EXPORT PROMOTION SCHEME
1. Merchandise Export from India Scheme (MEIS)
2. Service Export from India Scheme (SEIS)
ADVANCED AUTHORISATION SCHEME
What is this Scheme?
Under this scheme, Input which are used in export product can be imported without payment of custom duty.
IGST (ACD 3(7)) and GST (ACD 3(9)) compensation cess have been exempted upto 31st March, 2020, on import under advance authorisation for physical export or following deemed exports:
1. Supply of goods by a registered person against advance authorisation,
2. Supply of capital goods by registered person against EPCG authorisation,
3. Supply of goods by a registered person to EOQ
The goods imported are exempt from Basic custom duty, additional custum duty, education cess, anti-dumping duty and safeguard duty unless and otherwise specified.
|Validity||1. Advance authorisation shall be valid for 12 months from the issuance date.
2. Advance authorisation for deemed export shall be co-terminus with contracted duration of project execution or 12 months from the issuance date, whichever is later.
|Export Obligation||Period of fulfilment of export obligation under advance authorisation is 18 month from the date of issue of authorisation or notified by DGFT.|
|Export Realisation||Export proceeds shall be realised in freely convertible foreign currency otherwise specified.|
Which goods are imported under this scheme?
|Inputs which are physically incorporated in export product (making normal allowance for wastage)
Who are eligible for advance authorisation?
Advance authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s).
1. Physical Export
2. Intermediate supply or deemed export
3. Supplies made to specifies category of deemed exports.
4. Supply of stores on Board of foreign going vessel/aircraft provide there is specific SION in respect of item supplied.
Basis of issuance of Advance authorisation: Advance authorisation issued for inputs in relation to resultant product, on the following basis:
1. As per SION notified (available in the handbooks of procedure or;
2. On the basis of self-declaration: Regional Authority (RA) may also issue Advance authorisation where there is no SION/valid ad-hoc norms for an export product/or where SION ad-hoc norms have been notified/published but exporter intends to use inputs in the manufacturing product based on self-declaration by applicant. Wastage so claimed shall be subject to the wastage norms decided by norms committee. The applicant shall submit an undertaking to abide by the decision of Norms Committee. Or
3. Application specific prior fixation of norm by the norms committee.
4. On the basis of self-Ratification scheme: where there is no SION or Ad-hoc norms for export product and where SION has been notified but exporter intend to use additional input in the manufacturing process, eligible exporter can apply for an advance authorisation under the scheme on self-declaration and ratification basis. RA may issue advance authorisation in such cases need not to be referred to norms committee for ratification of norms. When Exporter (manufacture or merchant exporter) who hold AEO (Authorised Economic Operators) certificate under Common Accreditation Programme (above 3 stars status holder) of CBI&C is eligible to opt for the scheme.
ACTUAL USER CONDITION FOR ADVANCE AUTHORISATION
Advance authorisation and material imported thereunder will be with actual user condition:
1. Not Transferable: It will not be transferable even after completion of export obligation.
2. Disposal: However, authorisation holder will have an option to dispose of product manufactured out of duty-free input once export obligation is completed.
3. Waste: waste scrap arising out of manufacturing process, as allowed to be disposed off on payment of applicable duty or tax even before fulfilment of export.
Value addition target:
1. Minimum positive value addition is 15%. Except for physical export for which payment are not received in freely convertible currency and some other specified export product.
2. For tea, minimum value addition require shall be 50%.
Domestic Sourcing of Inputs: Holder of advance authorisation has an option to procure the materials/input from indigenous manufacturer/ STE in lieu of direct import against Advance Release Order (ARO)/ Invalidation letter/ Back to back inland credit letter. However Advance Authorisation holder may obtain supplies from EOU/EHTP/BTP/STP without obtaining ARO/Invalidation Letter.
Annual Advance Authorisation(AA): AA can be issued for annual requirement also.
|Annual AA Limit||Entitlement (In items of CIF value of imports shall be higher of:
a. Rs. 1 crore or
b. 300% of FOB value of Export/FOR value of deemed export in the preceding F/Y
|Criteria||Exporters have past export performance (in at least preceding two f/y) shall be entitled for advance authorisation for annual requirement.|
|Eligibility||Authorization for annual requirement shall be issued only where SIONS or valid Ad hoc norms exist as on the date of issue of authorisation. It is not on the self-declaration basis.|
Admissibility of Drawback: Drawback as per rate determined and fixed by the custom authority shall be available for duty paid inputs (both imported and indigenous) used in the export product.
2. DUTY FREE IMPORT AUTHORISATION
Under DIFA, Inputs which are used in export products can be imported without payment of custom duty. The goods imported are only exempted from basic custom duty. IGST will be payable on Imports.
1. Eligible Goods:
i) Input required from production of export goods.
Fuel cannot be imported under DIFA.
2. SION for DIFA: These authorisations shall be issued only for the product for which SION have been notified. DIFA Shall be issued pre/post export.
3. No DIFA for Actual user condition for any inputs: No DIFA shall be issued for an export product where SION prescribes Actual user condition for any input.
|Procedure & Condition||
|Transferability||After completion of export and realisation of export proceeding, request for issuance of DFIA may be made to concerned RA within a period of:
a) 12 Month from the date of export
b) 6 month (additional time allowed by RBI for realization) from the realisation of export proceeds, whoever is later.
|Realisation||Export proceeds shall be realised in freely convertible currency except and otherwise specified.|
|Domestic sourcing of Input||Domestic Sourcing of Inputs: Holder of DFIA has an option to procure the materials/input from indigenous manufacturer/ STE in lieu of direct import against Advance Release Order (ARO)/ Invalidation letter/ Back to back inland credit letter. However, Advance DFIA holder may obtain supplies from EOU/EHTP/BTP/STP without obtaining ARO/Invalidation Letter.|
|Value addition Target||Minimum positive value addition is 20%.
Except for physical export for which payment are not received in freely convertible currency and some other specified export product.
|Admissibility of drawback||Drawback as per rate determined and fixed by the custom authority shall be available for duty paid inputs (both imported and indigenous) used in the export product.|
1. Merchandise Export from India Scheme (MEIS) [going to be replaced by Refund of Duty or Taxes on Export Goods (RODTEP)]
2. Service Exports from India Scheme (SEIS)
|Objective||The objective of MEIS is to promote the manufacture and export of notified goods/products.||The objective of SEIS scheme is to encourage notified services from India. The scheme applies to export of services made on or after 01.04.2015.
However, services provided in the manner/mode specified are eligible.
1. Supply of a ‘service’ from India to any other country (Mode 1- Cross Border Trade)
It means supply of service is directly made and not through any commercial place of same supplier located outside India.
2. Supply of a ‘service’ from India to service consumers of any other country (Mode 2- Consumption abroad)
(Claimant of Reward)
|1. Exporter who has realised foreign exchange
2. Supporting manufacture
|Service Provider with IEC where net free foreign exchange earned of such service provider in the year of rendering service is:
1. Individual service provider and sole proprietorship = US $ 10,000
2. Other service provider = US $ 15,000
Note: Payment in Indian Rupees for service charges earned on specified services, shall be treated as receipt in deemed foreign exchange as per the guideline of RBI.
|Notified goods & Rate of Reward||Under MEIS Export of notified goods/Product to notified markets (creation of new market) shall be eligible for reward at the specified rate(s) (General Rate 7% but in some cases 5% or 4% is applicable).
Unless otherwise specified the basis of calculation of reward would be:
(i) On realised FOB value of export in free foreign exchange. or
(ii) On FOB value of export as given in the shipping bills in free foreign exchange, Whichever is less
|Refer policy as rate differs on different products (3% to 5%)|
|%of Reward of Scrip based on||FOB value of export goods||Net foreign exchange earned|
|Ineligible category||The following export categories/sectors shall be ineligible under MEIS (amended with effect from 05.12.2017)
i) Supplies made from DTA unit to SEZ unit
ii) Export of imported goods (without any manufacture)
iii) Export through transhipment (like imported from USA than change of vessel in India than exported to Japan)
iv) Deemed Export
v) SEZ/ EOU/ EHTP/BTP/FTWZ products exported through Domestic Tariff unit (DTA) unit. (Export of goods by EOU or SEZ etc to foreign consumer on the behalf of DTA unit would be eligible for MEIS if such goods are manufactured by EOU, SEZ etc. and directly exported by EOU, SEZ etc.
vi) Export product which are subject to Minimum export price or export duty.
vii) Export made by units in FTWZ.
Other sources of foreign exchange earning such as equity or debt participation, donation receipt of payment of loans etc. any other inflows of foreign exchange, unrelated to rendering of service, would be ineligible.
Goods based Export of Goods
Export of goods through courier/foreign post offices using e-commerce:
Export of handicraft items, handloom products, books/periodicals, leather footwear, toys and tailor-made fashion garment through courier and foreign post office using e-commerce of FOB value upto Rs. 5,00,000 per consignment shall be entitled to get reward under MEIS. If the value is more than Rs. 5,00,000 per consignment, then MEIS reward would be calculated on the basis of FOB value of Rs. 5,00,000 only.
Common provisions for export from India Scheme (MEIS & SEIS)
Net Foreign exchange earnings for the scheme are defined as under:
Net Foreign Exchange = Gross Earnings of Foreign Exchange – Total expenses / payment / remittances of Foreign Exchange (any expenses in Indian currency shall not be deducted) by the IEC holder, relating to service sector in the Financial year.
EXPORT PROMOTION CAPITAL GOODS SCHEME
|In return, exporter is under obligation to fulfill the export obligation
|Export Obligation||Import under EPCG scheme shall be subject to an export obligation equivalent to 6 times export of duty, taxes and cess saved on capital goods to be fulfilled in 6 years reckoned from the date of issue of authorisation.|
|Validity of authorisation||Authorisation shall be valid for 24 months (Import of Capital Goods) from the date of issue of authorisation.|
|Actual user condition||Import of goods shall be subject to actual user condition till export obligation is completed.|
|Transferability||After export obligation is completed capital goods can be sold or transferable.|
1. In case of integrated tax (ACD 3(7)) and compensation cess (ACD 3(9)) paid in cash on import of EPCG goods, incidence of the said integrated tax and compensation would not be taken for computation of net duty saved provided input tax credit is not availed.
2. Eligible exporters: Following are eligible for EPCG scheme:
3. Eligible capital goods:
IGST & GST Cess exempt on imports (w.e.f 13-10-2017) Capital Goods imported under EPCG scheme for physical exports are exempt from IGST & GST compensation cess upto 31st March 2020 (levied under sec 3(7) and 7) and 3(9) of custom tariff act provided in notification under dept of Revenue).
Domestic purchases free of duty: Alternatively, the authorization holder may also procure capital goods from indigenous sources.
Indigenous Sourcing of capital goods and benefits to domestic supplier:
A person holding an EPCG authorization may source capital goods from a domestic manufacturer. Such domestic manufacturer shall be eligible for deemed export benefits under FTP and as may be provided under GST Rules under the category of deemed export. Such domestic sourcing shall be permitted from EOUs and these supplies shall be counted for the purpose of fulfilment of positive NFE by said EOU.
4. Export Obligation: Export Obligation means obligation to export product(s) covered by authorization/permission in terms of quantity or value or both, as may be prescribed/specified by regional or competent authority. Export obligation consists of average export obligation and specific export obligation.
Specific export obligation (Specific EO) under EPCG scheme is equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from authorization issue date. Specific EO is over and above the average EO.
Note: In case of direct imports, EO shall be reckoned with reference to actual duty saved amount. In case of domestic sourcing, EO shall be reckoned with reference to notional custom duties saved on FOR value.
Average Export Obligation (AEO): Under EPCG scheme the average level of export made by the applicant in the preceding 3 three licensing years for the same and similar products. It has to be achieved within the overall EO period (including extended period unless otherwise specified).
5. Conditions applicable to the fulfillment of export obligation:
6. Incentives for early fulfillment of export obligation:
In case where authorization holder has fulfilled 75% or more of specific export obligation and 100% of average export obligation till date, if any , in half or less than half the original export obligation period specified, remaining export obligation shall be condoned and the authorization redeemed.
7. Post Export EPCG Duty Credit Scrip(s):
Under this scheme, capital goods are imported on full payment of applicable duties in cash. Later basic custom duty paid on capital goods is remitted in the form of freely transferable duty credit scrip(s). (similar to the reward schemes discussed earlier.
8. Salient feature of scheme are as follows:
Summary of EO:
|Cases||Specific EO in addition to average EO||Duty saved|
|1. Import of CG under EPCG Scheme||(Duty/taxes & cess saved) X (6 times)||Actual Duty Saved Amount|
|2. Indigenous sourcing of Capital goods under EPCG Scheme||(Notional Custom Duty saved) X (4.5 times)||It may be calculated on notional custom duty saved on FOR value.|
|3. Post Export EPCG Duty credit scrip||85% of 6 times base on duty rewarded||It is based on duty rewarded|