CA Pooja Sagar
The new five year Foreign Trade Policy (FTP) 2015-2020 introduces the ‘Service Exports from India Scheme (SEIS)’. This reward scheme shall come into force from the date of notification i.e. 1.04.2015. The rewards under SEIS shall be admissible for services rendered on or after the date of notification of this Policy.
The SEIS is to encourage export of notified services from India. The motto of the scheme is to provide rewards to exporters to offset infrastructural inefficiencies and associated costs involved and to provide exporters a level playing field. Also in order to give boost to exports from SEZ, the FTP has extended the reward scheme to units located in SEZs.
In order to lay emphasis on export of services, the Served from India Scheme (SFIS) is replaced by Service Exports from India Scheme (SEIS) .The intention is to provide benefits to all service providers located in India, instead of Indian Service Providers. Earlier, under SFIS the benefit was not available for foreign brand of the Indian companies.
Eligibility Criteria under SEIS
A. Service Providers of notified services, located in India shall be rewarded under the scheme subject to the rendering of the services in the following mode as specified by Para 9.51(i) and Para 9.51(ii) of the FTP 2015-2020:
a) Cross border trade: Supply of a ‘service’ from India to any other country.
b) Consumption abroad: Supply of a ‘service’ from India to service consumer(s) of any other country in India.
B. Such Service Provider should have minimum net free foreign exchange earnings in preceding financial years for:
Providers and sole proprietorship: US$10,000
C. Net Foreign exchange earnings for the scheme are defined as under:
Net Foreign Exchange = Gross Earnings of Foreign Exchange minus Total expenses / payment / remittances of Foreign Exchange by the IEC holder, relating to service sector in the Financial year.
D. 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.
E. Payment earned in India Rupees on specified services shall be deemed foreign earnings as per the guidelines of Reserve Bank of India.
F. In order to claim reward under the scheme, service provider shall have to have an active IEC at the time of rendering such services for which rewards are claimed.
Ineligible categories under SEIS
A. The following mode specified by Para 9.51 (iii) and Para 9.52 (iv) of FTP2015-2020 is not eligible for reward under the scheme:
a) Commercial Presence: Supply of a ‘service’ from India through commercial presence in any other country.
b) Presence of natural persons: Supply of a ‘service’ from India through the presence of natural persons in any other country.
B. 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.
C. Following shall not be taken into account for calculation of entitlement under the scheme
(a) Foreign Exchange remittances:
I. Related to financial Services Sector
i. Raising of all types of foreign currency loans.
ii. Export proceeds realization of clients.
iii. Issuance of foreign equity through ADRs / GDRs or other similar instruments.
iv. Issuance of foreign currency bonds.
v. Sale of securities and other financial instruments.
vi. Other receivables not connected with services rendered by financial institutions; and
II. Earned through contract/regular employment abroad (e.g. labour remittances)
b) Payments for services received from EEFC Account.
c) Foreign exchange turnover by healthcare institutions like equity participation, donations etc.
d) Foreign exchange turnover by educational institutions like equity participation, donations etc.
e) Export turnover relating to services of units operating under EOU / EHTP / STPI / BTP Schemes or supplies of services made to such units.
f) Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI / BTP units with turnover of DTA service providers.
g) Exports of goods.
h) Foreign exchange earnings for services provided by airlines, shipping lines service providers plying from any foreign country X to any foreign country Y routes not touching India at all.
i) Service providers in telecom Sector.
Entitlement and utilization under SEIS
Service Providers of eligible services shall be entitled to Duty Credit Scrip at notified rates on net foreign exchange earned. Scrips can be utilized for the payment of:
· Custom duties for import of inputs or goods except the notified items
· Excise duties on procurement of input and capital goods
· Service tax on procurement of services
· Custom duty in case of default in fulfillment of Export Obligation for authorization under Advance Authorization/EPCG etc, composition fee and application fee under FTP and payment of value shortfall in Export Obligation.
The scheme has given relaxation to the actual user condition and the Duty Credit Scrips and goods imported / domestically procured against them shall be freely transferable.
Remittances through Credit Card and other instruments for MEIS and SEIS
Free Foreign Exchange earned through international credit cards and other instruments, as permitted by RBI shall also be taken into account for computation of value of exports.
Service and Rate of Reward
The present rates of reward are 3% and 5%. The list of services and the rates of rewards would be reviewed after 30.9.2015.
Time Limit for filing application for Duty Credit Scrips
An application for obtaining Duty Credit Scrip shall be filed within a period of 12 months from the end of relevant financial year of claim period. Such application is filed online for a financial year on annual basis in form ANF 3B using digital signature.
Validity Period of Duty Credit Scrips
Duty Credit Scrip shall be valid for a period of 18 months from the date of issue.
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