R. Kumar, B.Com. MBA

Introduction:-

As lok sabha election is on its way in coming months so commerce ministry made some useful amendments to the Foreign Trade Policy (FTP) and gave some additional benefits to exporters. The finance ministry also altered its dispensations for importers which want to pass on Cenvat credit to buyers upon resale/transfer of the goods and notified the procedures for claim of Cenvat Credit refund under Rule 5B of the Cenvat Credit Rules, 2004.

In coming para we ‘ll discuss the same in more details:-

Changes incorporated in Indirect Tax w.e.f. 01.04.2014:

a. Export Promotion of Capital Goods (EPCG)Amendment:-

The Central Government has provided that additional time of 3 years for fulfilment of export obligation may be allowed to the Export Promotion of Capital Goods (EPCG) authorization holder, if such holder receives relief under corporate debt restructuring mechanism.

(Notification No. 70 (RE-2013)/2009-14 dated 20 February, 2014)

Explanation:- To help exporters seeking corporate debt restructuring (CDR) from banks due to financial difficulties, the Foreign Trade Policy (FTP) was amended to provide that wherever the holder of any EPCG (Export Promotion Capital Goods) Authorisation is granted relief under corporate debt restructuring (CDR), it may be allowed extension of the export obligation period up to three years from the date of approval of the corporate debt restructuring (CDR) scheme, without having to pay any composition fee for this.

b. Market Linked Focus Products Scrip (MLFPS) Amendment:-

1. Export of Product/Sectors of high export intensity/employment potential (which are not covered under present FPS List) would be incentivized @ 2 % of FOB value of exports (in free foreign exchange) for exports made from 27.8.2009 onwards, unless a specific date of export/period is specified by public notice/notification, under FPS when exported to the Linked Markets (countries), which are not covered in the present FMS list. Such products are listed in Table 2 of Appendix 37D of HBPv1.

2. About  47  new  products  have  been  added  under  Market  Linked Focus  Product  Scheme  (MLFPS).  These products are from engineering, auto components and textiles sector. 2 new countries i.e., Brunei and Yemen have been added as new markets under market linked focus products scrip (MLFPS).

3. MLFPS is being extended from 01.04.2013 to 31.03.2014 for exports to USA and EU in respect of items falling in Chapter 61 and Chapter 62 of ITC (HS).

Recent Amendments:-

The Central Government has revised appendices of Focus Product Scheme (FPS) and Market Linked Focus Product Scheme (MLFPS) so as to align the product description and classification.

(Public Notice No. 52 (RE-2013)/2009-2014 dated 25 February, 2014)

Explanation:- Under the Market Linked Focus Product scheme (MLFPS), 13 items (mostly textiles) were notified for additional benefit of duty credits of two per cent of the FOB value of exports. Three more items were added to benefits under the Focus Product Scheme.

c. Customs Baggage Circular No. 05/2014- Customs- F. No. 520/13/2013- Cus.-VI Dated: 27th February, 2014

Passengers returning to India need to fill luggage declaration form along with arrival card. This is new rule under custom baggage declaration regulation. Custom department issued a circular no.5/2014 dated 27 February 2014. Full circular is as under.

Customs Baggage Declaration Regulations 2013 – implementation thereof-reg

Explanation:-

The finance ministry brought the Customs Baggage Declaration Regulations, 2013, into effect from the beginning of this month. The Central Board of Excise and Customs (CBEC) revised its action plan for monitoring cases where the export obligation period and time prescribed for furnishing evidence of fulfilling the export order was over. The Central Board of Excise and Customs (CBEC) instructed that the guidelines contained in the Ammonium Nitrate Rules, 2012, for its import or export be scrupulously followed by the field formations.   

d. Importer to be mandatorily registered with the Central Excise authorities:

ü  Amendment in the procedure for registration of an Importer:

The Central Government has rescinded Notifications No 17/ 2014-CE and No 18/2014-CE both dated December 31, 2013 (‘Erstwhile Notifications’) which had earlier made changes in the CENVAT Credit Rules and Central Excise Rules for allowing an importer to pass-on the credit by obtaining registration as a “first stage dealer”. The said notifications were to come in force from March 01, 2014.

However, the Central Government has rescinded the Erstwhile Notifications and have issued notifications (‘Notifications’) notifying certain procedural requirements for an importer to be able to pass on the credit of duties. The amended notifications will come into effect from April 01, 2014.

The Notifications assume significance as they outline importer’s obligations under the Central Excise even if such importer is not a manufacturer of goods under the Central Excise Act, 1944.

ü  Amendments proposed vide the Erstwhile Notifications:

The Erstwhile Notifications proposed following amendments under the Central Excise Rules, 2002 (‘CER’) and CENVAT Credit Rules, 2004 (‘CCR’) wef March 01, 2014:

  1. An importer, who issues an invoice on which CENVAT Credit can be taken, would be required to get registration with central excise authorities as ‘first stage dealer’ (FSD).
  1. A ‘first stage dealer’ shall also mean an importer who sells goods imported by him under the cover of an invoice on which CENVAT credit may be taken and such invoice shall include an invoice issued from his depot or the premises of his consignment agent.

Given the above, an importer was required to be registered as an FSD in order to be able to pass on the CENVAT credit where the goods imported are sold to, so that the recipient of imported goods would, eventually, be eligible to avail CENVAT credit of the duty paid at the time of import. The changes proposed under the Erstwhile Notifications raised challenges like:

  • Applicability of the amendments to stock transfer by an importer to its own depot/ warehouse;
  • CENVAT credit chain being shortened.

Representations were made by various stakeholders on the impact of notification and the challenges posed by it.

ü  Registration and other procedural formalities notified vide the Notifications:

Consequent to consultation between the industry and government, the Central Government has now rescinded the Erstwhile Notificationsand have issued the Notifications (viz. No. 8/2014-CX; 9/2014-CX; 10/204-CX and 11/2014-CX) laying down the procedure to be followed by an importer and to address the concerns of stakeholders who were impacted by these Notifications.

With the Notifications being issued, an importer needs to obtain central excise registration (under a new category of “importer”) and also needs to fulfill certain compliance requirements subsequent to such registration.

Key highlights of the amendments are:

1. Credit on imported goods can be passed-on based on an importer’s invoice;

2. Such importer will have to obtain registration as a ‘registered importer’ with the central excise authorities (relevant amendments in the central excise registration application form has been made by creating a separate category of applicant, ie ‘importer’); and

3. Such importer will have to file quarterly returns giving details of the invoices raised during a quarter.  

Explanation:-

With effect from April, importers which issue invoices on which Cenvat credit can be taken must be registered with the Central Excise department. The registered importer is required to file a quarterly return. So, if manufacturers or service providers or registered dealers want to get inputs from an importer, they must ensure the latter is registered with the central excise department. The Cenvat Credit Rules, 2004, have been amended to facilitate distribution of credit by the input service distributor to its manufacturing units or units providing output service.

Conclusion:-

The Central Board of Excise and Customs (CBEC) has notified the procedure, safeguards, conditions and limitations for claiming refund of unutilised Cenvat credit taken on inputs and input services during the half-year for which it is claimed, for providing the services of renting of a motor vehicle designed to carry passengers on the non-abated value to any person who is not engaged in a similar business, supply of personnel for any purpose or security services or service portion in the execution of a works contract.

The notification prescribes a formula for claiming refund and stipulates this shall not exceed the amount of service tax liability paid or payable by the recipient of the service. Only one claim should be made for each half year. The amount of refund claimed should be debited in the Cenvat account. No refund is admissible for credit taken on input or input services received prior to July 1, 2012.

Author can be reached @ sunraj.18@rediffmail.com

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