip shall be adjusted for Duty Drawback as per DoR rules or notifications.Duty credit scrip shall be permitted to be utilized for payment of duty in case of import of capital goods under lease financing.

(i) Transfer of export performance: Transfer of export performance from one IEC holder to another IEC holder shall not be permitted. Thus, a shipping bill containing name of applicant shall be counted in export performance / turnover of applicant only if export proceeds from overseas are realized in applicant�s bank account and this shall be evidenced from e - BRC / FIRC. However, MEIS rewards can be claimed either by the supporting manufacturer (along with disclaimer from the company / firm who has realized the foreign exchange directly from overseas) or by the company/ firm who has realized the foreign exchange directly from overseas.

(ii) Incentives of MEIS are available to units located in SEZs also.

Note 1: Computation of net foreign exchange earning

Gross Earning of Foreign Exchange relating to service sector in the

Financial year) [Note A&B]

Less : Total expenses / payment / remittances of Foreign Exchange

by the IEC holder, relating to service sector in the Financial year [Note B]

Net Foreign Exchage

xxxx

(xxx)

xxxx

Note:A) Receipt of forex unrelated to provisioning of service shall not be considered : Foreign

exchange remittances other than those earned for rendering of notified services would not be

counted for entitlement. Thus, other sources of foreign exchange earnings such as equity or debt

participation, donations, receipts of repayment of loans etc. and any other inflow of foreign

exchange, unrelated to rendering of service, would be ineligible.B) For-Ex earning and expenses in capacity of SP shall only be considered : If the IEC holder

is a manufacturer of goods as well as service provider, then the foreign exchange earnings and

Total expenses / payment / remittances shall be taken into account for service sector only.

NOTES


EXPORT PROMOTION CAPITAL GOODS SCHEME (EPCG) NOTES

1) Export Promotion Capital Goods Scheme (EPCG) permits exporters to import capital goods for

pre-production

production

post-production

2) Eligible exporters: Following are eligible for EPCG scheme:● Manufacturer exporters with or without supporting manufacturer(s),● Merchant exporters tied to supporting manufacturer(s), and● Service providers including service providers designated as Common Service Provider

(CSP) subject to prescribed conditions.

4) Export Obligation: Export obligation means obligation to export product(s) covered by Authorisation/ permission in terms of quantity or value or both, as may be prescribed/specified by Regional or competent authority. Export obligation consists of average export obligation and specific export obligation.

Specific export obligation (Specific EO) under EPCG scheme is equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue-date. Specific EO is over and above the Average EO.

Note: In case countervailing duty (CVD) is paid in cash on imports under EPCG, incidence of CVD would not be taken for computation of net duty saved, provided CENVAT is not availed.

Average export obligation (Average EO) under EPCG scheme is the average level of exports made by the applicant in the preceding 3 licensing years for the same and similar products. It has to be achieved within the overall EO period (including extended period unless otherwise specified).

Eligible capital goods include

Capital Goods including capital goods in CKD/SKD condition

Ineligible capital goods include

Computer software systems

Spares, moulds, dies, jigs, fixtures,tools & refractories for initial liningand spare refractories

Catalysts for initial charge plus onesubsequent charge

Any capital goods (including captive plants andpower Generator Sets of any kind) for.

- Export of electrical energy (Power)

- Supply of electrical energy (power) under

deemed exports

- Use of power (energy) in their own unit,

Second hand capital goods

Capital goods for Project Importsnotified by CBEC

and - Supply/export of electricity transmission service

In return, exporter is under an obligation to fulfill the export obligation.

► At zero customs duty or ►Procure them indigenously without paying duty in the prescribed manner.

Import under EPCG scheme shall be subject to an export obligation equivalent to 6 times of duty saved on capital goods to be fulfilled in 6 years reckoned from the date of issue of authorization.

Export Obligation

Authorisation shall be valid for 18 months from the date of issue of Authorisation.

Validity ofAuthorization

After export obligation is completed, capital goods can be sold or transferred.Transferability

Actual UserCondition

Import of capital goods shall be subject to „Actual User� condition till export obligation is completed.

3) Eligible and ineligible capital goods:


NOTES5) Conditions applicable to the fulfilment of the Export Obligation (EO):(a) EO shall be fulfilled by the authorisation holder through export of goods which are

manufactured by him or his supporting manufacturer / services rendered by him, for which the EPCG authorisation has been granted.

(b) In case of indigeneous sourcing of capital goods, specific EO shall be 25% less than the EO mentioned above, i.e. EO will be 4.5 times (75% of 6 times) of duty saved on such goods procured.

(c) Shipments under Advance Authorisation, DFIA, Drawback scheme, or reward schemes; would also be counted for fulfilment of EO under EPCG Scheme.

(d) EO can also be fulfilled by the supply of Information Technology Agreement (ITA-1) items to DTA, provided realization is in free foreign exchange.

(e) Both physical exports as well as specified deemed exports shall also be counted towards fulfilment of export obligation.

6) Incentives for early fulfillment of export obligation In cases where Authorization holder has fulfilled 75% or more of specific export obligation and

100% of Average Export Obligation till date, if any, in half or less than half the original export obligation period specified, remaining export obligation shall be condoned and the Authorization redeemed.

7) Post Export EPCG Duty Credit Scrip(s) Under this scheme, capital goods are imported on full payment of applicable duties in cash.

Later, basic customs duty paid on Capital Goods is remitted in the form of freely transferable duty credit scrip(s) [similar to the Reward schemes discussed earlier].

Salient features of the schemes are as follows:-

◾ Specific EO shall be 85% of the applicable specific EO stipulated under EPCG scheme. Average EO remains unchanged.

◾ Duty remission shall be in proportion to the EO fulfilled.

◾ These Duty Credit Scrip(s) can be utilized in the similar manner as the scrips issued under reward schemes can be utilised.


EOU, EHTP, STP & BTP SCHEMES NOTES

(I) ELIGIBILITYv Such units may be set up for manufacture of goods, including repair, re-making,

reconditioning, re-engineering, rendering of services, development of software, agriculture.

v Trading units are not covered under these schemes.v Only projects having a minimum investment of ` 1 crore in plant & machinery shall be

considered for establishment as EOUs. However, this shall not apply to units in EHTP/ STP/ BTP, Handicrafts/ Agriculture/ Floriculture/ Aquaculture/ Animal Husbandry/ Information Technology Services, Brass Hardware and Handmade jewellery sectors. Board of Approvals may also allow establishment of EOUs with a lower investment criteria.

(II) PROCEDURE FOR SETTING UP NEW EOU, EHTP, STP AND BTP (a) Approval for setting up of units under EOU scheme shall be granted by the Units Approval

Committee within 15 days as per prescribed criteria. In other cases, approval may be granted by Board of Approval set up for this purpose

(b) On approval, concerned authority will issue a Letter of Permission (LoP)/ Letter of Intent (LoI) which will have initial validity of 2 years (extendable by 2 years and further extension, if necessary, by BoA), by which time unit should have commenced production.

(III) NET FOREIGN EXCHANGE EARNINGSv EOU/ EHTP/ STP/ BTP unit must be a positive net foreign exchange earner. However, a

higher value addition is specified for some sectors.

v How to compute NFE earnings?: NFE Earnings shall be calculated cumulatively in blocks of 5 years, starting from commencement of production.

In case unit is not able to achieve NFE due to:

(i) prohibition/ restriction imposed on export of any product, 5 years block period may be extended suitably by BoA.

(ii) adverse market condition or any grounds of genuine hardship having adverse impact on functioning of the unit, 5 year block is extendable upto 1 year.

Who monitors NFE?: Performance of EOU/ EHTP/ STP/ BTP units shall be monitored by Units Approval Committee as per prescribed guidelines.

Which supplies to DTA can be counted for positive NFE?: Following supplies effected from EOU/ EHTP/ STP/ BTP units to DTA (Domestic Tariff Area) will be counted for fulfillment of positive NFE:

(a) Supplies in DTA to holders of Advance Authorisation/ Advance Authorisation for annual requirement/ DFIA under duty exemption/ remission scheme/ EPCG scheme subject to certain exceptions.

(b) Supplies affected in DTA against foreign exchange remittance received from overseas.

(c) Supplies to other EOU/ EHTP/ STP/ BTP/ SEZ units, provided that such goods

Object

Exportation of goods

Export of Electronic

Hardware Software

Development of

software export

Units

EOU

EHTP

STP

BTP

Description

Export Oriented

Unit

Electronics Hardware

Technology

Software

Technology Park

Bio-Technology

Park

Administered by

Ministry of

Commerce & Industry

Ministry of

Information technology

Ministry of

Information technology

Dept. of

Biotechnology

1, These units are setup for their export of entire production of goods & services [except permissible sale in DTA]2. They can import input & Capital Goods without payment of customs duty.3. STP, EHTP, BTP Schemes are similar to EOU Schemes and provisions are more or less similar.


NOTESare permissible for procurement in terms of relevant provisions of FTP.

(d) Supplies made to bonded warehouses set up under FTP and/ or under section 65 of Customs Act and free trade and warehousing zones, where payment is received in foreign exchange.

(e) Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by MoF.

(f) Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/ electronics items.

(g) Supplies of items like tags, labels, printed bags, stickers, belts, buttons or hangers to DTA unit for export.

(IV) ENTITLEMENTS TO UNITS UNDER EOU, EHTP, STP AND BTP SCHEMES

(a) Entitlements for supplies from DTA

v Supplies from DTA to EOU/ EHTP/ STP/ BTP units will be regarded as “deemed exports” and DTA supplier shall be eligible for relevant entitlements for deemed exports, besides discharge of export obligation, if any, on the supplier.

v Notwithstanding the above, EOU/ EHTP/ STP/ BTP units shall, on production of a suitable disclaimer from DTA supplier, be eligible for obtaining entitlements specified under the provisions relating to deemed exports in FTP. For claiming deemed export duty drawback, they shall get brand rates fixed by DC wherever All Industry Rates of Drawback are not available.

In addition, EOU / EHTP / STP / BTP units shall be entitled to following:-

v Reimbursement of Central Sales Tax (CST) on goods manufactured in India. Interest @ 6% p.a. will be payable on delay refund of CST, if the case is not settled within 30 days of receipt of complete application.

v Exemption from payment of Central Excise Duty on goods procured from DTA on goods manufactured in India.

v Reimbursement of duty paid on fuel procured from domestic oil companies/ Depots of

domestic oil Public Sector Undertakings as per drawback rate notified by DGFT from time to

time. Reimbursement of additional duty of excise levied on fuel under the Finance Acts

would also be admissible.

v CENVAT credit on service tax paid.

(b) Other Entitlements

v Exemption from industrial licensing for manufacture of items reserved for SSI sector.

v Export proceeds will be realized within 9 months.

v Units will be allowed to retain 100% of its export earnings in the EEFC account.

v Unit will not be required to furnish bank guarantee at the time of import or going for job work in DTA, subject to fulfillment of required conditions.

v 100% FDI investment permitted through automatic route similar to SEZ units.

v Units shall pay duty on the goods produced or manufactured and cleared into DTA on monthly basis in the manner prescribed in the Central Excise Rules.

(V) EXPORT AND IMPORT OF GOODS

Export : Following exports are permitted:

ü all kinds of goods and services except items that are prohibited in ITC(HS),

ü Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) subject to fulfillment of the conditions indicated in ITC (HS).

Import : Following imports are permitted:

● Export promotion material upto a maximum value limit of 1.5% of FOB value of previous years exports.

● All types of goods, including capital goods, required for its activities, from DTA/ bonded warehouses in DTA/ International exhibition held in India, without payment of duty subject to „Actual User condition, provided such goods are not prohibited items of import.

● Goods including capital goods (on a self certification basis) required for approved activity, free of cost or on loan/ lease from clients, subject to „Actual User� condition.

● Certain specified goods from DTA, without payment of duty, for creating a central facility.

● Second hand capital goods, without any age limit, duty free.


NOTES

(VI) LEASING OF CAPITAL GOODS An EOU/ EHTP/ STP/ BTP unit may:

ü source capital goods from a domestic/ foreign leasing company without payment of excise/ customs duty, on the basis of a firm contract between parties.

ü sell capital goods and lease back the same from a Non Banking Financial Company (NBFC) subject to fulfillment of specified conditions.

(VII) INTER UNIT TRANSFERv Transfer of manufactured goods from one EOU/ EHTP/ STP/ BTP unit to another EOU/

EHTP/ STP/ BTP unit is allowed with prior intimation to concerned DC and Customs authorities, following procedure of in-bond movement of goods.

v Transfer of manufactured goods shall also be allowed from EOU/ EHTP/ STP/ BTP unit to a SEZ developer or unit following procedure prescribed in SEZ Rules, 2006.

v Capital goods may be transferred or given on loan to other EOU/ EHTP/ STP/ BTP/ SEZ units, with prior intimation to concerned DC and Customs authorities.

(VIII) SALE OF UNUTILIZED MATERIALv In case an EOU/ EHTP/ STP/ BTP unit is unable to utilize goods (including capital goods) and

services, imported or procured from DTA, it may beü transferred to another EOU/ EHTP/ STP/ BTP/ SEZ unit; orü disposed off in DTA with approval of Customs authorities on payment of applicable

duties and submission of import authorization; orü exported.

Such transfer from EOU/ EHTP/ STP/ BTP unit to another such unit would be treated as import for receiving unit.

v In case of capital goods, benefit of depreciation, as applicable, will be available in case of disposal in DTA only when the unit has achieved positive NFE taking into consideration the depreciation allowed.

v No duty shall be payable in case capital goods, raw material, consumables, spares, goods manufactured, processed or packaged, and scrap/ waste/ remnants/ rejects are destroyed within unit after intimation to Customs authorities or destroyed outside unit with permission of Customs authorities.

v Disposal of used packing material will be allowed on payment of duty on transaction value.

(IX) DTA SALE OF FINISHED PRODUCTS/ REJECTS/ WASTE/ SCRAP/ REMNANTS AND BY-PRODUCTSEntire production of EOU/ EHTP/ STP/ BTP units must be exported. However, following DTA sales are permissible:

(1) Sale of goods in DTA: Units may sell goods in DTAü upto 50% of FOB value of exports (including sales made to SEZ unit from Foreign

Exchange Account of such unit),ü subject to fulfilment of positive NFE,ü on payment of concessional duties.

other than gems and jewellery units

However, sale at concessional duty is not permitted:(i) in respect of motor cars, alcoholic liquors, books, tea (except instant tea), pepper &

pepper products, marble and other notified items or(ii) to units engaged in activities of packaging/ labeling/ segregation/ refrigeration/

compacting/ micronisation/ pulverization/ granulation/ conversion of monohydrate form of chemical to anhydrous form or vice-versa. An amount equal to Anti Dumping duty under section 9A of the Customs Tariff Act, 1975 leviable at the time of import, shall be payable on the goods used for the purpose of manufacture or processing of the goods cleared into DTA from the unit.

Note: Goods supplied by one unit of EOU/ EHTP/ STP/ BTP to another unit shall be treated as imported goods for second unit for payment of duty, on DTA sale by second unit.

Procurement and export of spares/ components, upto 5% of FOB value of exports, may be allowed to same consignee/ buyer of the export article, subject to the condition that it shall not count for NFE and direct tax benefits


NOTES

(2) Services provided in DTA: For services, sale in DTA shall also be permissible up to 50% of FOB value of exports and/ or 50% of foreign exchange earned, where payment of such services is received in foreign exchange.

(3) Sale of rejects in DTA: Rejects within an overall limit of 50% may be sold in DTA on payment of applicable duties (concessional or otherwise), on prior intimation to Customs authorities. Such sales shall be counted against DTA sale entitlement. Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE.

(4) Sale of scrap/ waste/ remnants, arising out of production, in DTA:

1) Scrap/ waste/ remnants arising out of production process or in connection therewith may be sold in DTA, as per SION notified under Duty Exemption Scheme, on payment of concessional duties as applicable, within overall ceiling of 50% of FOB value of exports.

2) Such sales of scrap/ waste/ remnants shall not be subject to achievement of positive NFE.

3) Sale of waste/scraps/remnants by units not entitled to DTA sale or sales beyond DTA sales entitlement, shall be on payment of full duties. Scrap/waste/remnants may also be exported.

4) In case scrap/ waste/ remnants are destroyed with permission of Customs authorities, no duties/ taxes payable on same.

(5) Sale of by-products in DTA: By-products may also be sold in DTA subject to achievement of positive NFE, on payment of applicable duties, within the overall entitlement of 50% of FOB value of exports. Sale of by-products by units not entitled to DTA sales, or beyond entitlements shall also be permissible on payment of full duties.

(6) Procurement of spares/components, up to 2% of the value of manufactured articles, cleared into DTA, during the preceding year, may be allowed for supply to the same consignee / buyer for the purpose of after-sale-service.

(X) EXPORT THROUGH OTHER EXPORTERS An EOU/ EHTP/ STP/ BTP unit may export goods manufactured/ software developed by it

through another exporter or any other EOU/ EHTP/ STP/ SEZ unit subject to specified conditions

(XI) EXIT FROM EOU SCHEME With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment of

excise and customs duties and industrial policy in force. If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.

(XII) CONVERSION Existing DTA units may also apply for conversion into an EOU/ EHTP/ STP/ BTP unit. Existing

EHTP/ STP units may also apply for conversion/ merger to EOU unit and vice- versa. In such cases, units will remain in bond and avail exemptions in duties and taxes as applicable.

Notes:1. In case of DTA sale of goods manufactured by EOU/ EHTP/ STP/ BTP, where basic duty and

CVD is nil, such goods may be considered as non-excisable for payment of duty.2. In case of new EOUs, advance DTA sale will be allowed not exceeding 50% of its

estimated exports for first year (2 years for pharmaceutical units).

In case of units manufacturing and exporting more than one product, sale of any of these products into DTA, upto 90% of FOB value of export of the specific products is permitted, provided total DTA sales does not exceed the overall entitlement of 50% of FOB value of exports for the unit.


Meaning : Deemed Exports refer to those transactions in which goods manufactured in India are supplied to specified projects or to specific categories of consumers. In deemed exports, goods supplied do not leave the country and payment for such supplies is received either in Indian rupees or in free foreign exchange by the recipient of the goods.

Objective : The objective of deemed exports is to ensure that the domestic suppliers are not in disadvantageous position vis-à-vis foreign suppliers in terms of the fiscal concessions. The underlying theory is that foreign exchange saved must be treated at par with foreign exchange earned by placing Indian manufacturers at par with foreign suppliers.

Deemed exports broadly cover three areas.a. Supplies to domestic entities who can import their requirements duty free or at reduced rates of

duty.b. Supplies to projects/ purposes that involve international competitive bidding.

c. Supplies to infrastructure projects of national importance.

(I) CATEGORIES OF SUPPLIES CONSIDERED AS DEEMED EXPORT

(II) BENEFITS FOR DEEMED EXPORTS Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and

supply of goods, qualifying as deemed exports, subject to specified terms and conditions:a. Advance Authorisation/ Advance Authorisation for Annual requirement/ DFIAb. Deemed Export Drawbackc. Refund of terminal excise duty if exemption is not available.

(III) ELIGIBILITY FOR REFUND OF TERMINAL EXCISE DUTY/ DEEMED EXPORT DRAWBACK

Refund of Terminal Excise duty or Central Excise duty paid on inputs/ components will be available only when CENVAT credit/ rebate of the same have not been availed by the recipient of such goods. Similarly, supplies will be eligible for deemed export drawback on Central Excise paid on inputs and service tax paid on input services, provided CENVAT credit facility/ rebate has not been availed by the applicant. However, in such cases, basic customs duty paid can be claimed as brand rate of duty drawback.

(IV COMMON CONDITIONS FOR DEEMED EXPORT BENEFITS(i) Supplies shall be made directly to entities listed in the point (I) above. Third party supply

shall not be eligible for benefits/exemption.(ii) In all cases, supplies shall be made directly to the designated Projects/Agencies/Units/

Advance Authorisation/ EPCG Authorisation holder. Sub-contractors may, however, make supplies to main contractor

instead of supplying directly to designated

NOTES

Supply by manufacturer Supply by main/sub-contractors(s)

Supply of goods against Advance Authorisation/Advance Authorisation for Annual Requirement/ DFIA

Supply of goods to projects or turnkey contracts financed by multilateral or bilateral agencies/Funds notified by Department of Economic Affairs (DEA), under International Competitive Bidding.

Supply of goods to units located in EOU/ STP/BTP/EHTP

Supply of goods to any project where import is permitted at zero customs duty as per customs Notification No. 12/2012-Cus dated 17.03.2012 and supply is made against International Competitive Bidding.

Supply of capital goods against EPCG authorisation

Supply of goods to mega power projects against International Competitive Bidding (even if customs duty on imports made by such project is not zero). Supply of goods to nuclear projects through competitive bidding (need not be international competitive bidding).

Supply of marine freight containers by 100% EOU provided said containers are exported within 6 months

Supply to goods to UN or international organisations for their official use or supplied to projects financed by them.

DEEMED EXPORTS


Projects/ Agencies. Payments in such cases shall be made to sub-contractor by main-contractor and not by project Authority.

(iii) Supply of domestically manufactured goods by an Indian Sub-contractor to any Indian or foreign main contractor, directly at the designated projects/ Agencys site, shall also be eligible for deemed export benefit provided name of sub-contractor is indicated either originally or subsequently (but before the date of supply of such goods) in the main contract. In such cases payment shall be made directly to sub-contractor by the Project Authority.


Special Economic Zone (SEZ)

(a) IntroductionA Special Economic Zone (SEZ) is a geographically bound zone where the economic laws in matters related to export and import are more broadminded and liberal as compared to other parts of the country. SEZ is considered to be a place outside India for all tax purposes. It is like a separate island within the territory of India and is deemed to be outside the customs territory of India. SEZs are projected as duty free area for the purpose of trade, operations, duty, and tariffs.

SEZ units are self-contained and integrated having their own infrastructure and support services. Within SEZs, a unit may be set-up for the manufacture of goods and other activities including processing, assembling, trading, repairing, reconditioning, making of gold/ silver, platinum jewellery etc.

Goods supplied to SEZs from DTA are treated as exports from India and goods supplied from the SEZ to the DTA are treated as imports into India.

The provisions relating to SEZ are contained in Special Economic Zone Act, 2005 and SEZ Rules, 2006.

State Governments are expected to play a very active role in the establishment of SEZ unit. Any proposal for setting up of SEZ unit in the Private/ Joint/ State Sector is routed through the concerned State government who in turn forwards the same to the Department of Commerce with its recommendations for consideration.

The main objectives of the SEZ Act are:(a) Export of goods and services without taxes(b) Generation of additional economic activity(c) Promotion of exports of goods and services(d) Promotion of investment from domestic and foreign sources(e) Creation of employment opportunities(f) Development of infrastructure facilities(g) Providing exemption from duties and taxes on procurement(h) Single window clearance: It is expected that this will trigger a large flow of foreign and

domestic investment in SEZs, in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities.

The SEZ Rules provide for:(a) Simplified procedures for development, operation, and maintenance of the Special

Economic Zones and for setting up units and conducting business in SEZs.(b) Single window clearance for setting up of an SEZ(c) Single window clearance for setting up a unit in a Special Economic Zone(d) Single Window clearance on matters relating to Central as well as State

Governments(e) Simplified compliance procedures(f) Maintenance of documents with self-certification(g) Simplified compliance procedures and documentation with an emphasis on self

certification

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment are:

(a) Duty free import/ domestic procurement of goods for development, operation and maintenance of SEZ units.

(b) Exemption from Central Sales Tax.(c) Exemption from Service Tax.(d) Single window clearance for Central and State level approvals.(e) Exemption from State sales tax and other levies as extended by the respective State

Governments.


RELATING TO IMPORT OF GOODS

1. Actual user condition: Goods which are importable without any restriction, may be imported by any person. However, if such imports require an Authorization, actual user alone may import such goods unless actual user condition is specifically dispensed with by DGFT.

2. Second hand goods: Import of second hand capital goods, including refurbished/ re- conditioned spares shall be allowed freely. However, second hand personal computers/ laptops, photocopier machines, air conditioners, diesel generating sets will only be allowed against authorisation. Second hand (used) goods, [except second hand capital goods], shall be restricted for imports and may be imported only against Authorization.

3. Removal of scrap/ waste from SEZ: Any waste or scrap or remnant including any form of metallic waste & scrap generated during manufacturing or processing activities of an SEZ Unit/ Developer/ Co-developer shall be allowed to be disposed in DTA (Domestic Tariff Area) freely, subject to payment of applicable customs duty.

4. Import of gifts and samples: Import of gifts shall be permitted where such goods are otherwise freely importable under ITC(HS). In other cases, a Customs Clearance Permit (CCP) shall be required from DGFT. Further, import of samples shall be governed by the prescribed procedures. Authorisation for import of samples is required only in case of vegetable seeds, bees and new drugs. Samples of tea upto ̀ 2,000 (CIF) per consignment will be allowed without authorization. Samples upto ̀ 3,00,000 can be imported by all exporters without duty.

5. Passenger Baggage:(a) Bonafide household goods and personal effects may be imported as part of passenger

baggage as per limits, terms and conditions thereof in the Baggage Rules, 1998.(b) Samples of such items that are otherwise freely importable under FTP may also be imported

as part of passenger baggage without an Authorization.(c) Exporters coming from abroad are also allowed to import drawings, patterns, labels, price

tags, buttons, belts, trimming and embellishments required for export, as part of their passenger baggage without an Authorization.

Note: Baggage provisions have been discussed in detail in Chapter-7- Importation, Exportation and Transportation of Goods.

6. Re-import of goods repaired abroad: Capital goods, equipments, components, parts and accessories, whether imported or indigenous, except those restricted under ITC(HS) may be sent abroad for repairs, testing, quality improvement or upgradation or standardization of technology and re-imported without an Authorization.

7. Import of goods used in projects abroad: After completion of projects abroad, project contractors may import, without an Authorization, goods including capital goods used in the project provided they have been used for at least one year.

8. Sale on high seas: Sale of goods on high seas for import into India may be made subject to FTP or any other law in force.

9. Import under lease financing: It is freely permitted. Permission of Regional Authority is not required for import of capital goods under lease financing. However, RBI approval is required in some cases.

10. Clearance of goods from customs: Goods already imported/ shipped/ arrived, in advance, but not cleared from customs may also be cleared against an Authorization issued subsequently. However, this facility will not be available to restricted items or items traded through STEs.

11. Execution of BG/ LUT: Whenever goods are imported duty free or otherwise specifically stated, importer shall execute prescribed LUT (Letter of Undertaking)/ BG (Bank Guarantee)/ Bond with Customs Authority before clearance of goods. In case of indigenous sourcing, Authorization holder shall furnish LUT/ BG/ Bond to RA concerned before sourcing material from indigenous supplier/ nominated agency as per the prescribed procedures.

12. Private/ public bonded warehouses for imports: Private/ public bonded warehouses may be set up in DTA (Domestic Tariff Area) as per terms and conditions of notification issued by DoR. Any person may import goods, except prohibited items, arms and ammunition, hazardous waste

NOTESMISCELLANEOUS PROVISIONS


and chemicals and warehouse them in such bonded warehouses. Such goods may be cleared for home consumption against authorisation, whenever required. Customs duty as applicable shall be paid at the time of clearance of such goods. If such goods are not cleared for home consumption within a period of one year or such extended period as the custom authorities may permit, importer of such goods shall re-export the goods.

PROVISIONS RELATING TO EXPORT OF GOODS

1. Free exports: All goods may be exported without any restriction except to the extent that such export is regulated by ITC(HS) or any other provision of FTP or any other law for the time being in force. DGFT may however, specify through a public notice such terms and conditions according to which any goods, not included in ITC(HS), may be exported without an Authorization.

2. Export of samples: Export of samples and free of charge goods shall be governed by prescribed procedures. Export of bona fide trade and technical samples of freely exportable item shall be allowed without any limit. In case of restricted items, application should be made to DGFT. Such samples can be exported as part of passenger baggage without an Authorisation.

3. Export of passenger baggage: Bonafide personal baggage may be exported either along with passenger or, if unaccompanied, within one year before or after passenger�s departure from India. However, items mentioned as restricted in ITC(HS) shall require an Authorization. Government of India officials proceeding abroad on official postings shall, however, be permitted to carry alongwith their personal baggage, food items (free, restricted or prohibited) strictly for their personal consumption. Samples of such items that are otherwise freely exportable under FTP may also be exported as part of passenger baggage without an Authorisation.

4. Export of gifts: Goods, including edible items, of value not exceeding ` 5,00,000 in a licensing year, may be exported as a gift. However, items mentioned as restricted for exports in ITC(HS) shall not be exported as a gift, without an Authorization. For export of samples/gifts/ spares/ replacement goods (other than SCOMET items) in excess of ceiling/period, application can be made to DGFT in form ANF-2Q.

5. Export of spares: Warranty spares (whether indigenous or imported) of plant, equipment, machinery, automobiles or any other goods, [except those restricted under ITC(HS)] may be exported along with main equipment or subsequently, but within contracted warranty period of such goods subject to approval of RBI.

6. Third party exports: Third - party exports means exports made b y a n e x p o r t e r o r manufacturer on behalf of another exporter(s). In such cases, export documents such as shipping bills shall indicate name of both manufacturing exporter/manufacturer and third party exporter(s). BRC, GR declaration, export order and invoice should be in the name of third party exporter. Such third party exports shall be allowed under FTP.

7. Export of imported goods: Goods imported, in accordance with FTP, may be exported in same or substantially the same form without an Authorization, provided that an item to be imported or exported is not restricted for import or export in ITC(HS).

Exports of such goods imported against payment in freely convertible currency would be permitted provided export proceeds are realized in freely convertible currency. However, export of such goods to notified countries will be permitted in Indian rupees subject to at least 15% value addition.

8. Export of replacement goods: Goods or parts thereof on being exported and found defective/ damaged may be replaced free of charge by the exporter and such goods shall be allowed clearance by customs authorities, provided that replacement goods are not mentioned as restricted items for exports in ITC(HS).

9. Export of repaired goods: Goods or parts exported and found defective, damaged or otherwise unfit for use may be imported for repair and subsequent re-export. Such goods shall be allowed clearance without an Authorization and in accordance with customs notification.

However, re-export of such defective parts/spares by the Companies/firms and Original Equipment Manufacturers shall not be mandatory if they are imported exclusively for undertaking root cause analysis, testing and evaluation purpose.

10. Private Bonded Warehouses for exports: Private bonded warehouses, which are set up exclusively for exports shall be entitled to procure goods from domestic manufacturers without payment of duty. Supplies made by a domestic supplier to such notified warehouses shall be treated as physical exports provided payments are made in free foreign exchange.

NOTES


11. Denomination of export contracts: All export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realised in freely convertible currency. However, export proceeds against specific exports may also be realized in rupees, provided it is through a freely convertible Vostro account of a non resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan. Additionally, rupee payment through Vostro account must be against payment in free foreign currency by buyer in his non-resident bank account.

Free foreign exchange remitted by buyer to his non-resident bank (after deducting the bank

service charges) on account of this transaction would be taken as export realization under export promotion schemes of FTP. Contracts for which payments are received through ACU shall be denominated in ACU Dollar. Central Government may relax provisions in this regard in appropriate cases. Export contracts and invoices can be denominated in Indian rupees against EXIM Bank/ Government of India line of credit.

12. Non-realisation of export proceeds: If an exporter fails to realise export proceeds within time specified by RBI, he shall, without prejudice to any liability or penalty under any law in force, be liable to action in accordance with provisions of FT(D&R) Act, rules and orders made thereunder and provisions of FTP.

13. Free movement of export goods: Consignments of items meant for exports shall not be withheld/ delayed for any reason by any agency of Central/ State Government. In case of any doubt, authorities concerned may ask for an undertaking from exporter and release such consignment.

14. No seizure of export related stock: No seizure of stock shall be made by any agency so as to disrupt manufacturing activity and delivery schedule of exports. In exceptional cases, concerned agency may seize the stock on basis of prima facie evidence of serious irregularity. However, such seizure should be lifted within 7 days unless the irregularities are substantiated.

D. Personal hearing by DGFT for Grievance Redressal: Government is committed to easy and speedy redressal of grievances from Trade and Industry.

As a last resort to redress grievances of Foreign Trade players, DGFT may provide an opportunity for Personal hearing before Policy Relaxation Committee (PRC) subject to fulfillment of certain conditions.

Export Promotion Councils: Basic objective of Export Promotion Councils (EPCs) is to promote and develop Indian exports. Each Council is responsible for promotion of a particular group of products, projects and services.

Registration-cum-Membership Certificate (RCMC): Any person, applying for an Authorization to import/ export, or any other benefit or concession under FTP shall be required to furnish on DGFT�s website in the Importer Exporter profile, RCMC granted by competent authority. For instance, Certificate of Registration as Exporter of Spices (CRES) issued by Spices Board shall be treated as RCMC for the purposes under this Policy.

NOTES


Documents

Foreign Trade Policy - CA Study...Government of India Foreign Trade Policy 2015-2020 [5 year Policy & Annual Updation] Ministry of Commerce and Industry DGFT Handbook-1 CBEC RBI STATE