Role of CA in new regime of Foreign Trade Policy

Introduction : Globalization, liberalization and multilateralism has given to a new league of businessmen and entrepreneurs. While International trade has been present throughout much of the history, its economic, social, and political importance has been on the rise in recent centuries. International Trade not only enables a nation to specialize in the goods which it can produce most cheaply and efficiently, but also to consume more than it would be able to produce with its own resources. International trade enlarges the potential markets for the goods of a particular economy.

Foreign Trade Policy (earlier called as Export Import Policy i.e. Exim Policy) is a set of guidelines and instructions established by the DGFT (Directorate General of Foreign Trade) in matters related to the import and export of goods in India. The Foreign Trade of India is guided by the Export Import Policy of the Indian Government and is regulated by the FT(D&R) Act – Foreign Trade (Development and Regulation) Act,1992.

DGFT is the main governing body in matters related to EXIM Policy. The main objective of the FT(D&R) Act is to provide the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India. Foreign Trade Act has replaced the earlier law known as the imports and Exports (Control) Act 1947.

The Indian Foreign Exchange Policy(FTP) contains various policy related decisions taken by the government in the sphere of Foreign Trade, i.e., with respect to imports and exports from the  country and more, especially export  promotion measures, policies and procedures. The policy aims at developing export potential, improving export performance, boosting foreign trade and earning valuable foreign exchange. FTP assumes great significance as a fall in exports has led to the closure of several small and medium scale export oriented units, resulting in large scale unemployment.

The Union Commerce Ministry, Government of India announces the integrated Foreign Trade Policy (FTP) every five years. This policy is updated every year with some modifications and new schemes. New schemes come into effect on the first day of financial year i.e. April 1, every year. The Foreign trade Policy which was announced on 28^th August, 2009 is an integrated policy for the period 2009-14.The existing Foreign Trade Policy 2009-14 will remain in force until further orders are issued.

Some of the salient features of the Act are as follows –

• Export Import is Free unless specifically regulated by the provisions of the policy or any other law for the time being in force.

• There are restrictions on Import for various strategic, health and other reasons. If the goods are not banned the government can give permission/license for specific reasons.

• Exports are promoted through various promotional schemes.

• There should be no taxes on exports and hence the taxes are either exempted or adjusted or refunded on both the outputs and the inputs, through schemes of Duty exemption, Duty refund (Drawbacks and Rebates).

• Even Capital goods can be imported at NIL duty for the purpose of exports under the scheme of EPCG.

• For units undertaking to export all their production, there are special schemes so that they can avoid taxes at every stage under the scheme of EOU.

• In certain case imports get duty exemption/concession for certain special purposes. In such cases, to enable domestic suppliers compete with international suppliers, the supplies of domestic suppliers are treated as deemed exports.

Professional opportunities

It is heartening to note that we had achieved our previous objective (FTP yr 2004-09) of fashioning trade into an instrument of economic growth and employment generation. This was vindicated by the fact that total trade in goods and services formed nearly half our GDP and around 136lakh new jobs are estimated to have been created in this period. The ministers appreciated the contribution of the services sector which accounted for more than 20% of our total trade. The Special Economic Zones (SEZs) are an important policy tool in this effort to increase our exports, generate employment and provide momentum to economic growth. These zones are intended to be magnets for attracting foreign investment and acting as a one stop shop for the state-of-the-art infrastructural facilities. With the multitude of activities governing international trade and their increasing complexity, the era of single tasking or specialization is no longer in vogue. Increasingly, companies are on the lookout for professionals who can multi-task i.e. handle both commercial and technical functions. The role of the CAs has therefore to be re-defined in this new era.

Advisory Services Related to Foreign Trade Policies & Instruments

Advisory Services to National Governments in framing WTO Compliant Foreign Trade Policies & modifying the existing schemes.

• Analysis of business operations and facilitation services

• Formation of a company/subsidiary of a foreign company

• Setting up 100% SEZ units

• Assistance in fulfilling the regulatory and licensing requirements

• Obtaining government clearances

• Liaisoning across related government agencies

• Development of strategies and implementation plans according to the specific needs of the clients.

• Consulting, documentation and facilitation for

 I. Exports and imports for Export-Import Policy

II. Licenses

III. Incentives

IV. Logistics

V. Foreign Trade Policy Finance

VI.  Foreign Trade Policy legal matters

• Getting Foreign Investment and related matters like Setting up of Business Operations in India including Liaison Office, Branch Office, Subsidiary Company, Joint Ventures.

• Approval of Investments from RBI/FIPB/Ministries.

• Quality certification for Foreign Companies exporting to India

• Domestic operations & Incorporations like Formation of companies in India & related issues with ROC, RBI & other Government departments, Registrations with DGFT (IEC), EPC (RCMC), Industry Ministry (IEM), Income tax (PAN), Sales tax, Excise, Representation of Cases Before Central Excise Appellate Authorities, Customs Authorities, Fixation of /Brand Rates for Drawback, Rebate / Refund of Central Excise Duties, Customs Duties etc.

• Application and Issuance of DEPB, Advance License, EPCG License, Duty Drawback, Deemed Export Benefits.
• Representation and Liaison:

i. With DGFT, RBI and Ministries for import-export licenses & other matters,

ii. For Foreign companies/NRIs in India, Indian Investments Abroad, etc

iii. Planning, Strategizing and implementation for clearances of Project Imports,Plant Relocations, Restricted Items Imports.

Advisory Services Related to Special Economic Zones/100 % Export Oriented Units (EOU) / Software Technology Parks (STP) / Electronic Hardware Technology Parks (EHTP)

• Assistance in preparation of project report

• Assistance in necessary applications, compliances etc. with the Board of Approval, State Government, Development Commissioner, Approval Committee, etc.

• Consultancy services for developing and setting up units in Special Economic Zones.

• Representation before Board of Approval on behalf of any person aggrieved by the order passed by the Approval Committee.

Where–Rule 55 of Special Economic Zones Rules, 2006 states that any person aggrieved by an order passed by the Approval Committee under section 15 of the Special Economic Zones Act, 2005or against cancellation of Letter of Permission under section 16, may prefer an appeal to the Board.Rule 61 of the Special Economic Zones Rules, 2006 states that every appellant may appear before the Board in person or authorize one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of his or its officers to present his or its case before the Board.

• Report under section 80LA(3) of the Income-tax Act, 1961 in Form No. 10CCF

• Report on Annual performance of units -The information given in the formats for APRs should be authenticated by the authorized signatory of the unit and should be certified for its correctness by a Chartered Accountant with reference to the account records and registers maintained by the unit (Appendix 14 –I-F Handbook of procedures of Foreign Trade Policy)

• Certificate on production and exports
• Certificate for CST reimbursements certifying receipt of the goods

• The unit has to present its claim for reimbursement of CST in the prescribed form to the Development Commissioner of the SEZ concerned or the designated officer of the EHTP/STP.

• Certification of Statement of Exports made in the preceding licensing year in the format given in Appendix 26 for Annual Advance License purposes

To specialize in this area, one has to have a deep understanding of our Foreign Trade Policy administered by the office of the DGFT as also the trade related measures being applied by other government agencies such as Customs, Excise, Service Tax, Income Tax, Ports, RBI etc.

A Chartered Accountant is also required to keep himself updated with the international trade laws and WTO’s state of negotiations to compete with other professionals in other countries.

With this mindset, the Institute of Chartered Accountants of India has included indirect taxes in its curriculum. Given the expectations from recruiting companies, we should expect that Foreign Trade Policy would also be a significant thrust area in the courses.

Some of the subjects that are important from the perspective of a CA for venturing into the area of foreign trade are:

• Legal provisions that is critical in the area of Foreign Trade, namely, Acts, Rules, Orders, Notifications, Public Notices, Circulars under the Foreign Trade Policy. The various statutes administered by the departments such as the Customs, Excise, Service tax, Income Tax, RBI, Ports, Standard Setting Bodies etc are also important from the perspective of international trade.

• Import and Export Policy in terms of prohibitions, restrictions and other related measures on imports and exports. This information would give an idea of the viability of a company venturing into the business related to any of these products.

• Macro picture of the trend in import and export of goods and services, regulations governing the realization/payments and accounting procedures thereof.

• Foreign exchange risk management strategies, product pricing and international marketing.

• Information of duty exemption/ remission schemes, end use duty exemption scheme, export promotion scheme and market development initiatives. These would help in the reduction of export costs.
• The ways and means of reducing transaction costs in international transactions.

• Risk management tools and mitigation of risks arising out of international transaction ranging from Marine risks, Exchange risks etc. to losses due to fire, accident etc.

• Knowledge of the best documentation practices for export and import documentation.

(Author –Srishti Suri  is a CA Final final student and can be reached at srishcolboss @ yahoo.co.in)