prpri Export of Services- SEIS – Export Incentive to Service Industry Export of Services- SEIS – Export Incentive to Service Industry

Export of Services- An Insight- Service Exports from India Scheme (SEIS)- Export Incentive to Service Industry

Executive Summary

♦ SEIS scheme was introduced on 1st April 2015 under the Foreign Trade Policy of India 2015-2020.

♦ The purpose for the SEIS scheme is to make export of Indian services more competitive in international markets. Therefore, SEIS replaced served from India Scheme (SFIS) which was introduced in the past and the validity of scheme is for 5 years.

♦ Due to COVID 19 outbreak, the FTP Policy is extended to 31.03.2021 as notification issued on 31.03.2020.

♦ Apply to service providers located in India instead of Indian service providers.

♦ SEIS benefit will be given in the form of duty credit scripts and not in the form of money. The scripts can be used either for payment of specified duty as mentioned below or easily transferrable in cash by sale to other buyer.

♦ The incentives under the SEIS Scheme are provided to all types of service providers who are located in India irrespective of the nature of organization of the service provider. The rate of reward under SEIS which is 3% to 7% would be computed on the net foreign exchange earned.

♦ The validity of duty credit scripts issued under chapter 3 is 24 months w.e.f. 01.04.2016,

1. What is Service Export from India (SEIS) Scheme

A scheme designed to provide incentive to exporters to offset infrastructural inefficiencies and associated costs. The Duty Credit Scripts and goods imported/ domestically procured against them shall be freely transferable. The Duty Credit Scripts can be used for:

(i) Payment of Basic Customs Duty and Additional Customs Duty specified under sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 for import of inputs or goods, including capital goods, as per DoR Notification, except items listed in Appendix 3A.

(ii) Payment of Central excise duties on domestic procurement of inputs or goods,

(iii) Payment of Basic Customs Duty and Additional Customs Duty specified under Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 and fee as per paragraph 3.18 of this Policy.

Objective of the Service Exports from India Scheme (SEIS) scheme to encourage and maximize export of notified services from India.

2. Procedural Aspects as per Foreign Trade Policy (FTP) (2015-2020)

Main provisions of SEIS Scheme eligibility criteria, conditions, entitlement is governed through Chapter 3 of Foreign Trade Policy (FTP) 2015-2020 as issued by Minister of State for Commerce & Industry, Government of India and regulated by Directorate General of Foreign Trade (“DGFT”), the same is mentioned below:-

3. What are the eligibility criteria for SEIS scheme as defined under Para 3.08 of Chapter 3 of Foreign Trade Policy (FTP)

4. Service Providers of notified services, located in India, shall be rewarded under SEIS. Meaning thereby that services rendered in the manner as per Para 9.51(i) and Para 9.51(ii) of this policy shall be eligible. The notified services and rates of rewards are listed in Appendix 3D.

Under Para 9.51 (i) and (ii) of FTP, service provider means a provider providing services i.e. eligible services:-

1. Supply of a service‟ from India to any other country; (Mode 1- Cross border trade)

2. Supply of a service‟ from India to service consumer(s)of any other country in India; (Mode 2-Consumption abroad)

3. Such service provider should have minimum net free foreign exchange earnings of

For Individual Service Providers and sole proprietorship= US $ 10,000

For others= US $ 15,000

in year of rendering service to be eligible for Duty Credit Scrip of such minimum net free foreign as mentioned above of  exchange earnings criteria in year of rendering service.

1. 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. The list of such services is indicated in Appendix 3E.

2. 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.

3. 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.

4. 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.

5. What are the ineligible categories under SEIS? (Refer Para 3.09 of Chapter 3 of Foreign Trade Policy (FTP), :-

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.

6. How to calculate entitlement under SEIS? (Refer Para 3.10 of Chapter 3 of Foreign Trade Policy (FTP)) :-

Service Providers of eligible services shall be entitled to Duty Credit Scrip at notified rates (as given in Appendix 3D) on net foreign exchange earned.

7. Whether remittances through Credit Card and other instruments for SEIS is allowed (Refer Para 3.11 of Chapter 3 of Foreign Trade Policy (FTP) :-

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.

8. Para 3.04 of Chapter -3 of Foreign Trade Procedure defines that an application for grant of duty scrip for eligible services rendered shall be filed online for a financial year on annual basis in ANF 3B using digital signature. An applicant is required to obtain class-III digital signature to file application online on dgft.gov.in. RA shall process the application received online after due scrutiny.

9. List of Eligible Services and Rates of reward (Annexure to Public Notice 07/2015-2020, dated 11th May 2018 read with 45/2015-20, dated 05.12.2017)

10. List of Ineligible Sectors/ categories under SEIS

Following shall not be taken into account for calculation of entitlement under the SEIS

(a) Foreign Exchange remittances:

1. Related to Financial Services Sector

2. Raising of all types of foreign currency Loans;

3. Export proceeds realization of clients;

(b) Issuance of Foreign Equity through ADRs / GDRs or other similar instruments;

1. Issuance of foreign currency Bonds;

2. Sale of securities and other financial instruments; vi. Other receivables not connected with services rendered by financial institutions; and

3. Earned through contract/regular employment abroad (e.g. labour remittances);

4. Payments for services received from EEFC Account;

5. Foreign exchange turnover by Healthcare Institutions like equity participation, donations etc.

(c) Foreign exchange turnover by Educational Institutions like equity participation, donations etc.

1. Export turnover relating to services of units operating under SEZ / EOU / EHTP / STPI / BTP Schemes or supplies of services made to such units;

2. Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI / BTP units with turnover of DTA Service Providers;

3. Exports of Goods.

      • 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.
      • Service providers in Telecom Sector.

11. List of services where payment received in Indian rupees to be treated as Deemed Foreign Exchange APPENDIX 3E (Please read Para 3.08(c) of FTP and Public Notice No.3 dated 01.04.2015)

Payments which have been received in foreign exchange or which would have been otherwise received in foreign exchange, but paid in Indian Rupees(INR), including through its agents in India out of the amount remittable to the overseas principal, or out of remittances to be sent by the overseas buyer, for services rendered in Customs Notified Areas to a foreign liner ( or procured by a foreign entity in case of services included in rental of vessels with crew)as listed below would be considered as deemed to be received in foreign exchange and deemed to be earned in foreign exchange and shall be eligible for issuing rewards under the Services Exports From India Scheme.

12. Impact of COVID 19 and related extensions of due dates

1. As per Public Notice No 08/2015-2020, dated 1st June 2020, for SEIS application:-

2. For the services rendered in FY 2016-2017, the last date of application with 10% late cut would be 30.06.2020 and after that it would become time barred.

3. For the services rendered in the FY 2017-2018, 5% late cut as was applicable on 31.03.2020, shall continue to be applicable for application submitted till 30.06.2020 and thereafter 10% late cut would be applicable for application submitted till 31.03.2021.

4. Relaxations has been provided applicable late cuts for SEIS applications and the validity of scripts issued under chapter 3 of FTP which are expiring between 01.03.2020 to 30.06.2020 has been extended upto 30.09.2020,

5. As per Notification No. 57/2015-2020, dated 31st March 2020, the existing Foreign Trade Policy 2015-2020 which is valid upto 31.03.2020 is extended upto 31.03.2021. Various other changes are also made extending the date of exemptions by one year and extending validity of DFIA and EPCG authorizations for import purposes. Further as per Notification No. 60/2015-2020, dated 31st March 2021, the existing FTP Policy 2015-2020 which is valid upto 31.03.2021 is extended upto 30-09.-2021

6. Various s have been submitted to the Government of India to notify scheme for the year 2019-2020, however till date no notification has been issued.

13. Important check points and documentation before and after filing of application under SEIS scheme

1. To hold an active IEC Code. It should be remembered that rectify and/ or amend any changes in IEC code before making an application for SEIS scripts. Any application filed with the DGFT is IEC based.

2. To check Export of eligible services as notified in Appendix 3D read with para 3.08 of chapter 3 Foreign Trade Policy 2015-2020.

3. To obtain registration cum membership certificate (RCMC) from the appropriate authority like for legal services, registration and annual renewal is required from Service Export Promotion Council (SEPC) as mentioned in public notice no. 26/2015-2020, dated 1st August 2018. Before making an application before SEPC, please obtain country wise and currency wise export turnover certificate for last three years.

4. Obtain class-III digital signature of organization.

5. Keep all the export invoices along with Foreign Inward Remittance Certificate (FIRC) sequentially and it should reconcile with the eligible services as mentioned in Annexure-3D. Please ensure that remitting bank is correctly mentioning RBI code on the FIRC.

6. Keep details of all the foreign expenses incurred during the year.

7. Calculate net foreign exchange earned during the year and compute amount of SEIS scripts eligible % of net foreign exchange. No late cut will be deducted if application will be filed within one year from the end of financial year.

8. Online file ANF-3B annually on dgft.gov.in on services under SEIS (apply for SEIS scheme). Please insert digital signature.

9. All pages of the enclosures to ANF-3B need to be attested by the Chartered Accountant (CA)/ Cost and Works Accountant (ICWA)/ Company Secretary (CS).

10. Along with filing the ANF-3B, the applicant shall upload the following documents online:-

11. Documentary evidence in the form a CA/CWA/CS certificate, which certifies that payment in INR for services rendered as under Appendix 3E have been scrutinized and these payment in INR are approved under RBI guidelines as deemed to be received in foreign exchange and deemed to be earned in foreign exchange – is required to be submitted by applicants which claims benefit for INR payments.

12. In case description of the services as per the invoices is different from the description of services in the appendix 3D/3E, then the copies of the sample invoices for each of the different services shall be uploaded by the applicant.

13. After uploading of all documents a fee of INR 1,000 shall be paid and then final ANF 3B form will be downloaded from the website.

14. There is no need to submit any hard copies in DGFT.

15. An applicant is required to visit regularly on the website http://dgftcom.nic.in/eComapplications.html and in case any deficiency letter is issued by regional DGFT, then it should be properly replied and submitted in hard copy within one month from the date of issue of notice.

16. All correspondence with DGFT should be on the letter head of the applicant and not on the letter head of authorized person like CA or CS.

17. An applicant is required to carefully select port of registration at the time of filing of online application. It is preferable to select EDI port like INTKD6 instead of Non EDI Port like INDEL5, FPO. Since, scripts issued on EDI port can be easily sold in the market, whereas there are very few buyers to purchase scripts issued on the non-EDI port.

Conclusion:-

At the outset, we should thank to our Government of India for issuing such a beneficial incentive scheme for service industry and boosting our economy and competing in the international market. Considering the COVID scenario and to boost the Indian economy to earn foreign exchange, the Government should also notify the scheme for the year 2019-2020.

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Company: V J P K & Co
Location: New Delhi, Delhi, India
Member Since: 15 Jan 2018 | Total Posts: 2
Ambitious and self-motivated individual with more than 10 years of professional experience, excellent knowledge of Indian taxation as well as USA taxation. Qualified exams of CPA from AICPA and hold a degree of CA and DISA from ICAI. View Full Profile

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One Comment

  1. Venkatraman Subramanyam says:

    Hello Sir, We are an Indian Subsidiary and provide Export Services to our Customers in the area of Sales Enablement, Software consultancy, Software publishing and Supply. Are we eligible to claim Service Export Incentives under the Scheme. Thank you.

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