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Table of Contents
Export Growth Potential of India
Foreign Trade Policy 2023
Penal Provisions
Export Promotion Schemes – Overview
Advance Authorisation
Export Promotion Capital Goods Scheme (‘EPCG’)
Relevant changes under AA and EPCG under FTP 2023
Duty Drawback
Remission of Duties or Taxes on Export Products (RoDTEP)
Taxes/duties remitted under RoDTEP
Points to be noted
EOU/STP Scheme – Overview and Features
EOU/STP Scheme – Taxes on supply chain
Status Holder (‘SH’) Scheme
Clubbing of various schemes
Deemed Export
Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET)
SCOMET
Amnesty Scheme
1. Export Growth Potential of India
Widening trade deficit, a cause of concern
Service Exports USD 340.29 bn during 2022-23 (estimated) and USD 254 bn during 2021-22
Free Trade Agreements with the UK, EU, Canada and other countries in advanced stages
Foreign law firms allowed to operate in India
Foreign Universities being allowed
Focus on Make in India
2. Foreign Trade Policy 2023
1. Issued under Section 5 of the Foreign Trade (Development and Regulations) Act, 1992
2. Formulated and administered by the Directorate General of Foreign Trade
3. Consists of:
FTP
Handbook of Procedures
Standard Input Output Norms (SION)
4. No end date to current FTP unlike previous FTPs which were valid for 5 years
5. Major policy shift from incentives on exports (like MEIS, SEIS etc) to remission of duties
6. Three new chapters introduced – Developing Districts as Export Hub (Chapter 3), Promoting Cross Border Trade in Digital Economy (Chapter 9) and SCOMET (Chapter 10)
7. Regulates import and export of goods from India
8. Goods are categorized in 3 category:
Free: Import or export allowed without any licence or permission
Restricted: Import allowed with licence/authorisations
Prohibited: Import or export not allowed
9. Approvals or licences under other laws need to be obtained separately
10. To boost merchanting activities from India – Merchanting trade involving shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary allowed subject to compliance with RBI guidelines, except for goods/items in the CITES and SCOMET list
11. IEC mandatory for service exporters on the date of rendering service for availing benefits under FTP
3. Penal Provisions
4. Export Promotion Schemes – Overview
5. Advance Authorisation
Objective
To allow the duty free import of input, required for manufacture of export product
Coverage
Manufacturer exporters or merchant exporter tied to supporting manufacturer
Entitlement
Import of inputs allowed on the basis of SION (or ad-hoc norms)
AdvanceAuthorization for Annual requirement allowed to exporters with export performance in at least preceding two financial years
CIF value of imports can be up to 300% of the physical export and/or FOR value of deemed export in preceding financial year or Rs. 1 Crore, whichever is higher
Benefits
Imports exempted from Basic Customs duty, IGST, Additional Customs Duties, SWS, Anti-dumping Duty, Safeguard Duty
Other Key points
Imports subject to Actual user condition
Minimum 15% value addition required on inputs
Export obligation period 18 months (extendable up to another 12 months)
6. Export Promotion Capital Goods Scheme (‘EPCG’)
Objective
To facilitate the duty free import of capital goods for export production
Coverage
Manufacturer exporters with or without supporting manufacturers, merchant exporters tied to supporting manufactures and service providers
Entitlement
Import of capital goods required for manufacture of export goods or services
Import of spares, mould, dies etc. also allowed
Benefits
Exemption from Customs duty on import
Refund of IGST on local procurements
Other Key points
Actual user condition till the completion of export obligation
Export obligation equal to 6 times of duty saved to be achieved in 6 years
Exports above average of last three years exports are only counted for EO under EPCG
In case of domestic procurement, EO shall be 25% of applicable specific EO
Waiver of part EO in case of early fulfilment of substantial EO
7. Relevant changes under AA and EPCG under FTP 2023
Benefits of Self-ratification Scheme for fixation of Input-Output Norms extended to 2 star and above status holders in addition to Authorized Economic Operators at present.
Reduced EO for EPCG for Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system and Rainwater Filters and Green Hydrogen.
Dairy sector to be exempted from maintaining Average EO – to support dairy sector to upgrade the technology.
Special AA Scheme extended to export of Apparel and Clothing sector under para 4.07 of HBP on self-declaration basis to facilitate prompt execution of export orders. Norms would be fixed within fixed timeframe.
8. Duty Drawback
Objective
To allow reimbursement of the ‘notional’ Basic Customs duty suffered on inputs/input services used for import/manufacture of products intended to be exported
Coverage
Manufacturer exporters or merchant exporter
Entitlement
Cash refund of notional Basic Customs Duty on inputs used in export product
Drawback is granted at a rate (specified by Government) of FOB value of export
If rate fixed by Government reimburses less than 80% of actual duty then exporter can seek special brand rate for his product
Other Key Points
Duty drawback not available on exports of EOU, SEZ, Advance authorisation etc.
Fixation of brand rates take significant time
Drawback amount cannot be more than market value of the product
9. Remission of Duties or Taxes on Export Products (RoDTEP)
Cabinet approved the RoDTEP to replace the MEIS (March 2020)
Incentive as a percentage of the FOB value of export
Implementation with end to end digitization
Monitoring and audit mechanism with IT based Risk Management System (RMS)
Objective of RoDTEP is to make Indian exports cost competitive to International Markets
Rates on the basis of actual taxes suffered but not reimbursed
10. Taxes/duties remitted under RoDTEP
VAT & ED on fuel used in self incurred transportation costs
VAT and ED used in generation of electricity via power plants or DG sets
VAT and ED on fuel used in running of machineries/plant
Electricity duty on purchase of electricity
Stamp duty on export documents
Mandi Tax/Municipal Tax/Property Tax
Blocked GST ITC under Section 17(5)
Blocked GST due to defaults of suppliers (mismatch of ITC, Section 16(2) & 16 (4)
11. Points to be noted
1. What happens if intention to avail benefit under RoDTEP is not declared in Shipping Bill?
ICEGATE advisory states that benefit would not be available. Appeal may be filed for amendment of free SB to RoDTEP
2. Can EPCG or duty drawback scheme be claimed simultaneously along with RoDTEP?
Yes. No specific restriction under the Scheme
3. Can unlimited benefits on goods exported be claimed or is there a ceiling?
Scheme is under overall budget outlay-indication that there could be ceiling on max. benefit within the overall budget
4. Whether benefit can be claimed if consideration is received in INR?
No. In certain cases, payment received in INR is considered equivalent to forex
5. Factory has MOOWR license – Is benefit under RODTEP available?
Yes. Products manufactured wholly or partly in a warehouse under Section 65 of the Customs Act, 1962 are ineligible
6. What to do if excess scrips have been credited to the exporter?
Similar to duty drawback, surrender back excess amount
12. EOU/STP Scheme – Overview and Features
IGST exemption on imports extended sine die vide Notification no. 37/2022-Cus dated 30 June, 2022
Unlike SEZ, Authorities not demanding import licence on local sale of laptops or other electronic items
Liberal Business Contingency Plan guidelines
Liberal Work from Home guidelines
Objective
To provide specific incentives, internationally competitive and conducive environment for exports
Coverage
Manufacturer exporters and service providers; trading not allowed
Entitlement
Import of capital goods required for manufacture of export goods or services
Import of raw material, packing material, fuel, spares, mould, dies etc. also allowed
Benefit
Exemption from Customs duty on import of raw material, consumables and capital goods
Refund of IGST on local procurement of goods
Deemed export drawback on local procurements
Other Key Points
Sharing of facilities with SEZ not permitted
No Corporate tax benefit
Import of restricted goods allowed without authorizations
13. EOU/STP Scheme – Taxes on supply chain
14. Status Holder (‘SH’) Scheme
Key aspects
Particulars
Objective
To grant privileges to exporters with high export performance
Eligibility
Status holders are business leaders who have excelled in international trade and have successfully contributed to country’s foreign exchange
All exporter of goods or services having IEC on the date of application
Recognition granted by DGFT/Development Commissioner
FOB value of exports in convertible foreign exchange or in Indian rupees considered
‘Double weightage’ of exports allowed for One Star Status Holder category
‘Double weightage’ also allowed to MSME, BIS/ISO certified units, unit in NE states & JK, export of fruits and vegetables
Privileges
Exemption from furnishing of bank guarantee for schemes under FTP unless otherwise specified
Fixation of SION within 60 days of the application
DTA sale permission not required to STP units; only intimation
Authorization and Customs clearances for both imports and exports on self-declaration basis
Exemption from compulsory negotiation of documents through banks
Two star and above category permitted to set up export warehouse
Priority treatment in handling of consignment by the authorities
Manufacturers who are three start or above will be enabled to self-certify their goods as originating from India
FOC samples allowed subject to annual limit of INR 1 Crores or 2% of average annual export realization during the last three years, whichever is lower.
Status Category
Under erstwhile FTP
Under FTP 2023
Threshold export performance to be achieved in during current and previous three financial years
Threshold export performance to be achieved in during current and previous three financial years
Status Category
Exports Performance FOB/FOR Value (in US $ million)
Status Category
Exports Performance FOB/FOR Value (in US $ million)
One Star Export House
3
One Star Export House
3
Two Star Export House
25
Two Star Export House
15
Three Star Export House
100
Three Star Export House
50
Four Star Export House
500
Four Star Export House
200
Five Star Export House
2000
Five Star Export House
800
Export performance is necessary in at least two out of four years
For deemed exports, FOR value shall be converted into US $ at the exchange rate notified by CBIC as on 01 April each year.
Export performance is necessary in all the three financial years
For deemed exports, FOR value shall be converted into US $ at the exchange rate notified by CBEC as on 01 April each year.
Validity- 5 Years
15. Clubbing of various schemes
16. Deemed Export
Certain specified supplied regarded as deemed export even though goods do not leave the country and payment is received in INR
Deemed export as per GST law are the supplies specified by notification issued under Section 147 of CGST Act, 2017
Under FTP and GST law, supplies to AA, EPCG, EOU/STP/BTP scheme holders eligible as deemed export
In addition under FTP, supplies to specified projects eligible for deemed export benefit
Under GST law, refund of GST available post supply
Under FTP, deemed export drawback (AIR) and refund of terminal excise duty available; granted by DGFT
In addition, AA may also be issued for supplies to deemed export category
17. Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET)
India signatory to International conventions on disarmament and non-proliferation
United Nations Security Council Resolution 1540 obliges all countries to prohibit access of weapons of mass destruction and their delivery systems to non-state actors (in particular for terrorist purposes)
India is also member of major multilateral export control regimes like Missile Technology Control Regime, Wassenaar Agreement and Australia Group
India formulated Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Act, 2005 which regulates export, transfer, re-transfers, brokering in specified goods, technology and services
Special Chemicals, Organisms, Materials, Equipment and Technologies or SCOMET now part of FTP; earlier only part of ITC (HS)
18. SCOMET
India’s export control list specifies items and technology which have dual use – civil as well as military
Export of items mentioned in SCOMET list allowed only with the approval of DGFT or other authorities
Exporter need to self declare in the shipping bill if export item covered in SCOMET list
Non-compliance attracts penal provisions under Customs Act, 1962 and FTDRA, 1992
Products grouped under total 8 chapters
SCOMET Category
SCOMET Items
Jurisdictional Licensing Authority
Remark
0
Nuclear materials, nuclear-related other materials, equipment and technology
Department of Atomic Energy (DAE)
Including items mentioned in Note 2 of CIN of SCOMET List
1
Toxic chemical agents and other chemicals
Directorate General of Foreign Trade (DGFT)
2
Micro-organisms, Toxins
DGFT
3
Materials, Materials Processing Equipment and related Technologies
DGFT
4
Nuclear-related other equipment and technology, not controlled under Category ‘0’
DGFT
5
Aerospace systems, equipment, including production and test equipment, and related Technology and specially designed components and accessories thereof.
DGFT
6
Munitions List
Department of Defence Production (DDP)/Ministry of Defence Excluding those covered under Note 2 and 3 of CIN and Sub-category 6A007, 6A008
Department of Defence Production (DDP)/ Ministry of Defence
Excluding those covered under Note 2 and 3 of CIN and Sub-category 6A007, 6A008
7
‘Reserved’
DGFT
8
Special Materials and Related Equipment, Material Processing, Electronics, Computers, Telecommunications, Information Security, Sensors and Lasers, Navigation and Avionics, Marine, Aerospace and Propulsion.
DGFT
19. Amnesty Scheme
An Amnesty Scheme vide Public Notice 2/2023 dated 1 April 2023 Announced
Scheme covers only default under Advance and EPCG authorization
Scheme does not cover defaults under other schemes like EOU, STPI, duty drawback etc.
Default in export obligation only covered under the scheme
AA and EPCG authorizations issued under FTP 2009-14 till 31.03.2015 covered
AA and EPCG issued under previous FTP covered only when EO period valid beyond 12.08.2013
Advance and EPCG authorizations issued under FTP 2015-20 not covered
All duties in proportion to unfulfilled EO need to be paid back
Interest amount capped to 100% of basic duty amount
No interest payable on Additional Customs Duty and Special Additional Customs duty
Substantial saving of interest possible
CVD and SAD paid under Amnesty scheme cannot be claimed as credit or refund
Application needs to be filed DGFT by 30.06.2023 and payment of duties by 30.09.2023
Application to be filed in an application form given at DGFT portal
In case of 100% default in EO; pay duty and interest and then approachDGFT
In case of partial default, DGFT will suggest the amount payable after examination
Payments already made for closure of authorization not eligible for refund
Cases pending under adjudication or appeal may be closed under the scheme
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