EXPORT ASSISTANCE, IMPORT FACILITY, TAX CONCESSIONS AND DUTY DRAWBACKS PRESENTED BY- DEEPSHIKHA AGARWAL HARSHIT MALHOTRA KAMAL KUMAR KOMAL AGRAWAL
Director General Of Foreign TradeThe Directorate is headed by the Director General ofForeign Trade and is responsible for: formulating executing , the Foreign Trade Policy/ Exim policy. with the objective of promoting Indian exports DGFT alsoissues licenses to exporters & monitors theircorresponding obligations.
Export Promotion Measures In India• Excise Duty Refund :tax imposed by the Central Government on goods manufactured in India.• This duty is collected at source, that is before removal of goods from the factory premises.• Fiscal incentives Exemption from Income Tax: In order to enable the exporters to plough back their earnings and promote exports, the Government has given IT exemption to exporters under section 80HHC of the I.Tax Act .• Similarly long term tax holidays are allowed to 100% EOUs in designated areas such as EPZs, SEZs etc.
Export Promotion schemes & Incentives Duty Exemption Schemes- Advance license Advance license (authorization) issued to allow duty free import of inputs, which are physically incorporated in export product. These schemes are : Advance Authorization Duty Free Import Authorization (DFIA) Advance license holders are exempted from payment of customs duty, additional customs duty anti dumping duty education cess safeguard duty.
Duty Exemption Schemes- Advance license• Duty Exemption Schemes- This scheme is considered useful when a standard product is manufactured in large quantities & standard raw materials are used for production. Duty free import of mandatory spares upto 10% of CIF value of license are also allowed.
Export Promotion Schemes & IncentivesDuty Exemption & Remission Schemes Duty Exemption schemes enable duty free import of inputs required for export production. The new scheme offers the facility to import required inputs before the exports & allows transferability of scrip once the export obligation is fulfilled. Duty remission scheme consists of Duty Entitlement Passbook Scheme (DEPB) Duty Drawback scheme (DBK).
Export Promotion Schemes & IncentivesDuty Remission Schemes• Under this scheme, grant of customs duty credit against the exported product, is provided on the import content of the product exported.• The credit is granted on post- export basis, as a specified percentage of FOB value.• DEPB is a fully transferable instrument, which can be availed of by the manufacturer as well as the merchant exporter.
Duty Remission Schemes Duty drawback Scheme (DBK) Duty drawback is defined as the rebate of duty chargeable on any imported or excisable material used in the manufacture of goods exported from India.• These are calculated On the basis of average consumption of inputs, duties & taxes paid, quantity of wastage & export price of exported products.• These are given either on quantity basis (per kg) or on ad valorem basis (as % of FOB value) & are reviewed and revised periodically.
Marketing Development Assistance (MDA)• Under MDA, exporters with turnover upto Rs. 15.00 crores are eligible for financial assistance for a range of export promotions activities such as participation in Trade Fairs, buyer-seller meets abroad or in India , export promotion seminars etc.• Financial assistance with travel grants is available to exporters traveling to Latin America, Africa, CIS region, ASEAN countries, Australia & New Zealand.
Market Access Initiative (MAI)• This scheme is intended to provide financial assistance for medium term export promotion efforts with a sharp focus on a country & product.• Export Promotion Councils (EPC) Industry & Trade Associations, Agencies of State governments, Indian Commercial Missions abroad are eligible for assistance under this scheme.• Range of activities can be funded by MAI scheme. These include: market studies, setting up of showrooms/warehouses, sales promotion & publicity campaigns, participation in international trade fairs etc.• Financial assistance ranging from 25% to 100% of total costs can be received
Served from India Scheme (SFIS)Service Exports• Objective is to accelerate growth in exports of services so as to create a powerful & unique “Served From India” brand, instantly recognized and respected.• All service providers of services listed, who have a total free foreign exchange earning of at least Rs. 10 Lakhs in preceding year will qualify for duty credit scrip equivalent to 10% of free F.E.
Special Economic Zones(SEZ)• specifically designated duty free enclave which shall be deemed to be a foreign territory for the purpose of trade operations & duties & tariffs.• The policy provides for setting up of SEZ in the public, private & joint sectors or by state governments. The Government has already converted a number of Export Processing Zones (EPZ) to SEZ.• SEZ units can retain 100% of their export proceeds in Exchange Earner’s Foreign Currency (EEFC) account.
Some of the features of SEZ are: Export & Import : Goods & services going into the SEZ areafrom DTA shall be treated as deemed exports and the domesticsuppliers are eligible for deemed export benefits. Similarly, goods & services coming from SEZ area into DTAshall be treated as if the goods are being imported. The entireproduction of SEZ must be exported & DTA sales are permittedonly after payment of full applicable customs duties. Activities permissible : Foreign direct Investments: (FDI) : FDIupto 100% is allowed through automatic route for allmanufacturing activities, except prohibited items.Promotional Package: Exemption from payment of CED onprocurement of capital goods, raw materials, consumablespares etc. from the domestic market.
Export & Trading Houses• Merchant as well as Manufacturer Exporters, Service Providers, EOUs & units located in SEZs , AEZs, Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) & Bio-Technology Parks (BTPs) shall be eligible for status. Status holder will be eligible for a number of facilities including : Authorization & customs clearance for both imports & exports, on self-declaration basis. 100% retention of foreign exchange on EEFC account Enhancement of normal repatriation period from 180 days to 360 days.
Assistance to States for Infrastructural Development of Exports (ASIDE)• Under this scheme, the Department of Commerce provides funds to states for development of infrastructure on the basis of twin criteria of gross exports & rate of growth of exports in such states.• Objectives of ASIDE include developing infrastructure such as roads connecting production centres with ports setting up of Internal container depots (ICD) & container freight Stations (CFS) Setting up of infrastructure facilities like roads, power stabilization, minor ports, effluent treatment plans etc Creation of State level industrial parks & equity participation in infrastructure projects
Scheme for status holder1. Additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports accelerate exports and encourage technological up gradation.2. This facility shall be available for sectors of leather (excluding finished leather), textiles and jute, handicrafts, engineering (excluding Iron & steel & non-ferrous metals in primary and intermediate form, automobiles & two wheelers, nuclear reactors & parts, and ships, boats and floating structures), plastics and basic chemicals (excluding pharma products).‡3. This facility shall be available up to 31 March, 2011.4. Transferability for the Duty Credit scrips being issued to status holders under VKGUY Scheme permitted only for the procurement of cold chain equipments.
Assistance for marine product• ‡Fisheries exempted from maintenance of average EO under EPCG Scheme (along with 7 sectors) however Fishing Trawlers, boats, ships and other similar items shall not be allowed for this exemption• Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for the marine sector.
Assistance for Gems and Jewellery sector• ‡Duty Drawback is allowed on Gold Jewellery exports to neutralize duty incidence.• Plan to establish "Diamond Bourse (s) with an aim to make India and International Trading Hub announced.• Introduction of a new facility to allow import on consignment basis of cut & polished diamonds for the purpose of grading/ certification.‡‡ EPCG Scheme: Obligation under EPCG scheme relaxed. To aid technological up gradation of export sector, EPCG Scheme at Zero Duty has been introduced. Export obligation on import of spares, moulds etc. under EPCG Scheme has been reduced by 50%.
Assistance for pharma exports• ‡Export Obligation Period for advance authorizations issued increased from existing 6 months to 36 months.• Pharma sector included under MLFPS for countries in Africa and Latin America & some countries in Oceania and Far East.
Assistance for Exports Oriented Units• EOUs have been allowed to sell products manufactured by them in DTA (Domestic Tariff Area) upto a limit of 90% instead of existing 75%, without changing the criteria of similar goods , within the overall entitlement of 50% for DTA sale. (This means that instead of 75% these units can sell up to 90 % of their products in the domestic markets)• EOU allowed to procure finished goods for consolidation along with their manufactured goods, subject to certain safeguards.• Extension of block period by one year for calculation of Net Foreign Exchange earning of EOUs kept under consideration.• EOU allowed CENVAT Credit Facility.
Support for Market and Product Diversification• 26 new markets have been added under Focus Market Scheme.• The incentive available under Focus Market Scheme (FMS) has been raised from 2.5% to 3%.• The incentive available under Focus Product Scheme (FPS) has been raised from 1.25% to 2%.• Extra products have been included in the scope of benefits under FMS.
Announcements for MDA & MAI:Higher allocation for Market Development Assistance (MDA) andMarket Access Initiative (MAI) has been announced.Towns of Export Excellence (TEE)The following cities have been recognized as towns of exportexcellence (TEE)Handicrafts : Jaipur, Srinagar and AnantnagLeather Products : Kanpur, Dewas and AmburHorticultural Products: Malihabad
BASIC FACTORS INFLUENCING IMPORT POLICY• The economic needs of the country• effective use of foreign exchange• industrial as well as consumer requirements
OBJECTIVES OF IMPORT POLICY• On the import side the policy has three objectives:• to make necessary imported goods more easily available, including essential capital goods for modernizing and upgrading technology;• to simplify and streamline procedures for import licensing;• to promote efficient import substitution and self- reliance.
• Imports are allowed free of duty for export production.• Eg. An EOU/EHTP/STP/BTP unit may import and/or procure from DTA or bonded warehouses in DTA/international exhibition held in India without payment of duty all types of goods, including capital goods, required for its activities, provided they are not prohibited items of import in the ITC (HS).
• Input output norms have been specified for more than 4200 items which tell about the amount of duty free import of inputs allowed for specified products.• There are no restrictions on imports of capital goods.• Import of second hand capital goods whose minimum residual life is of five years is permitted.
• Export Promotion Capital Goods (EPCG) scheme provides exporters to import capital goods at a concessionary custom rates. In the past 30 years Indian imports have risen quite dramatically.• At present imports accounts for 17% of the GDP. Capital goods have been continued to be imported and in the last three years, their share has fallen from 25% to 22%.
• A new 8-digit commodity classification based ITC Harmonised System of coding for imports were adopted in 2002. The common classification used by the Directorate General of Foreign Trade (DGFT) and Customs helps eliminate classification disputes and reduce transaction costs and time.
• The Department of Revenue, Ministry of Finance, Government of India has issued a Customs Notification No.107/2008 notifying the duty concessions applicable for import of about 259 specified items under South Asian Free Trade Agreement (SAFTA).• applicable for import of specified items from four countries namely Bangladesh, Bhutan, Maldives and Nepal. Also, the extent of tariff concession will be on the applied or standard rate of import duty.
Tax Incentives-Infrastructure sector• The tax incentives offered to the investors by the Government of India are a boon for firms involved in IT outsourcing to India. The incentives that facilitate economic growth and development are:• 1. Infrastructure:• A 10 years tax holiday to ventures engaged in developing and / or maintaining and operating an infrastructure facility.• 2. Power:• 10 years tax holiday to undertakings, which generate and / or distribute power.• 3. Telecom:• 5 years tax holiday for companies providing telecom services including Internet services and broadband services. Also 30 % deduction from profits for the next 5 years in any 10 continuous years out of first 10 years is also offered.
Tax Incentives• 4. Industrial Parks and Special Economic Zones• 10 years tax holiday is applicable to ventures that develop and /or operate or maintain in notified IT parks and special economic zones.• 5. Other Industries:• 5-year tax holiday is available for new industrial units to be set up in backward states and districts.• 6. Incentives for Exports:• No Tax is deducted on exporters profits for unit set up on EPZs, STPs, EHTPs, FTZ and SEZs.• 7. Other Incentives:• Tax concessions are allowed for FTI and a weighted deduction of 150% for scientific research and development expenditure have been offered. 10 years tax holiday is available for R&D companies engaged in scientific and industrial research.
AGRICULTURE• The various benefits offered by the Finance Minister to support agriculture sector in Union budget 2010 are:• Complete service tax exemption for the establishment and sponsoring of such apparatus.• Complete customs tax exemption for refrigeration divisions required for the production of chilled vans or trucks• Benefit of 5% concessional customs tariffs on particular agricultural equipment not created in India
• Tax exemption from central excise tariff on particular equipment for conservation and processing of agriculture and associated sectors• Tax exemption from service tariff on the conservation and warehousing of farm produce.• Service tax exemption on the testing and documentation of agricultural seeds• Service tax exemption on the transportation of cereals and pulses by rail and road.
• Indirect Taxes• Restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. Central Excise duty on petrol and diesel enhanced by Re.1 per litre each.• The government has levied a one rupee per liter excise duty on gasoline and diesel this may increase transportation cost.
• Agriculture & Related Sectors• Provide full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks.• Provide concessional customs duty of 5 per cent to specified agricultural machinery not manufactured in India;
• Provide central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax to the storage and warehousing of their produce; and• Provide full exemption from excise duty to trailers and semi-trailers used in agriculture
• To exempt the testing and certification of agricultural seeds from service tax. This will help to reduce the cost of certified seeds manufacturers and at the same time farmers can afford it at lower price.• The transportation by road of cereals, and pulses to be exempted from service tax. Transportation by rail to remain exempt.
• To ease the cash flow position for small-scale manufacturers, they would be permitted to take full credit of Central Excise duty paid on capital goods in a single installment in the year of their receipt. Secondly, they would be permitted to pay Central Excise duty on a quarterly, rather than monthly, basis.• Reduction in basic customs duty on long pepper from 70 per cent to 30 per cent;• Reduction in central excise duty on latex rubber thread from 8 per cent to 4 per cent;
• Excise duty has been rolled back to 10 % from 8 %. Owing to this Steel Authority of India (SAIL) is expected to raise long product prices by Rs.1,000 a ton in March in order to pass on the higher duty burden.
SEZ• A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a countrys typical economic laws. The category SEZ covers a broad range of more specific zone types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC).
TAX CONCESSIONS TO SEZ’s• exemption from customs duty on goods imported into the SEZ by the Developer or SEZ Unit to carry on the authorised operations;• exemption from customs duty on goods exported from the SEZ by the Developer or SEZ Unit to any place outside India;• exemption from excise duty on goods brought from Domestic Tariff Area ("DTA") to the SEZ by the Developer or SEZ unit to carry on the authorized operations
• Exemption from Capital Gains Capital gains arising on transfer of assets (machinery, plant, building, land or any rights in buildings or land) on shifting of the industrial undertaking from an urban area to any SEZ would be exempt from capital gains tax.
• No TDS by Overseas banking Units (OBUs) on interest on deposits/borrowings from non- resident or person not ordinarily resident
SEZ’s• Income tax:-• Deduction from Profits and Gains from export of goods/services as follows (Section 10AA)- 100% income tax exemption for first 5 years 50% income tax exemption for next 5 years• No MAT (Minimum Alternate Tax)
Indirect taxes• SEZ units may import or procure from the domestic sources. Duty free, all their requirements of capital goods, raw materials, consumables, spares, packaging materials, office equipment, DG sets etc. for implementation of their project in the Zone without any license or specific approval• No import duty on these goods imported• No excise duty on these goods procured from DTA (Domestic Tariff Area)
• No service tax on services availed from DTA (Domestic Tariff Area)• No Value Added Tax (VAT) and Central Sales Tax (CST) on goods procured from DTA (Domestic Tariff Area)• On goods procured from DTA, drawback under section 75 allowed to SEZ unit• Goods imported/procured locally duty free could be utilised over the approval period of 5 years
GEMS AND JEWELLERY• Import duties:• Reduce the import duty on both Gold and Silver including precious metal scrap and should be allowed at 0% (zero) duty.
• Reduce import duties on finished jewellery into India.• Recommends uniform VAT rates of 1% to be implemented across India and maintain the same rate. In addition the above, clarification is to be given to all states that VAT set off is to be allowed when raw material is issued from one state to another state for manufacturing of jewellery.
WHAT IS DUTY DRAWBACK SCHEME?• Under the Duty Drawback Scheme administered by Customs & Central Excise Department the duties paid on inputs and service tax paid on input services used in the manufacture of export goods are refunded to the exporters in the form of drawback. The drawback rates are worked out and notified every year after taking into account the budgetary changes in the duty structure and other relevant facts.
• The exercise is underway in the Ministry to re- work and revise the rates of duty drawback for the year 2009-2010.• All Industry Rates of Duty Drawback are worked out by considering the consumption of input materials/ services and the incidence of duties/taxes on these input materials/ services.
KINDS OF DRAWBACKS• Unused Merchandise: Imported merchandise is unused and exported or destroyed under Customs supervision. 99 percent of the duties, taxes or fees paid on the merchandise may be recovered as drawback.• Substitution Unused Merchandise: Merchandise that is commercially interchangeable with imported merchandise upon which duties and taxes were paid and that has not been used, is exported or destroyed under Customs supervision. 99 percent of the duties, taxes or fees paid on the merchandise may be recovered as drawback.
• Rejected Merchandise: Merchandise is exported or destroyed because it does not conform with samples or specifications, or has been shipped without the consent of the consignee, or has been determined to be defective as of the time of importation. 99 percent of the duties which were paid on the merchandise may be recovered as drawback.• Direct Identification Manufacturing: If articles manufactured in the United States with the use of imported merchandise are subsequently exported or destroyed then drawback not exceeding 99 percent of the duties paid on the imported merchandise may be recoverable.
• Substitution Manufacturing: Both imported merchandise and any other merchandise of the same kind and quality are used to manufacture articles, some of which are exported or destroyed before use, then drawback not exceeding 99 percent of the duty which was paid on the imported merchandise may be payable on the exported/destroyed articles
How to Obtain Drawback• The guidelines for completing a drawback claim are provided in the Customs Regulations, more specifically 19 CFR 191 Subpart E. We can help you with the application process, prepare inventory record and file the claim.• The locations for filing a drawback claim are Boston, Chicago, Houston, Los Angeles, Miami, New Orleans, Newark, and San Francisco.• A drawback entry and all documents necessary to complete a claim generally must be filed within three years after exportation or destruction of the articles
MANUFACTURING DRAWBACK RULINGSTo obtain drawback, a manufacturer or producer of articles intendedto be claimed for drawback must first apply for a manufacturingdrawback ruling. There are two types of manufacturing drawbackrulings: (1) General and (2) Specific.(1).General Manufacturing Drawback RulingGeneral manufacturing drawback rulings are provided for in Section191.7, of the Customs Regulations (19 C.F.R. §191.7) and aredesigned to simplify drawback for certain common manufacturingoperations.
• (2) Specific Manufacturing Drawback Ruling Where a manufacturer or producer cannot follow any one of the prescribed general manufacturing rulings without variation, the manufacturer or producer must apply for a specific manufacturing drawback ruling under Section 191.8. Sample formats for specific manufacturing drawback rulings are contained in Appendix B to Part 191, Customs Regulations (19 C.F.R. Part 191).
Export ProcedureDuty Drawback – for Past Exports. Waiver formrequirement of prior notice of intent to export mustbe supported by a direct inventory identificationmethod.The conditions for identification by accountingmethod are:• The lots of merchandise must be fungible• Inventory records must establish that the lotsso identified as being received into and withdrawnfrom the same inventory are being used in theordinary course of business.
• All receipts into and all withdrawals from the inventory must be recorded in the accounting record. Subject to verification by Customs .• It must be used without variation for a period of at least one year unless approval is given by Custom for a shorter period.
• Waiver of Prior Notice of Intent to Export You may be eligible for Waiver of Prior Notice under Section 191.91 of the Customs Regulations. The approval is based on the submission of an application and compliance with the regulations.• Claim Period In the case of unused merchandise drawback, it is necessary to establish that the merchandise was exported or destroyed within three years from the date of import
• In the case of rejected merchandise drawback, you must establish that the merchandise was returned to Customs custody within three years after it was originally released from Customs custody.• In the case of manufacturing drawback, you must establish that manufactured articles on which drawback is being claimed were exported within five years from the date of import.
Payment of Drawback Claims• When a claim has been determined to be complete and satisfies all drawback requirements, the drawback amount is verified and the entry liquidated for the refund due. Drawback is payable to the exporter/destroyer unless the right to claim drawback has been transferred to a third party through a Certificate of Delivery and/or Manufacture. Furthermore, the exporter/destroyer must certify that drawback on the particular exportation or destruction will not be assigned to any other party.