Served From India Scheme (SFIS) IntroductionSFIS is a Reward / Incentive Scheme introduced by the Ministry of Commerce, Government ofIndia. It is covered under Chapter 3 of Foreign Trade Policy (FTP) and Hand Book Procedure(HBP). Objective of this scheme is to accelerate growth in export of services so as to create apowerful and unique ‘Served From India’ brand, instantly recognized and respected world over.It is interesting to note that 56% of GDP in India comes from the services sector (data for 2010-11) and it is all set to increase in the coming years. It is only but natural that the Government ofIndia encourages export of services alongwith the indigenous market through several measureslike direct and indirect tax exemptions, setting up of Software Technology Parks (STPI) andSpecial Economic Zones (SEZ) etc. Additionally service providers rendering certain category ofservices can make use of the SFIS which is the simple and efficient scheme.Before understanding how the SFIS works, it is worth knowing certain key terminologies used inFTP as below:• Person means an individual, firm, society, company, corporation or any other legal person including the DGFT officials.• Services include all tradable services covered under General Agreement on Trade in Services and earning free foreign exchange.• Service Provider means a person providing i. Supply of a ‘service’ from India to any other country; Eg: Supply of architecture service from India to France. ii. Supply of a ‘service’ from India to service consumer of any other country in India; Eg: Providing hospitality service to a foreigner who visits India. iii. Supply of a ‘service’ from India through commercial or physical presence in territory of any other country; Eg: Providing services from a Branch Office, Joint Venture etc established outside India. iv. Supply of a ‘service’ in India relating to exports paid in free foreign exchange or in Indian Rupees which are otherwise considered as having being paid for in free foreign exchange by RBI. EligibilityAll Indian Service Providers providing services as specified by DGFT (Directorate General ofForeign Trade) (List of services as mentioned in Appendix 10 of HBP) are eligible for DutyCredit Scrip (DCS). Categorized under 12 broad headings there are about 135 services listedthat are eligible under SFIS. Broadly they include Business Services, Communication Services,Construction and Related Engineering Services, Distribution Services, Educational Services,
Environmental Services, Financial Services, Health-Related And Social Services, Tourism AndTravel-Related Services, Recreational, Cultural And Sporting Services, Transport Services andOther Services.Service Providers, who have free foreign exchange earning of at least Rs. 10 Lakhs inpreceding financial year / current financial year shall qualify for DCS. For Individual ServiceProviders, minimum limit is Rs 5 Lakhs. It may be noted that the eligibility is not on therevenue clocked / accounted but actual earnings realized in free foreign exchange. EntitlementAll Service Providers shall be entitled to DCS equivalent to 10% of free foreign exchangeearned during current financial year. Eligible & Ineligible RemittancesForeign exchange remittances earned for rendering of services would be eligible for DCS. Freeforeign exchange earned through International Credit Cards and other instruments as permittedby RBI for rendering of service shall also be taken into account for computation of DCS.Foreign exchange remittances other than those that are earned for rendering of services wouldnot be counted for entitlement. Eg: equity or debt participation, donations, receipts of repaymentof loans etc. Usage of Duty Credit ScripDCS may be used for import of any capital goods including spares, office equipment andprofessional equipment, office furniture and consumables; that are otherwise freely importableand / or restricted under ITC (HS). Imports shall relate to any service sector business ofapplicant.Utilization of DCS earned shall not be permitted for payment of duty in case of import ofvehicles, even if such vehicles are freely importable under ITC (HS).In case of hotels, clubs having residential facility of minimum 30 rooms, golf resorts andstand-alone restaurants having catering facilities, DCS may also be used for import ofconsumables including food items and alcoholic beverages. Non TransferabilityEntitlement / goods (imported / procured) shall be non transferable (except within groupcompany and managed hotels) and be subject to Actual User condition. Procurement from Domestic SourcesUtilization of DCS shall be permitted for payment of excise duty in terms of Central ExciseNotification issued in this behalf for procurement from domestic sources, of items permitted forimports under SFIS Duty Credit Scrip.
How to apply for Duty Credit ScripFor foreign exchange earned during current financial year, application for DCS shall be filed onmonthly/quarterly/half-yearly/annual basis, at the option of the applicant to be exercised alongwith first application for the current financial year, with jurisdictional Regional Authority (DGFToffice). Following documents shall be submitted:- Application in ANF 3B- Certificate from CA/CS/CWA as per the format given in Annexure to ANF 3B- Documentary evidence of earning in Indian RupeesThe last date for filing application on time shall be 12 months from the end of relevant month /quarter / half-year /year periodicity.Service provider shall within one month of completion of imports made or expiry of validity ofDuty Credit scrip whichever is earlier, submit a statement of imports made under it tojurisdictional RA with a copy to jurisdictional Excise authorities (service tax cell) whereverapplicable. ConclusionService providers who are not registered as EOUs or as an SEZ can still leverage on theexports made and utilize SFIS optimally. As in the case of any Export Incentive Scheme underthe EXIM Policy, service providers intending to avail the benefit under SFIS must necessarilyhave IEC code and RCMC (Registration Cum Membership Certificate) with an Export PromotionCouncil (EPC). Where there are no sector specific EPCs, service providers may register withFIEO (Federation of Indian Export Organisation).Disclaimer:The above does not purport to be legal advice and is meant to only clarify certain regulatory andpractical aspects as elaborated above. For specific clarifications / legal advice feel free to writeto email@example.com. For more such articles visit http://lexvalorem.com/resorcecenter.html