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India's exports special schemes
The document discusses various foreign trade policies and schemes in India. It provides information on: 1) The Foreign Trade Policy which regulates all import-export transactions in India and is issued every 5 years. It classifies goods as free, restricted or prohibited for trade. Various registrations and licenses are required under this policy. 2) The Foreign Trade (Development and Regulation) Act which allows the government to formulate import-export policies and appoint authorities to regulate foreign trade. It details provisions around licenses, penalties, appeals. 3) Key export promotion schemes like Advance Authorization, Duty Free Import Authorization, Duty Entitlement Passbook which allow duty-free import of inputs or goods. The Export Promotion Capital Goods
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India's exports special schemes
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- 2. FOREIGN TRADE POLICY(FTP) Issued by the MoC to regulate all import-export transactions ◦ 5 year policies issued – Current Policy 2009-2014 Procedural aspects set out in the Handbook of Procedures accompanying the Policy ◦ Various goods bifurcated into Free/Restricted/Prohibited Prescribes necessary registrations, etc for undertaking such transactions ◦ Obtaining Importer Exporter Code ◦ Necessary licenses in case of restricted goods Export Incentive Schemes for : ◦ Exporters of Goods ◦ Service Exporters Supported by appropriate ◦ Deemed Exporters notification from MOF www.StudsPlanet.com FTP issued under Section 5 of the F T (D&R) Act, 1992
- 3. FOREIGN TRADE (D&R) ACT, 1992 Sec 3 – CG to make provisions to facilitate imports and increase exports Sec 5 – Formulate and announce the export and import policy from time to time Sec 6 – CG to appoint DGFT to regulate the Act and assist in formulation of the Policy Provisions in relation to issuance of IEC Search/Seizure/Penalty/Confiscation Provisions ◦ Penalty to be Rs. 1000 or 5 times the valur of goods whichever is more ◦ Adjudicating Authority to settle the amount of penalty ◦ Penalty/confiscation not to interfere with other punishments Provisions relating to Appeal/Revision Misc. Provisions www.StudsPlanet.com
- 4. PROFESSIONAL OPPORTUNITIES Every $of export results in duty benefit Value Added Services ◦ Identifying the various transactions undertaken by the client to determine benefits available under FTP including transaction structuring ◦ Not all service exporters optimizing benefits SFIS EPCG ◦ Benefits in relation to Deemed Exports not tapped completely ◦ Review of benefits being availed to identify the most optimum scheme Compliance Services ◦ Certification ◦ Application preparation and obtaining licences ◦ Litigation www.StudsPlanet.com
- 5. SIGNIFICANT EXPORT PROMOTIONSCHEMES Promotional Measures ◦ Served from India Scheme (SFIS) ◦ Focus Market Scheme (FMS) ◦ Focus Product Scheme (FPS) Duty Exemption & Remission Schemes ◦ Advance Authorization Scheme ◦ Duty Free Import Authorization Scheme ◦ Duty Entitlement Passbook Scheme EPCG Scheme Special Schemes ◦ Deemed Exports ◦ Export Oriented Unit (EOU) ◦ Special Economic Zone (SEZ) www.StudsPlanet.com
- 6. IDENTIFYING APPROPRIATE SCHEME Each Scheme has following 4 aspects: ◦ Objective Enables clarity on interpretational issues ◦ Eligibility Meeting the eligibility criteria is most critical before any further analysis as to applicability of the Scheme is undertaken ◦ Entitlement With a view to optimise the total benefit, it is critical that such scheme as would result into maximum benefit, considering commercial requirements is opted ◦ Imports permitted Each scheme restricts the nature of goods that can be imported under the entitlement conferred by the Scheme ◦ Conditions and obligations Satisfaction of the conditions is an absolute necessity www.StudsPlanet.com
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- 8. SERVED FROM INDIASCHEME… Objective ◦ To accelerate the growth in export of services ◦ To create a powerful and unique SFI brand, instantly recognized and respected world over ◦ Enhance India’s share in global exports of services ◦ Help small scale service providers Eligibility ◦ Individual service provider who earn forex of at least Rs. 5 lakhs during preceding financial year ◦ Other service provider who earn forex of at least Rs. 10 lakhs during preceding or current financial year www.StudsPlanet.com Eligible services include all services listed under GATS
- 9. …SERVED FROM INDIASCHEME… Duty free entitlement benefit ◦ 10% of the total foreign exchange earned Imports allowed ◦ Capital goods including spares; ◦ Office equipment and professional equipment; ◦ Office furniture and consumables ◦ Entitlement cannot be used for payment of duty in relation to imported vehicles Conditions ◦ Goods imported shall be non transferable Transferability allowed within the service providers of the Group Company with actual user condition ◦ Not to include inter alia Foreign exchange remittances related to Financial Services Sector, export proceeds realizations, issuance of FCBs etc., payments for services received from EEFC etc. www.StudsPlanet.com
- 10. …SERVED FROM INDIASCHEME Professional Opportunities ◦ Advisory Applicability and utility of the scheme in varying fact profiles Analysis of impact of relevant Notifications and Circulars Eligibility of kind of goods that can be imported – including office equipment Legal and interpretational issues ◦ Execution / Implementation Ascertaining eligible service exports of client Ascertaining the requirement of imported goods Import restrictions, if any, applicable to a particular client Getting the SFIS Scrip Filing application Follow up with Department Assistance in utilization of the credit scrip Procedural compliances and documentation requirements www.StudsPlanet.com
- 11. FOCUS MARKET SCHEME… Objective ◦ To offset the high freight cost and other disabilities to select international markets with a view to enhance export competitiveness Entitlement ◦ Duty free credit scrip equivalent to 3% of FOB value of exports made from Aug. 27, 2009 Notified countries set out in Appendix 37 C Focus Markets (Table 1- American, African, East European, Asian and CIS-CAR block) New Focus Markets (Table 2- Latin American and Asia-Oceania block) Eligible exports – all goods to notified countries ◦ Ineligible exports Supplies to SEZ units; Service exports; Ores and Concentrates; Diamond and other precious, semi precious stones; Gold, silver etc.. Cereals of all types; Sugar, of all types; Milk & milk products Crude / Petroleum Oil www.StudsPlanet.com
- 12. …FOCUS MARKET SCHEME… •Imports allowable • Duty Credit Scrip and goods imported there under are freely transferable • Inputs or Capital goods which are otherwise freely importable under ITC • Others • Proof of landing critical for availment of the benefit • Cenvat / Drawback • Additional Customs duty / Excise duty paid, can be adjusted as Cenvat credit or Duty drawback www.StudsPlanet.com
- 13. …FOCUS MARKET SCHEME Professional Opportunities ◦ Advisory Applicability of the scheme in varying fact profiles Analysis of impact of relevant Notifications and Circulars Eligibility of kind of goods that can be imported Representation for addition of specific countries Transaction structuring to create eligibility under the scheme Legal and interpretational issues ◦ Execution / Implementation Identifying countries to which exports are made Determining utilisation of credit scrip Getting the FMS Scrip Filing application Follow up with Department Procedural compliances and documentation requirements www.StudsPlanet.com
- 14. FOCUS PRODUCT SCHEME… Objective ◦ To incentivise export of such products, having high employment intensity in rural and semi urban areas ◦ To offset the inherent infrastructure inefficiencies and other associated costs involved in marketing of these products Entitlement & Eligibility ◦ Exports of notified products to all countries entitled for duty free credit scrip equivalent to 2% (5%-special products) of FOB value of exports for each licensing year ◦ Following exports shall not be taken into account for credit entitlement Deemed exports Exports made by SEZ units or SEZ products exported by DTA units EOUs / EHTPs / BTPs who’re availing direct tax benefits / exemptions Exports through transshipment www.StudsPlanet.com
- 15. …FOCUS PRODUCT SCHEME… Imports allowable ◦ Duty Credit Scrip and goods imported there under are freely transferable ◦ Inputs or Capital goods which are otherwise freely importable under ITC Others ◦ Cenvat / Drawback Additional Customs duty / Excise duty paid, can be adjusted as Cenvat credit or Duty drawback ◦ This scheme is an alternate option to Focus Market Scheme or Vishesh Krishi and Gram Udyog Yojana www.StudsPlanet.com
- 16. …FOCUS PRODUCT SCHEME Professional Opportunities ◦ Advisory Applicability of the scheme in varying fact profiles Analysis of impact of relevant Notifications and Circulars Eligibility of kind of goods that can be imported Representation for addition of specific products Transaction structuring to create eligibility under the scheme Legal and interpretational issues ◦ Execution / Implementation Ascertaining eligible goods that have been exported Getting the FPS Scrip Filing application Follow up and liasoning with Department Assistance in utilization of the credit scrip Procedural compliances and documentation requirements www.StudsPlanet.com
- 17. DUTY EXEMPTION AND REMISSIONSCHEMES www.StudsPlanet.com
- 18. ADVANCE AUTHORIZATION SCHEME … (Erstwhile‘Advance License Scheme’) Issued on the basis of ◦ Inputs and export given under Standard Input Output Norms (SION); or ◦ Adhoc norms or self declared norms Para 4.7 of the Handbook of Procedure ◦ Authorization can also be applied for annual requirement for a particular product group by Status holders and by the other exporters having at least past two years export performance Eligibility ◦ Manufacturer/Exporter as well as Merchant/Exporter tied up with supporting manufacturer www.StudsPlanet.com
- 19. … ADVANCE AUTHORIZATIONSCHEME … Entitlement ◦ Duty free imports of inputs & consumables are allowed for manufacture of export product Normal allowance for wastage available ◦ Duty free imports of spares upto 10% of the CIF value of the Authorization which are required to be exported Imports allowable ◦ All items except prohibited items Conditions ◦ Authorization is under actual user condition i.e. materials imported cannot be transferred, must be incorporated in the export product Option with Authorization holder to dispose off the product manufactured out of the duty free inputs on completion of export obligation If imports made in higher quantity, then duty alongwith interest to be paid www.StudsPlanet.com
- 20. … ADVANCE AUTHORIZATIONSCHEME… • Limitation / Practical Issues • Strict enforcement of technical characteristics, quality and specification of inputs gives very little flexibility to exporters • Problem in auditing of Duty Entitlement Exemption Certificate (DEEC) after fulfillment of export obligation • Dual monitoring of export obligation by both DGFT and Customs with little coordination interse between them • Payment of high interest on the unutilized quantity of raw material even in case of bonafide default www.StudsPlanet.com Very widely used Scheme, however, a review of the effectiveness of this scheme vis-à-vis other schemes may reveal different results
- 21. DUTY FREE IMPORTAUTHORIZATION SCHEME… Combined features of ◦ Advance Authorisation Scheme; and ◦ Erstwhile Duty Free Replenishment Certificate Scheme Entitlement ◦ Duty free import of inputs which are used in manufacture of export product as per SION Normal allowance for wastage available Eligibility ◦ Manufacturer/Exporter as well as Merchant/Exporter tied up with supporting manufacturer Conditions ◦ Minimum 20% value addition required with an export commitment ◦ Actual user condition in case of pre-export authorization www.StudsPlanet.com
- 22. …DUTY FREE IMPORTAUTHORIZATION SCHEME… Benefit ◦ Exemption from following duties on procurement Customs, Additional Customs & Excise duty, Education Cess, Anti- dumping duty & Safeguard duty Import allowable ◦ All items except prohibited items Transferability ◦ Allows transferability of scrip as well as goods imported thereunder Cenvat facility ◦ Cenvat credit facility available for inputs either imported or procured indigenously against the Authorization www.StudsPlanet.com
- 23. …DUTY FREE IMPORTAUTHORIZATION SCHEME Professional Opportunities ◦ Advisory To identify appropriate scheme DFIA Vs. AAS Minimum value addition criteria reduces quantum of benefit Transferability ensures benefits to producers using domestic inputs Applicability of the scheme in varying fact profiles Analysis of impact of relevant Notifications and Circulars Whether scrip should be purchased at all by non-exporters Legal and interpretational issues ◦ Execution / Implementation Calculation of input output norms to confirm eligibility under the scheme Calculation of quantum of value addition Preparation and filing of application including all supporting documentation Procedural compliances and documentation requirements www.StudsPlanet.com
- 24. DUTY ENTITLEMENT PASSBOOKSCHEME… Objective ◦ To neutralize the incidence of Customs duty on import content of the export product Entitlement ◦ Duty credit on the basis of pre-notified entitlement rates ◦ Such credit can be utilized to import goods without payment of duty ◦ DEPB or Products imported against it are freely transferable Advantages ◦ Freely transferable ◦ No actual user condition ◦ Additional Customs Duty/Excise Duty paid in cash or through debit under DEPB can be adjusted as Cenvat Credit Applicability of Drawback ◦ Additional Customs duty / Excise duty paid in cash or through debit may also be adjusted as Cenvat Credit or Duty Drawback www.StudsPlanet.com
- 25. …DUTY ENTITLEMENT PASSBOOKSCHEME Professional Opportunities ◦ Advisory Continuous review required for adoption of most appropriate scheme DEPB on the verge of being phased out Rates are being revised downwards periodically Whether scrip should be purchased at all by non-exporters? Legal and interpretational issues Analysis of impact of Notifications and Circulars ◦ Execution / Implementation Ascertaining eligibility of goods Preparation of application, documents & declaration to be submitted Application for grant of credit Benefits - before whom to be claimed Procedural compliances and documentation requirements www.StudsPlanet.com
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- 27. EXPORT PROMOTION CAPITALGOODS SCHEME… Objective ◦ Achieve growth in exports by allowing capital goods to be imported at concessional rate of duty Entitlement ◦ Pre export benefit – import at concessional rate of 3% and 0% customs duty Components and spares also eligible to concession Eligibility ◦ Manufacturer exporters ◦ Supporting manufacturers ◦ Service providers Imports allowed - capital goods, including ◦ spares (including refurbished/reconditioned spares), ◦ tools, jigs, ◦ fixtures, ◦ dies and moulds ◦ Second hand capital goods without any restriction on age www.StudsPlanet.com
- 28. …EXPORT PROMOTION CAPITALGOODS SCHEME… Benefits ◦ Deemed export benefits on domestic sourcing ◦ Leasing of imported capital goods permissible Obligations ◦ Export Obligation to be fulfilled upto 50% by export of goods manufactured or services rendered, balance can be through other units/Group Companies EO = 8 times duty saved (6 times in 6 years in case of 0% duty) To be fulfilled within 8 years from issue of license; To be fulfilled within 12 years in case amount of duty saved exceeds Rs. 100 Cr Exports under Advance Authorisation, DFIA, Drawback, etc. can also be considered towards fulfillment of EO Special extended period to achieve EO for BIFR / SSI ◦ Actual user condition till fulfillment of export obligation www.StudsPlanet.com
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- 30. DEEMED EXPORTS… • Concept •Unique to India • Specified transactions where goods are not physically exported outside the country • Payment for such supplies is received either • in Indian rupees or • in free foreign currency • Objective • Public Interest • Encourage exports directly / indirectly • Benefits • Deemed Exporters shall be entitled to • Advance Authorization / DFIA • Deemed export Drawback • Refund of Terminal Excise duty www.StudsPlanet.com
- 31. …DEEMED EXPORTS… Entitlement ◦Following categories of supplies by main contractors / sub- contractors treated as deemed exports Against Advance Authorisation / Advance Authorisation for annual requirement / DFIA To EOU / STP / EHTP / BTP Capital goods to EPCG Authorisation holders Projects financed by multilateral or bilateral agencies / funds as notified by the Department of Economic Affairs, Ministry of Finance under International Competitive Bidding (ICB) Supply of goods where legal agreements provide for tender evaluation without inclusion of Customs duty Supply and installation of goods and equipment where bids are evaluated on the basis of Delivered Duty Paid (DDP) prices for goods manufactured abroad www.StudsPlanet.com
- 32. …DEEMED EXPORTS… Capitalgoods to fertilizer plants including CG in unassembled / disassembled condition plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till stage of commercial production, and spares to the extent of 10% of FOR value To any project or purpose in respect of which the MoF, by notification, permits import of such goods at zero Customs duty To power projects and refineries not covered above (Subject to ICB) Supply of marine freight containers by 100% EOU Containers to be exported out of India within 6 months or such further period as permitted by Customs To projects funded by UN Agencies To nuclear power projects through competitive bidding as opposed to ICB www.StudsPlanet.com
- 33. …DEEMED EXPORTS ProfessionalOpportunities ◦ Advisory What transactions qualify as deemed exports Impact of Notifications / Circulars / precedents on varying fact profiles Structuring of transactions as deemed exports Legal / Interpretational issues ◦ Execution / Implementation Conceptualization and implementation of the transaction to qualify as deemed exports Preparation & maintenance of accounts & documents Procedural compliances www.StudsPlanet.com
- 34. EXPORT ORIENTED UNITS… Concept ◦ Unit primarily expected to export ◦ Covers capital goods (including raw material for making capital goods), raw materials and others ◦ Entitlement to sell upto 50% of FOB value of exports to the Domestic Tariff Area (DTA) ◦ Sub-contracting to DTA permitted Fiscal benefits ◦ Exemption from Customs Duty on import / local procurement and Excise duty on manufacture for export ◦ Refund of Central Sales tax on inter state procurement of goods ◦ Exemption from Income tax in respect of export earnings ◦ Leasing of Capital Goods without payment of Customs / Excise duty www.StudsPlanet.com
- 35. …EXPORT ORIENTED UNITS… •Obligation • The unit should be positive net foreign exchange earner (NFEE) • Duty, interest and penalty payable on non fulfillment of NFEE www.StudsPlanet.com The biggest incentive of Income Tax holiday fadding out at end of the current fiscal year
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- 37. SPECIAL ECONOMIC ZONE www.StudsPlanet.com “Speciallydelineated duty free enclave” “No licence required for import” “Deemed foreign territory for trade, operations, duties and tariff” “Manufacturing, trading or service activity allowed” “SEZ unit to be positive net foreign exchange earner within three years” “Full freedom for subcontracting including subcontracting abroad” “Job work on behalf of domestic exporters for direct exports allowed” “No separate documentation required for Customs and Exim Policy”
- 38. KEY PLAYERS • Developmentof SEZ • Developer • Person responsible for procuring the land on which the SEZ will be set up and arranging for the construction, development, provision of infrastructure, operation and maintenance of the SEZ • Co-developers • Person who enters into an agreement with the Developer to assist the Developer in providing infrastructure in the SEZ or undertaking any other operations as have been authorized by the Board of Approval • Units in SEZ • Entrepreneurs • Units are set up within the SEZ by Entrepreneurs to undertake manufacturing activities and / or provide services www.StudsPlanet.com
- 39. OTHER KEY PLAYERS •Parties involved in the development of a SEZ • Contractors • Service Providers and • Vendors • Contractors / Service Providers / Vendors • Application to DC for getting approval • Post Approval will be eligible for SEZ benefits www.StudsPlanet.com
- 40. DIRECT TAX BENEFITS- UNITS ◦ Deductions of Profits (Section 10AA) *Deduction is allowed provided the amount is credited to a Special Reserve Account which is created and utilized for the business of the unit within 3 years ◦ Deduction available only in respect of profit and gains from physical exports Deduction (% of Profit) Years 100 0-5 50 5-10 50* 10-15 www.StudsPlanet.com
- 41. INDIRECT TAX BENEFITS APPLICABLELAWS EXEMPTIONS Excise • Goods manufactured and exported out of the SEZ units • Goods procured from the Domestic Tariff Area into the SEZ Customs • Goods imported into a SEZ • Goods exported from a SEZ Unit (other than except DTA Sale) • Drawback on goods brought from the DTA into a SEZ Unit Service tax • Taxable Services exported out of the SEZ units to a place outside India • Taxable Services procured from the Domestic Tariff Area into SEZ • Drawback on services provided from the DTA into a SEZ • Drawback on services provided in SEZ by service providers located outside India Central Sales tax • Exemption from CST on purchase of goods from DTA • No exemption on sale by SEZ unit into the DTA www.StudsPlanet.com Indirect tax benefits are available only for carrying out Authorized Operations
- 42. POSITIVE NFE REQUIREMENT www.StudsPlanet.com Theunit shall achieve positive Net Foreign Exchange (NFE) NFE to be calculated cumulatively for a period of 5 years from the commencement of production NFE to be computed as :- A - B > 0 A = FOB value of exports Includes supply of Information Technology Agreement items and notified zero duty telecom or electronic items, namely, colour display tubes for monitors and deflection components for colour monitors or other items notified by Central Government Includes supply to other units and developers in the same or other SE or EOU/EHTP/STP/BTP B = CIF value of imported inputs and imported capital goods (for annual calculation of NFE, the value of imported capital goods and lump sum payment of foreign technical know-how fee shall be amortized over 10 years @ 10% of the value)
- 43. THANK YOU www.StudsPlanet.com Value-added advisein relation to the Foreign Trade Policy can have a direct, unanticipated and positive impact on the clients bottom line
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