Export Promotion and IncentivesINTERNATIONAL MARKETINGMARZIEH ARIANFARBIMS-UNIVERSITY OF MYSOREAPRIL 2013
The various incentives/exemptions availableto exporters in India : Sales Tax/VAT Exemption Excise Exemption Duty Drawback Income Tax Concessions Import Concessions Special Economic Zones Free Trade & Warehousing Zones Star Export Houses EOUs(Export Oriented Units), Electronic Hardware Technology Parks(EHTPs), Software TechnologyParks(STPs),Bio-Technology Parks(BTPs) Deemed Exports
Sales Tax/VAT ExemptionVAT at zero rate and full credit of input tax is also available to adealer directly selling to an exporter provided the same goods areactually exported.- The exporter needs to provide the following documents as evidence ofgoods exported: Copy of export contract or order from a foreign buyer Copy of the customs clearance certificate Copy of the commercial invoice issued to the foreign buyer Copy of Bill of Lading/Air-Way Bill Proof of payment from the foreign purchaser or letter of credit
‘ H ’ form The exporter can make use of H Formssupplied by the CST (Central Sales Tax)authorities that are being continued even nowin the VAT regime.- The application has to be supported by thefollowing documents: Copy of Customs Certified Shipping Bill Copy of Customs Certified Invoice Copy of Letter of Credit Copy of Confirmed Export Order The supplier, on the other hand, cansubmit the following documents with his VATreturn to justify zero rating of his particularsale to the exporter: Purchase order from exporter. Form H. Copy of Bill of Lading/Air-Way Bill
Excise ExemptionExcise is a tax on production or manufacture of goods. It is a duty leviedon the production of goods and the liability of payment of excise duty arisesimmediately upon manufacture of goods. In India, excise duty is governed bythe provisions of the Central Excise Act, 1944.- Exporters can avail excise clearance in the following ways: Exports under Claim of Excise Rebate Export under Bond
Procedure for Filing the Rebate Claimand its Sanction1. Application in the prescribed form2. Duplicate copy of ARE-I/ARE-II in sealed cover received from Customs Officer3. Duly attested copy of Bill and Lading4. Duly attested copy of shipping bill (export promotion copy)5. Original copy of duly ARE-I/ARE-II duly endorsed by the Customs Officercertifying the export of the consignment6. disclaimer certificate in case where the claimant is other than the exporter.- Export under BondUnder Rule 19 of Central Excise Rules, an exporter is permitted to removeexcisable goods for export without payment of excise duty by executing a bond(legal undertaking) in favor of the excise authorities for the amount of the exciseduty payable.
Duty DrawbackDuty drawback is an incentive given to the exporters of different categoriesof goods under the “ Customs and Central Excise Duty Drawback Rules,1995” The duty drawback scheme is administered by the Directorate of DutyDrawback in the Ministry of Finance, Government of India.-There are two types of drawback rates: All Industry Rates Brand/Special Brand Rates
Income Tax Concessions Under Section 10A of the Income Tax Act, 1961 undertakingoperating from a Special Economic Zone (SEZ ) that manufacturesarticles/things or computer software are eligible for deduction ofexport profits. For undertaking commencing operation from thenotified Special Economic Zones (SEZs) on or after 1st April, 2002,the tax holiday is available for a total period of seven assessmentyears, comprising of a deduction of 100% of export for five yearsfollowed by deduction of 50% of export profits for subsequent twoyears.
Import ConcessionsThe Government of India has several schemes in place that allow theexporters to import inputs/ capital goods at concessional rates of import duty.The schemes are discussed below: Export Promotion Capital Goods Scheme (EPCG) Duty Free Import Authorization Scheme Duty Exemption Passbook Scheme (DEPB)
Export Promotion of Capital Goods Scheme(EPCG)what are capital goods? Capital goods are the things you need ,in order to manufacture your products or give yourservices.(including spares for pre production, production and post production)Examples: Textile machines, big agro-harvesting vehicles, expensive lab instruments formedicines, printing press for magazine/newspaper, sophisticated computer-server for your callcenter etc.What is Export Promotion Capital Goods Scheme? (EPCG) Under EPCG scheme, you can import these instruments (capital goods) at only 5% customs duty(some times zero duty). But it is subject to an export obligation ranging from 6 to 8 times of dutysaved on capital goods imported under EPCG scheme, to be fulfilled in 6 to 8 years reckonedfrom Authorization issue-date. This EPCG is part of India’s EXIM policy (Export-import)
Duty Free Import Authorization SchemeThis scheme is the latest improvement announced in the Annual Supplement 2006 to the FTP 2004-09. Thenew scheme seeks to clubs the Advance Licensing scheme and the Duty Free Replenishment Certificate andwere to come into effect from May 1, 2006.- Advance License can be issued for the following: Physical exports Intermediate supplies Deemed exports- An Advance License contains:1. The names and description of items to be imported and exported/supplied.2. The quantity of each item to be imported or wherever the quantity cannot be indicated, the value ofthe item shall be indicated3. The aggregate CIF value of imports.4. The FOB/FOR value and quantity of exports/supplies.
Duty Entitlement Passbook (DEPB) Scheme Under DEPB (Duty Entitlement Passbook) Scheme, exporters are allowed to claimcustoms duty credit as a specified percentage of FOB value of exports made in freelyconvertible currency. The objective of DEPB is to neutralize the incidence of Customsduty on the import content of the export product. The neutralization shall be providedby way of grant of duty credit against the export product. The scheme launched in 1997 is likely to be replaced by some superior alternative thatis being worked out through a dialogue with the export community. Under the DEPB. The DEPB is valid for a period of 24 months from the date of issue.
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Special Economic Zones In order to create an internationally competitive and smoothworking environment for exports in India, the Government of Indiaformulated the Special Economic Zone policy on 1/4/2000. Underthe current foreign trade policy, Special Economic Zone (SEZ) isdefined as a specifically delineated duty free enclave that isdeemed to be foreign territory for the purposes of trade operationsand duties and tariffs. Goods and services going into the SEZ areafrom DTA (Domestic Tariff Area) are to be treated as exports andgoods coming from the SEZ area into DTA are to be treated asimports.
The following facilities/incentives are available to units in SEZs: No license required for import. Exemption from customs duty on import of capital goods, raw materials, consumables, sparesetc. Supplies from DTA (Domestic Tariff Area) to SEZ units treated as deemed exports. Reimbursement of Central Sales Tax paid on domestic purchases. 100% income tax exemption for a block of five years, 50% tax exemptions for two years and upto 50% of the profits ploughed back for the next three years under Section 10-A of Income TaxAct. SEZ units may be for manufacturing, trading or service activity. SEZ unit to be positive net foreign exchange earner within three years. 100% Foreign Direct Investment in manufacturing sector allowed through automatic route,barring a few sectors. Facility to realize and repatriate export proceeds within 12 months. cCont…
Facility to retain 100% foreign exchange receipts in EEFC(exchange earner’s foreign currency)Account. Re-export imported goods found defective, goods imported from foreign suppliers on loanbasis etc. Domestic Sales on full duty subject to import policy in force. No fixed wastage norms. Full freedom for sub-contracting including sub-contracting abroad. Job work on behalf of domestic exporters for direct export allowed. No routine examination by Customs of export and import cargo. No separate documentation required for Customs and Exim Policy. In-house customs clearance. Support services like banking, post office clearing agents etc.
Free Trade and Warehousing ZonesThe units functioning out of such zones will be extended from: Income Tax Exemption as per Section 80-IA of the Income Tax Act Exemption from Service Tax Free foreign exchange currency transactions Other benefits as applicable to units in Special Economic Zones
Star Export Houses-Under the current foreign trade policy Merchants as well as Manufacturer exporters, service providers, ExportOriented Units (EOUs),and Units located in Special Economic Zones(SEZs),Agri Export Zone(AEZs),Electronic Hardware Technology Parks(EHTPs), Software Technology Parks(STPs),Bio-TechnologyParks(BTPs) are eligible for applying for status as Star Export Houses. They are allowed license/certificate/permissions and Customs clearances for both imports andexports on self-declaration basis. Fixation of Input-Output norms on priority within 60 days. They are allowed exemption from compulsory negotiation of documents through banks. Theremittance, however, needs to be received through banking channels. 100% retention of foreign exchange in EEFC account. They are permitted enhancement in normal repatriation period from180 days to 360 days. They are entitled for consideration under the Target Plus Scheme. They enjoy exemption from furnishing of Bank Guarantee in schemes under the foreign trade policy.
Deemed Exports Supply of goods against Advance License/Advance License for annual requirement. Supply of goods to Export Oriented Units. Supply of capital goods to holders of licenses under the Export Promotion Capital Goods (EPCG)scheme. Supply of goods to projects financed by multilateral or bilateral agencies. Supply of capital goods, including in unassembled/disassembled condition as well as plants,machinery, accessories, tools, dyes. Supply of goods to any project or purpose in respect of which the Ministry of Finance. Supply of goods to the power projects and refineries not covered in (vi) above. Supply of marine freight containers by 100% EOU. Supply to projects funded by UN agencies. Supply of goods to nuclear power projects through competitive bidding as opposed toInternational Competitive Bidding.Cont….
Deemed exports are allowed the followingprivileges: Advance License for intermediate supply/deemed export / DFRC (Duty FreeReplenishment Certificate) / DFRC for intermediate supplies Deemed Export Drawback Exemption from terminal excise duty where supplies are made against InternationalCompetitive Bidding. In other cases, refund of terminal excise duty will be given.