Directorate General of Foreign Trade (DGFT) simplifies Composition Fee for Export Obligation Extension under Advance Authorization Scheme in a Move to boost trade facilitation and ease of doing business

The Directorate General of Foreign Trade (DGFT) has notified the amended rules for calculation of Composition Fee for extending Export Obligation under Advance Authorization Scheme by amending Para 4.42 of Handbook of Procedures (2015-20) vide Public Notice No.52/2015-20 dated 18th January, 2023.

The simplification of calculations for Composition Fee helps in automation and faster service delivery by making the process more efficient and easier to understand. The previous formula for Composition Fee was convoluted and difficult to understand, which made the process more tedious and strenuous for exporters. However, the revised Composition Fee formula, which is based on a specific rate for different levels of the ‘CIF value of Authorisation’, is more straightforward and easier to calculate.

This will help automate the entire Export Obligation extension process with minimal human intervention, further eliminating the risk of errors and misconceptions.

Automation of the process will reduce the need for manual calculations and paperwork, which will ultimately lead to faster service delivery. This will be beneficial to exporters as it will reduce the time and effort required to complete the Export Obligation extension process.

Additionally, automation will also reduce the risk of errors and misconceptions, which will further improve the efficiency of the process. The process of automation is being taken up under the IT-revamp project of DGFT and shall be notified separately. Simplification of calculations also helps in the “Ease of Doing Business” objective by reducing the complexity and making the process more straightforward for exporters.

By simplifying the calculations for Composition Fee, the DGFT is working towards this objective by making the process more efficient and easier to understand for exporters. This will ultimately lead to trade facilitation and ease of doing business.

Government of India
Ministry of Commerce & Industry
Department of Commerce
Directorate General of Foreign Trade
Vanijya Bhawan, New Delhi

Public Notice No. 52/2015-2020 | Dated: 18th January, 2023

Subject: Amendments in Para 4.42 of the Handbook of Procedures 2015-2020.

F. No. 01/94/180/133/AM22/PC-4.—In exercise of powers conferred under Paragraph 1.03 and 2.04 of the Foreign Trade Policy 2015-2020, as amended from time to time, the Director General of Foreign Trade hereby makes the following amendments in the provisions of Para 4.42 of the Handbook of Procedures 2015-2020:

Existing Para 4.42

Amended Para 4.42
(d) Extension in export obligation period for Authorisations issued under Appendix-4J shall be allowed for a period not more than the half of the stipulated export obligation period. In such cases, composition fee shall be levied @ 0.5% per month of unfulfilled FOB value, in case exports effected are more than 50% in value terms within initial Export Obligation period and @1% per month where less than 50% exports in value terms have been effected within initial export obligation period. (d) Extension in export obligation period for Authorisations issued under Appendix-4J shall be allowed for a period not more than the half of the stipulated export obligation period.

In such cases, composition fee shall be levied in such a manner as prescribed hereunder:

CIF VALUE OF ADVANCE AUTHORIZATION (AA) LICENSES ISSUED

COMPOSITION FEE TO BE LEVIED (IN RS.)
Up to Rs. 2 Crores 5000
More than rs. 2 Crores to Rs. 10 Crores 10000
Above Rs. 10 Crores

15000

(e) Regional Authority may consider a request of Advance Authorisation holder for one extension of EO period upto six months from the date of expiry of EO period subject to payment of composition fee of 0.5% of the shortfall in EO. Authorisation holder will have to submit a self – declaration to RA stating that unutilised imported/domestically procured inputs are available with the applicant. (e) Regional Authority may consider a request of Advance Authorisation holder for one extension of EO period upto six months from the date of expiry of EO period subject to payment of composition fee of 0.5% of the shortfall in EO. Authorisation holder will have to submit a self – declaration to RA stating that

CIF VALUE OF ADVANCE AUTHORIZATION COMPOSITION
FEE TO BE LEVIED (IN Z)
Up to Z2 Crores 5,000
More than Z2 Crores
to Z10 Crores
10,000
Above Z10 Crores 15,000

Authorisation holder will have to submit a self – declaration to RA stating that unutilised imported/domestically procured inputs are available with the applicant.

(f) Request for further extension of six months after first extension as in (e) above can be considered by Regional Authority, provided Authorisation holder has fulfilled minimum 50% export obligation in quantity as well as in value, on pro-rata basis. This will be subject to payment of composition fee @ 0.5% per month on unfulfilled FOB value of export obligation. No further extension shall be allowed by Regional Authority. This provision shall also be applicable to Advance Authorisations issued during FTP 2009-2014. However, only two extensions of six months each as mentioned above can be allowed subject to payment of composition fee and under no circumstance Regional Authority shall allow any extension beyond 12 months from date of expiry of EO period. At the time of filing application for second EO extension, the Authorisation holder will have to submit a self – declaration to RA stating  that unutilised imported/domestically procured inputs are available with the applicant. (f) Request for further extension of six months after first extension as in (e) above can be considered by Regional Authority, subject to the payment of composition fee as prescribed hereunder:

CIF VALUE OF
ADVANCE
AUTHORIZATION
COMPOSITION
FEE TO BE
LEVIED (IN Z)
Up to Z2 Crores 10,000
More than Z2 Crores
to Z10 Crores
20,000
Above Z10 Crores 30,000

 

No further extension shall be allowed by Regional Authority. However, only two extensions of six months each as mentioned above can be allowed subject to payment of composition fee and under no circumstance Regional Authority shall allow any extension beyond 12 months from date of expiry of EO period. At the time of filing application for second EO extension, the Authorisation holder will have to submit a self – declaration to RA stating that unutilised imported/ domestically procured inputs are available with the applicant.

(g) Deleted (g) Whenever a ban / restriction is imposed on export of any product, export obligation period in respect of Advance Authorisation already issued prior to imposition of ban, would stand automatically extended for a period equivalent to the duration of ban, without any composition fee.
(h) The revised composition fee for EOP extension under para 4.42 of HBP (2015-20) will only be applicable for the requests made on or after 19.01.2023. However, existing/pending applications shall be governed by the earlier relevant provision of HBP (2015-20).

Effect of this Public Notice: Para 4.42 of the Handbook of Procedures 2015-2020 has been amended to simplify the process of levying Composition Fee in case of extension of Export Obligation Period (EOP) under Advance Authorization Scheme and for higher IT enablement of DGFT.

(Santosh Kumar Sarangi)
Director General of Foreign Trade
Ex-officio Additional Secretary to Government of India
E-mail: dgft@nic.in

[Issued from File No. 01/94/180/133/AM22/PC-4]

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