Export promotion schemes under Foreign Trade Policy provides promotional measures to boost India’s exports with the objective to offset infrastructural inefficiencies and associated costs involved to provide exporters a level playing field. The Ministry of Commerce & Industry, Government of India is the overall in-charge of Foreign Trade in India. The office of the Director General of Foreign Trade (DGFT) is situated in New Delhi; the said authority is responsible for the execution of the Foreign Trade policy of the Government of India.
The Director General of Foreign Trade is a part of the Department of Commerce under the Ministry of Commerce & industry, Government of India. DGFT having its regional offices at all over India and these regional offices are primarily responsible for implementation of various export promotion schemes, issuance of Import-Export Code numbers, grant of various Export promotion licences and issuance of scheme certificates under Foreign Trade Policy. The Ministry of Commerce & Industry is the controlling authority of Foreign Trade, who issue Foreign Trade Policy books, Public Notices, Notifications, Policy Circulars, Clarifications, amended policies & instructions from time to time for successful implementation of Export Promotion Schemes.
The Central Board of Indirect Taxes & Customs (CBIC) is a part of the Department of Revenue under the Ministry of Finance, Government of India, is a nodal agency to implement the various Export Promotion schemes as announced by the Central Government from time to time as per Foreign Trade Policy. The Customs wing of CBIC plays a much more vital role to implement the various export promotion schemes as provided under Foreign Trade Policy.
The midterm review of the Foreign Trade Policy 2015-20 has been announced on 5’th December’2017 to make corrective changes as per the evolving global trade scenario and to align with the changes in the indirect taxes regime with the introduction of GST from 1’st July’2017. The revised and updated Export Promotion Schemes was made effective from 5’th December’2017 declared by the Ministry of Commerce and industry of the Government of India. The brief of the Export promotion schemes are as under:
The objective of schemes to provide rewards in form of Duty Credit Scrips to exporters for the growth of export sectors with low cost. There are two schemes for exports of Merchandise and Services respectively:
Under this scheme, exports of notified goods/ products with ITC [HS] code , to notified markets as listed in Appendix 3B of Handbook of Procedures , shall be rewarded under MEIS with Duty Credit Scrips , are granted freely transferable duty credit scrips on realized FOB value of exports in free foreign exchange at specified reward rate (2,3-5%). Such duty credit scrips can be used for payment of Customs duties for import of inputs or goods, payment of tax on domestic procurement and payment of Customs duties in case of EO default. Scrips and inputs imported under the scrips are fully transferable. This has provided much flexibility to exporters. Incentives under MEIS are available to units located in SEZs also.
Exports of notified goods of FOB value upto Rs 25, 000 per consignment, through courier or foreign post office using e-commerce shall be entitled for MEIS benefit and value of exports using e-commerce platform is more than Rs.25,000 per consignment then MEIS reward would be limited to FOB value of Rs.25000 only. The reward/incentives provided by the Government makes the exporters competitive in the international market including Europe, The United States of America and Africa. These three markets are covered under the scheme for all notified 5012 tariff lines.
ii. Service Exports from India Scheme (SEIS)
The objective of Service Exports from India Scheme (SEIS) is to encourage export of notified Services from India. Service providers of notified services as per Appendix 3E are eligible for freely transferable duty credit scrip @ 5% of foreign exchange earned. The notified services and rates of rewards are listed in Appendix 3D.
These schemes enable duty free import of inputs for export production with export obligation, including replenishment of inputs or duty remission. These schemes consist of:-
Under this scheme, duty free import of inputs are allowed, that are physically incorporated in the export product (after making normal allowance for wastage) with minimum 15% value addition. Advance Authorization (AA) is issued for inputs in relation to resultant products as per SION or on the basis of self declaration, as per procedures of FTP. AA normally has a validity period of 12 months for the purpose of making imports and a period of 18 months for fulfillment of Export Obligation (EO) from the date of issue. AA is issued either to a manufacturer exporter or merchant exporter tied to a supporting manufacturer(s).
Exporters having past export performance (in at least preceding two financial years) shall be entitled for Advance Authorization for Annual requirement.
Advance Authorisation for Annual Requirement shall only be issued for items notified in Standard Input Output Norms (SION), and it shall not be available in case of adhoc norms under paragraph 4.03 (b)(ii) of FTP.
Advance Authorisation for Annual Requirement shall also not be available in respect of SION where any item of input appears in Appendix 4-J.
Entitlement in terms of CIF value of imports shall be upto 300% of the FOB value of physical export and / or FOR value of deemed export in preceding financial year or Rs 1 crore, whichever is higher.
Import of mandatory spares which are required to be exported / supplied with the resultant product shall be permitted duty free to the extent of 10% of CIF value of Authorisation.
Advance Authorisation and / or material imported under Advance Authorisation shall be subject to ‘Actual User’ condition. The same shall not be transferable even after completion of export obligation. However, Authorisation holder will have option to dispose of product manufactured out of duty free input once export obligation is completed.
Goods exported under Advance Authorisation/ Duty Free Import Authorisation may be re-imported in same or substantially same form subject to such conditions as may be specified by Department of Revenue. Authorisation holder shall also inform about such re-importation to the Regional Authority which had issued the Authorisation within one month from date of re-import.
Duty Free Import Authorisation is issued to allow duty free import of inputs. In addition, import of oil and catalyst which is consumed / utilised in the process of production of export product, may also be allowed.
Provisions of paragraphs 4.12, 4.18, 4.20, 4.21 and 4.24 of FTP shall be applicable to DFIA also.
Duty Free Import Authorisation Scheme shall not be available for import of raw sugar.
DFIA is issued to allow duty free import of inputs, with a minimum value addition requirement of 20%. DFIA shall be exempted only from the payment of basic customs duty. DFIA shall be issued on post export basis for products for which SION has been notified.
Regional Authority shall issue transferable DFIA with a validity of 12 months from the date of issue. No further revalidation shall be granted by Regional Authority.
While issuing Duty Free Import Authorisation, Regional Authority shall mention technical characteristics, quality and specification in respect of permitted inputs for imports in the Authorisation.
Exporters of gems and Jewellery can import / procure duty free (excluding Integrated Tax and Compensation Cess leviable under Section 3(7) and 3(9) of customs Tariff Act) input for manufacture of export product.
Gems and Jewellery exporters shall be allowed to export cut and polished precious and semi-precious stones for the treatment and re-import as per customs rules and regulations. In case of re-export, the exporter shall be entitled for duty drawback as per rules.
Re-import of rejected Jewellery Gems & Jewellery exporters shall be allowed to re-import rejected precious metal jewellery as per paragraph 4.91 of Handbook of Procedures.
Export and import on consignment basis Gems & Jewellery exporters shall be allowed to export and import diamond, gemstones & jewellery on consignment basis as per Handbook of Procedures and Customs Rules and Regulations.
The objective of the EPCG Scheme is to facilitate import of capital goods for producing quality goods and services and enhance India’s manufacturing competitiveness.
Under this scheme import of capital goods at zero Customs duty is allowed for producing quality goods and services to enhance India’s export competitiveness. Import under EPCG shall be subject to export obligation equivalent to six times of duty saved in six years. Alternatively, the Authorisation holder may also procure Capital Goods from indigenous sources in accordance with provisions of paragraph 5.07 of FTP. Scheme also allows indigenous sourcing of capital goods with 25% less export obligation.
Import of capital goods for Project Imports notified by Central Board of Indirect Taxes and Customs is also permitted under EPCG Scheme.
Authorisation shall be valid for import for 18 months from the date of issue of Authorisation. Revalidation of EPCG Authorisation shall not be permitted.
In case Integrated Tax and Compensation Cess are paid in cash on imports under EPCG, incidence of the said Integrated Tax and Compensation Cess would not be taken for computation of net duty saved provided Input Tax Credit is not availed.
Import of items which are restricted for import shall be permitted under EPCG Scheme only after approval from Exim Facilitation Committee (EFC) at DGFT Headquarters.
If the goods proposed to be exported under EPCG authorisation are restricted for export, the EPCG authorisation shall be issued only after approval for issuance of export authorisation from Exim
Facilitation Committee at DGFT Headquarters.
ii. Post Export EPCG Duty Credit Scrip Scheme
A Post Export EPCG Duty Credit Scrip Scheme shall be available for exporters who intend to import capital goods on full payment of applicable duties, taxes and Cess in cash and choose to opt for this scheme.
Basic Customs duty paid on Capital Goods shall be remitted in the form of freely transferable duty credit scrip(s), similar to those issued under Chapter 3 of FTP.
Specific EO shall be 85% of the applicable specific EO under the EPCG Scheme. However, average EO shall remain unchanged.
Duty remission shall be in proportion to the EO fulfilled.
All provisions for utilization of scrips issued under Chapter 3 of FTP shall also be applicable to Post Export EPCG Duty Credit Scrip (s).
All provisions of the existing EPCG Scheme shall apply insofar as they are not inconsistent with this scheme.
Units undertaking to export their entire production of goods and services (except permissible sales in DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) Scheme for manufacture of goods, including repair, re-making, reconditioning, re-engineering, rendering of services, development of software, agriculture including agro-processing, aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisciculture, viticulture, poultry and sericulture. Trading units are not covered under these schemes.
Objectives of these schemes are to promote exports, enhance foreign exchange earnings, attract investment for export production and employment generation.
An EOU / EHTP / STP / BTP unit may export all kinds of goods and services except items that are prohibited in ITC (HS). However export of gold jewellery, including partly processed jewellery,
whether plain or studded, and articles, containing gold of 8 carats and above upto a maximum limit of 22 carats only shall be permitted.
An EOU / EHTP/ STP/ BTP unit may import and / or procure, from DTA or bonded warehouses in DTA / international exhibition held in India, all types of goods, including capital goods, required for its activities, provided they are not prohibited items of import in the ITC (HS).
The procurement of goods covered under GST from DTA would be on payment of applicable GST and compensation cess. The refund of GST paid on such supply from DTA to EOU would be available to the supplier subject to such conditions and documentations as specified under GST rules and notifications issued there under. EOUs can also procure excisable goods falling under the Fourth Schedule of Central Excise Act, 1944 from DTA without payment of applicable duty of excise.
Second hand capital goods, without any age limit, may also be imported with or without payment of duty/ taxes as provided under Para 6.01(d)(ii).
EOU / EHTP / STP / BTP unit shall be a positive net foreign exchange earner. In addition sector specific provision of Appendix 6 B of Appendices & ANFs, where a higher value addition and other conditions are given, shall be required to be followed. NFE Earnings shall be calculated cumulatively in blocks of five years, starting from commencement of production. Whenever a unit is unable to achieve NFE due to prohibition / restriction imposed on export of any product mentioned in LoP, the five year block period for calculation of NFE earnings may be suitably extended by BoA.
Further, wherever a unit is unable to achieve NFE due to adverse market condition or any grounds of genuine hardship having adverse impact on functioning of the unit, the five year block period for calculation of NFE earnings may be extended by BOA for a period of upto one year, on a case
to case basis.
Application for setting up an EOU shall be considered by Unit Approval Committee (UAC)/ Board of Approval (BoA)
“Deemed Exports” for the purpose of this FTP refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign exchange. Supply of goods as specified in Paragraph 7.02 below shall be regarded as “Deemed Exports” provided goods are manufactured in India.
“Deemed Exports” for the purpose of GST would include only the supplies notified under Section 147 of the CGST/SGST Act, on the recommendations of the GST Council. The benefits of GST and conditions applicable for such benefits would be as specified by the GST Council and as per relevant rules and notification.
Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and supply of goods, qualifying as deemed exports, subject to terms and conditions as given in HBP and ANF-7A:
(a) Advance Authorisation / Advance Authorisation for annual requirement / DFIA.
(b) Deemed Export Drawback for BCD.
(c) Refund of terminal excise duty for excisable goods mentioned in Schedule 4 of Central Excise Act 1944 provided the supply is eligible under that category of deemed exports and there is no exemption.
Supply of goods will be eligible for refund of terminal excise duty as per Para 7.03 (c) of FTP, provided recipient of goods does not avail not avail ITC / rebate on such goods.
Supplies will be eligible for deemed export drawback as per para 7.03 (b) of FTP, as under:
The refund of drawback in the form of Basic Customs duty of the inputs used in manufacture and supply under the said category shall be given on brand rate basis upon submission of documents evidencing actual payment of basic Custom duties.
In case, claim is filed by submitting mis-declaration/mis-representation of facts, then in addition to effecting recovery under Para 7.10(b) above, the applicant shall be liable for penal action under the provisions of F.T. (D&R) Act, Rules and orders made there under.
Deemed exports benefits contained in FTP 2015-20 shall be available for supplies effected till 30.06.2017 in terms of FTP 2015-20 provisions as it stood till 30.06.2017. In respect of supply made after 30.6.2017, new provision shall apply.
Foreign Exchange earnings are the main ingredient to accelerate the growth of economy. In order to enhance inflow of foreign exchange earnings into the country, the Government is giving much priority for the boost of export of goods and services by way relaxation of export procedures and boost of export production of goods by implementing of export promotion schemes under Foreign Trade Policy. However, there is need of further review of Foreign Trade policy 2015-20 by the Government to bring improvement on the policy at par with the Goods and Services Tax so that export promotion schemes would be more beneficial for the manufacturer exporters as well as merchant exporters, consequently resulted in the growth of export sectors and enhancement inflow of foreign exchange earnings into the country.