If you are exporting the services, your net profit can be increased by 5% to 7% because Indian government is giving incentive on service exports?
There is a scheme Service Export from India Scheme (SEIS) in Foreign Trade Policy 2015-20 where Government of India has notified various eligible services, rates & conditions for rewards.
Governing act of Foreign Trade Policy 2015-2020 is The Foreign Trade (Development and Regulation) Act, 1992.(Hereinafter Referred As ‘FTDRA, 1992’)
However, India has lost case against USA in WTO and the fate of all export incentive schemes are in danger. Fortunately, SEIS scheme has not been challenged by USA
Let us understand about the Service Export from India Scheme in Frequently Asked Questions (FAQ) format.
1. What is ‘Service’?
“Service” Includes all tradable services covered under General Agreement on Trade in Services (GATS) and earning Free Foreign Exchange
The GATS define services in four ‘modes’ of supply: cross-border trade, consumption abroad, commercial presence, and presence of natural persons.
2. Who is a ‘Service Provider’ Under Foreign Trade Policy 2015-20?
As per Para 9.51 of FTP, Service Provider means a person providing:
(i) Mode 1- Cross border trade – Supply of a ‘service’ from India to any other country e.g. BPO/KPO/ITES services, consultancy etc.
(ii) Mode 2- Consumption abroad – Supply of a ‘service’ from India to service consumer(s) of any other country e.g.: tourism, educational services, medical treatment etc.
(iii) Mode 3 – Commercial Presence – Supply of a ‘service’ from India through commercial presence in any other country e.g.: banking, hotel etc.
(iv) Mode 4- Presence of natural persons – Supply of a ‘service’ from India through the presence of natural persons in any other country like doctor, nurse, IT engineer etc. functioning as a consultant, employee, from one country to another.
SEIS benefit is available for Mode 1 and Mode 2 only.
SEIS benefit is not available for Mode 3 and Mode 4.
3. Reward Rates
As per Appendix 3D of Foreign Trade Policy 2015 – 20, reward rates for various services are as follows: –
|Professional Services||Legal Services, Taxation, Architectural, Engineering, Medical and Dental||7%|
|Research and Development Services||R&D – Natural Sciences, Social Sciences and Humanities, Interdisciplinary R&D||7%|
|Rental/Leasing services without operators||Ships, Aircraft, Other Transport equipment and other machinery & equipment||7%|
|Other business services||
|Tourism and Travel Related Services||Hotel and Restaurants
Travel Agencies, Tour Operators and Tour Guides
|Recreational, Cultural and Sporting Services||Entertainment Services (Including – Theatre, Live Bands and Circus Services), News Agency Services, Libraries, Archives, Museum, Cultural Activities, Sporting and other recreational activities||7%|
|Transport Services||Maritime Transportation, Air Transport and Road Transport Services include auxiliary services to all modes of transport like warehousing, cargo handling etc.||7%|
|Construction and Engineering related services||General construction work for building, civil construction, installation and assembly work and building completion and finishing work.||7%|
|Educational Services||Primary, Secondary, Higher and adult education services||7%|
|Environmental Services||Sewage, Refuse Disposal and Sanitation Services||7%|
|Health Related and Social Services||Hospital Services||7%|
4. What are the eligibility criteria for claiming rewards under SEIS?
> Services rendered should fall under the definition of “Service” of “Foreign Trade Policy”
> Service Provider should have minimum Net free Foreign Exchange Earnings of US$ 15000
> Service provider must have active IEC Code
5. Who are not eligible for claiming rewards under SEIS?
As per para 3.09 of FTP, SEIS benefit is not allowed if the Foreign exchange remittances/sources of earnings in form of
a. Other than those earned for rendering of notified Services would not be counted for entitlement.
b. Equity or debt participation.
c. Receipts of repayment of loans.
e. any other inflow of foreign exchange, unrelated to rendering of services, etc.
f. Export turnover relating to services of units operating under EOU/EHTP/STPI/BTP Schemes or supplies of services made to such units.
g. Related to Financial Service Sector – Foreign remittance earned through
Export Proceeds Realization of Clients
Issuance of Foreign Equity through ADRs/GDSRs or other similar instruments
Issuance of Foreign Currency Bonds
Raising all type of Foreign Currency Loans
Sale of Securities and other Financial Instruments
Other receivables not connected with services rendered by financial institutions
h. Earned through contract/regular employment abroad (e.g. labour remittances)
i. Export of goods
j. Clubbing of turnover of services rendered by SEZ/EOU/EHTP/STPI/BTP units with turnover of DTA Service Providers
k. Payments for services received from EEFC Account;
l. 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
m. Service providers in Telecom Sector
6. How to calculate Foreign Exchange Earnings (FEE)?
*Net Foreign Exchange Earnings = Gross Earnings of Foreign Exchange – Total Expenses/Payment/Remittances of Foreign Exchange by the IEC holder, relating to service sector in the Financial Year
7. What is the effective date of scheme?
The Rewards under MEIS/SEIS shall be admissible for exports made/services rendered on or after the date of notification of this policy.
8. What is the last date of filing of application for Duty Scrips?
For SEIS, the last date for filing application shall be 12 months from the end of relevant Financial year of claim period.
However, if you are late – Than don’t worry – DGFT is very much liberal, they will give you incentive with a late filing cut. Incentive will be given as per below table: –
|Sr. No.||Particulars||Late Cut Rate||Incentive|
|1||Application received after the expiry of last date but within six months from the last date (0 to 6 Months)||2%||98%|
|2||Application received after six months from the prescribed date of submission but not later than one year from the prescribed date (7th Month to 12th Month)||5%||95%|
|3||Application received after 12 months from the prescribed date of submission but not later than 2 years from the prescribed date (8th Month to 24th Month)||10%||90%|
For example if a Service Provider applied for SEIS within 6 months of expiry of due date, he will get 98% of the eligible claim but if applied with a more delay than the claim amount will get reduced to 95% to 90% depends upon when he has applied.
Let us understand by an example – For the FY 2018-19, due date for filing application for reward under SEIS scheme is 31st March 2020
a. If claim is filed after 31st March 2020 but before 30th September 2020 – He is eligible for 98% of rewards.
b. If claim is filed between 1st October 2020 to 31st March 2021 – He is eligible for 95% of rewards
c. If claim is filed between 1st April 2021 to 31st March 2022 – He is eligible for 90% of rewards
SEIS claim cannot be filed beyond 31st March 2022 for the FY 2018-19. In nutshell, a person can file claim within 3 years of end of financial year.
9. Where SEIS Scrips can be used?
In payment of taxes like customs duties, excise duties, service tax on the procurement of services, exchange duties and other.
It is to be noted that these Scrips cannot be utilized for paying Integrated Goods and services tax (IGST) and GST Compensation Cess (if applicable) on import of goods
10. What is the validity of the Scrips?
These credit Scrips are valid for a term of 24 months from the date of its issuance. (Public Notice No. 33/2015-2020 dated 23.10.2017)
An Online Application needs to be filed on the DGFT Server and the relevant fields of information need to be entered in the SEIS ECOM Module.
12. What are the points to be Ponder?
(Author can be reached at +91-9560607530 and [email protected])