CA NOTES ON FOREIGN TRADE POLICY

Foreign Trade Policy
Vishal Jain Page 1 Praveen Jain

FOREIGN TRADE POLICY
INTRODUCTION TO FOREIGN TRADE POLICY
MEANING OF FOREIGN TRADE, TRADE POLICY & FOREIGN TRADE POLICY
Foreign Trade Trade Policy
It is the exchange of goods and services between Nations. It is a collection of Rules and Regulations which pertain to Trade.
Foreign Trade Policy i.e. FTP
(earlier called as Export Import Policy i.e. EXIM Policy)
FTP contains the basic principles and points the direction in which India propose to go as to its Foreign Trade.
Through FTP, a country set the direction of its Foreign Trade. And such FTP needs constant monitoring and updation.
FTP is a set of guidelines or instructions or procedures or regulatory requirements
 issued or laid down by the Central Government
 in matters related to Foreign Trade viz. IMPORT of GOODS / SERVICES into India OR EXPORT of GOODS / SERVICES from India.
Note: Importance of International Trade
 International trade enables a nation to specialize in those goods it can produce most cheaply and efficiently. Such goods when sold to other
countries lead to increase in foreign exchange earnings.
 International trade also enables a country to consume more than it would be able to produce if it depended only on its own resources.

LEGISLATION GOVERNING FOREIGN TRADE IN INDIA
Government of India
Ministry of Commerce &
Industry
Foreign Trade (Development & Regulation) Act, 1992
(Rules + Order)
(5 Years Policy + Annual Updation)
 Regulates International Trade
 Develops International Trade
 Promotes International Trade
Director General of
Foreign Trade
Headquarters at Delhi
Several Offices in India
(Decision of DGFT is Final and Binding)
 Assist in Formulation of FTP
 Implementation of FTP
 Promotion of Export
 Grants IEC (PAN / GSTIN based on PAN)
 Issues Authorization (Permission / License)
 Monitors Export Obligation (EO)
Notes:
1. Ministry in
Charge of FTP
Ministry of Commerce and Industry
(i) Foreign Trade (Development & Regulation) Act, 1992: FT (D&R) Act, 1992 provides
 for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from,
India and
 for matters connected therewith or incidental thereto.
(ii) Foreign Trade Policy: FTP is framed under Section 5 of F(D&R) Act, 1992. FTP is framed and amended by Central
Government by notification in Official Gazette.
(a) 5 Years Policy: Ministry of Commerce and Industry, Government of India announces FTP in every 5 years.
Currently, effective FTP is 2015-2020.
(b) Annual Updation: It is updated every year in April in addition to changes that are made throughout the year.
2. Execution of FTP Director General of Foreign Trade (DGFT) acts as advisor and executor
(i) DGFT: Central Government may appoint any person to be DGFT for the purpose of this Act. DGFT
 shall advise Central Government in formulation of FTP and
 shall be responsible for carrying out that FTP

(ii) Key Responsibilities of DGFT: FTP is framed under Section 5 of F(D&R) Act, 1992. FTP is framed and amended
by Central Government by notification in Official Gazette.
(a) Authorization: DGFT issues authorization (earlier called as licence) for import/export. ‘Authorization’ means
a permission in terms of the FT(D&R) Act to import or export.
(b) Import Export Code: DGFT also grants Importer Exporter code (IEC) Number to importers and exporters.
Import and export without IEC number is not permitted, unless specifically exempted.
(c) Decision of DGFT is Final and Binding: Decision of DGFT is final and binding in respect of
 interpretation of any provision of FTP,
 classification of any item in ITC (HS),
 content, scope or issue of any authorization issued under the FTP.
Other Authorities involved in Implementation of FTP
(i) Central Board of Indirect Taxes and Customs (CBIC): CBIC under Ministry of Finance has two Departments
namely, Customs and GST which facilitates in implementing the provisions of the FTP.
(a) Customs Department is responsible for clearance of export and import goods after their valuation and
examination. Customs Authorities follow the policy formed by the DGFT while clearing the goods.
(b) GST Department is also involved as GST law also covers international transactions. These are treated as “inter-
state supplies. Thus, Central GST Authorities are also involved in export matters. To avoid dual control, some
taxable persons are under jurisdictions of State GST authorities. In their case, State GST Authorities are
controlling authorities.
(ii) Reserve Bank of India (RBI): RBI under Ministry of Finance is the nodal bank in the country.
(a) RBI formulates the policies related to management of money, including payments and receipts of foreign
exchange.
(b) RBI monitors the receipts and payments for exports and imports.
FTP (Ministry of Commerce) vis a vis Tax Laws (Ministry of Finance)
FTP is closely connected with Customs and GST Law. However, FTP provisions does not override provisions of tax laws.
(i) FTP has policy of duty-free clearance of imported goods for use in manufacture of goods for export. Exemption to ensure duty free
clearance has to be issued under Tax Law. If no such exemption is issued, then policy remains ineffective.
(ii) Further, actual benefit of the exemption depends on the language of exemption notifications issued by CBIC.

CONTENTS OF FTP
(SET OF DOCUMENTS WHICH CONSTITUTE FTP)
CONTENTS OF FTP
Foreign Trade Policy 2015-20 Handbook of Procedures
Indian Trade Classification
(Harmonized System)
for Import and Export Itesm
Notified by CG
[under FT (D&R) Act]
Notified by DGFT
[in exercise of powers given by FTP]
Notified by DGFT
[in exercise of powers given by FTP]
2015-2020
 It provides basic policy
 It has 9 chapters
Handbook of Procedures
Volume I – 2015-2020
Input Output Norms
Volume II – 2015-2020
 It contains procedural
aspects of policy
 It has many chapters
and also contains
appendices, forms and
guidelines for Foreign
Trade
 It contains Standard
Input Output Norms
(SION) of various
goods / products
 SION are used for the
purpose of providing
facility to exporters to
make duty-free import
of inputs required for
manufacture of export
goods under
Exemption /
Remission Scheme
ITC (HS) Classification of Export and
Import Norms – 2015-2020
 It contains Export-Import Policy
regarding export / import of
specific item as given in Indian
Trade Classification Code based
on Harmonized System of
Nomenclature (HSN)
 ITC(HS) codifies goods based on
8 digit codes (similar to that used
in Customs / GST classification)
 ITC(HS) is divided in 2 Schedules
 Schedule I (Import Policies):
Prohibited, Restricted,
Canalized and Free Goods
 Schedule II (Export Policies):
Most of goods are Free Goods.

STRUCTURE OF FOREIGN TRADE POLICY AND HANDBOOK OF PROCEDURES
Chapters
Chapter Title in
Chapter Title in
Handbook of Procedures
Chapter I Legal Framework and Trade Facilitation Introduction and Trade Facilitation
Chapter II General Provisions regarding Imports and Exports Same as Policy
Chapter III Export from India Schemes (MEIS Scrip / SEIS Scrip) Same as Policy
Chapter IV Duty Exemption Schemes / Duty Remission Schemes Same as Policy
Chapter V Export Promotion Capital Goods Scheme Same as Policy
Chapter VI Export Oriented Units (EOU)
Electronic Hardware and Technology Parks (EHTP)
Software Technology Parks (STP)
Same as Policy
Chapter VII Deemed Exports Same as Policy
Chapter VIII Quality Complaints and Trade Disputes Same as Policy
Chapter IX Definitions Miscellaneous Matters
Notes: Provisions relating to Special Economic Zone (SEZ) are contained in separate Act called as Special Economic Zone Act, 2005 and are not
part of FTP. However, provisions of SEZ are closely related to Foreign Trade Policy.

ORGANIZATION SET UP
Government of India
Ministry of Commerce and Industry
(Frames FTP)
Director General of Foreign Trade
(Advices CG in framing FTP and implements FTP)
Regional Authorities
(Assists DGFT to implement and monitor policy)
Committees
(Aid and advise DGFT on policy matters)
Policy
Interpretation
Committee
Policy
Relaxation
Committee
Norms
Committee
EPCG
Committee
Notes:
(i) Exemption from Policy / Procedures: DGFT may in public interest pass such orders or grant such exemption, relaxation or relief, as he may
deem fit and proper, on grounds of genuine hardship and adverse impact on trade to any person or class or category of persons from any
provision of FTP or any procedure. While granting such exemption DGFT may impose such conditions as he may deem fit after consulting
the Committees as under:
Committees Role of Committees
(a) Norms Committees  Fixation / modification of product norms
(b) EPCG Committee  Nexus with Capital Goods (CG) and benefits under EPCG Schemes
(c) Policy Relaxation Committee (PRC)  All other issues
(ii) Personal Hearing by DGFT for Grievance Redressal:
(a) FTP provides for relaxation of policy and procedures on grounds of genuine hardship and adverse impact on trade. If an importer / an
exporter is aggrieved by any decision taken by Policy Relaxation Committee (PRC), or a decision / order by any authority in DGFT, a
specific request for personal hearing along with the prescribed application fee has to be made to DGFT.
(b) DGFT may consider request for relaxation after consulting concerned Norms Committee, EPCG Committee or Policy Relaxation
Committee (PRC). The decision conveyed in pursuance to the personal hearing shall be final and binding.

PROVISIONS RELATING TO IMPORT AND EXPORT
GENERAL PROVISIONS FOR IMPORT AND EXPORT UNDER FTP
Head Particulars
Indian Trade
Classification
(Harmonized
System) - ITC (HS)
Export and import policies for all goods are indicated against each item in ITC (HS) of Exports Schedule and Imports
Schedule. ITC (HS) is compilation of codes for all goods for export and import.
 Schedule I lays down the Import Policy while Schedule II lays down Export Policy.
Exports and imports shall be ‘free’ except when regulated by way of ‘prohibition’, ‘restriction’ or ‘exclusive trading
through State Trading Enterprise (STE)’, as laid down in ITC (HS) of Exports and Imports.
Categorization Imports / Exports Policy for Imports / Exports under Scheme
Prohibited Goods Items prohibited for import / export. No import / export allowed.
Canalized Goods * Items reserved for import / export by STE. Non-STE cannot import / export these goods.
Restricted Goods Items restricted for import / export. Import / export allowed but subject to
conditions like licensing / authorization, etc.
Free Goods Items freely importable / exportable. No prohibition or No reservation for STE or No
restriction.
* Note: Canalized Goods are goods reserved for State Trading Enterprises – STE
(i) State Trading: State trading occurs when there exists a trading organization for which the prices and / or
quantities of international transactions in commodities are determined as an instrument in the pursuit of
government policies.
(ii) State Trading Enterprise: STE are governmental and non-governmental enterprise, including marketing boards,
which have been granted exclusive or special rights or privileges, in the exercise of which they influence through
their purchases or sales the level or direction of imports or exports
 Special Privilege: Grant of Subsidy
 Exclusive Privilege: Monopoly in the production, consumption or trade of certain goods
(iii)Examples of STE in India:
 Food Corporation of India (FCI) – Import of many cereals is only by FCI
 Mineral & Metals Trading Corporation (MMTC) – Import of certain minerals is only by MMTC
 State Trading Corporation of India Ltd (STC)

Procedure by DGFT DGFT may specify procedure to be followed by an exporter or importer or by any licencing or any other competent
authority for the purpose of implementing provisions of Foreign Trade Act, the rules and the orders made there-
under and FTP. Such procedures shall be published in Hand Book of Procedures.
Exemption from
Policy / Procedure
by DGFT
DGFT may pass such orders or grant such relaxation or relief, as he may deem fit and proper, on grounds of genuine
hardship and adverse impact on trade.
DGFT may, in public interest, exempt any person or class or category of persons from any provision of FTP or any
procedure and may, while granting such exemption, impose such conditions as he may deem fit.
Transit Facility Transit of goods through India from / or to countries adjacent to India shall be regulated in accordance with bilateral
treaties between India and those countries and will be subject to such restrictions as may be specified by DGFT in
accordance with international conventions.
Mandatory
Documents for
Export / Import
Mandatory Documents required for Import of Goods into India:
(i) Bill of Lading / Airway Bill / Lorry Receipt / Railway Receipt / Postal Receipt
(ii) Commercial Invoice cum Packing List (Commercial Invoice and Packing List can be given as Separate Documents)
(iii)Bill of Entry
Mandatory Documents required for Export of Goods from India:
(i) Bill of Lading / Airway Bill / Lorry Receipt / Railway Receipt / Postal Receipt
(ii) Commercial Invoice cum Packing List (Commercial Invoice and Packing List can be given as Separate Documents)
(iii)Shipping Bill / Bill of Export
IMPORT EXPORT CODE
Import and Export
only with IEC
No export or import shall be made by any person without obtaining an IEC number unless specifically exempted.
Application process for IEC is completely online and IEC can be generated by the applicant as per the procedure
detailed in the Handbook of Procedure.
Note: Service provider requires IEC if benefit has to availed under FTP.
PAN based IEC GSTIN (which is PAN based) OR PAN is IEC w.e.f. 1st July, 2017:
 Importer / Exporter is GST Registered Entity: GSTIN shall be treated as IEC.
 Importer / Exporter is NOT GST Registered Entity: PAN shall be treated as IEC.
Note: When anyone applies for IEC, his IEC will be same as PAN informed by him.
Proof required for
IEC
Following proofs are required for IEC:
 Address Proof of applicant entity, and

 Cancelled cheque bearing entity's pre-printed name or Bank Certificate.
Following proofs are NO more required for IEC:
 Copy of PAN is not required as PAN data is integrated.
 Photograph in the IEC and requirement of Digital Signature has been dispensed with.
Note: IEC is now PAN-based system generated code and may no longer be treated as identity card for identity
purposes.
AUTHORIZATION UNDER FTP
Authorization Authorization is permission / license to import or export as per provisions of FTP.
Authorization can be based on
 Value and / or quantity,
 Value Addition (VA) to be achieved,
 Actual User Condition,
 Export Obligation (EO),
 Other Conditions.
Authorization may be:
 Simple permission to import goods: Duty shall be payable on
import of such goods.
 Permission to import goods duty frees* (like import under Advance
Authorization, EPCG Authorization, etc.): The importer shall
execute Legal of Undertaking (LUT) / Bank Guarantee (BG) / Bond
with Customs Authorities, as prescribed, before clearance of goods.
* Note: Generally, such duty free imports are allowed subject to condition of fulfilment of Export Obligation (EO).
(i) EO may be in sense of ‘achievement of specified value addition’, or ‘in absolute quantity or value terms’.
(ii) Further, EO must be achieved within the period as specified in the Authorization
Requirement of
Authorization
Authorization is required for following:
(i) Import / Export of Restricted Goods / Services: Any goods / services, the export or import of which is ‘restricted’
may be exported or imported ONLY in accordance with an license / authorization / permission or in accordance
with the prescribed procedure.
(ii) Export of Special Goods: Special export authorization required for export of items such as Special Chemicals,
Organisms, Materials, Equipment’s and Technologies.
Actual User
Condition for
Import of Goods
(i) Import of goods of which require an authorization can be imported only by an Actual User alone unless Actual
User condition is specifically dispensed with by DGFT. (Actual User is a person who is authorized to use
imported goods in his own premise)

requiring
Authorization
(ii) However, goods imported with actual user condition can be transferred for any reasons prescribed under
Handbook of Procedures.
Grant of
Authorization is
NOT right of
Importer / Exporter
(i) No person may claim and Authorization as a right.
(ii) DGFT (or RA) shall have power to refuse
 to grant or renew the same in accordance with provisions of
 FT (D&R) Act, rules made thereunder and FTP.
Validity of
Authorization
(i) Validity Period: Validity period of import or export authorization is a period within which import or export
permitted under licence / authorization / permission. etc., shall be completed.
(ii) Revalidation: Revalidation of import or export license / certificate / authorization / permission means extending
the validity period for import or export prescribed thereunder. Prescribed fees shall be paid for seeking
revalidation.
PROVISIONS FOR IMPORT UNDER FTP
Import of Goods
requiring
Authorization
(Actual User
Condition)
(i) Import of Free Goods NOT requiring Authorization:
 Goods which are importable without any restriction may be imported by any person.
(ii) Import of Restricted Goods requiring Authorization:
 Import of goods of which require an authorization can be imported only by an Actual User alone unless
Actual User condition is specifically dispensed with by DGFT. (Actual User is a person who is authorized to
use imported goods in his own premise).
 However, goods imported with actual user condition can be transferred for any reasons prescribed under
Handbook of Procedures.
Import of Second
Hand Goods
requiring
Authorization
(i) Import of Second Hand Goods requiring Authorization: Import of following Second Hand Goods is restricted
and hence import of such goods require an import authorization from Regional Authority (RA) of DGFT:
(a) Personal Computers, Laptops including their Reconditioned and Refurbished Spares;
(b) Photocopier Machines, Digital Multifunctional Print & Copying Machine;
(c) Air Conditioners;
(d) Diesel Generating (DG) Set;
(e) All second hand goods other than Capital Goods
(ii) Import of Second Hand Goods NOT requiring Authorization: Following Second Hand Goods are importable
freely without any import authorization:

(a) All other Second Hand Capital Goods except aforesaid restricted second hand goods such as personal
computers, laptops, etc.)
(b) Refurbished and reconditioned spares of capital goods are freely importable subject to production of
certificate from Chartered Engineer to the effect that such spares have atleast 80% residual life of original
spare.
Import of Goods
requiring
Authorization – Pre
Import or Post
Import
(i) Goods already imported / shipped / arrived, in advance, but not cleared from Customs may also be cleared against
an authorization issued subsequently.
(ii) However, such goods already imported / shipped / arrived, in advance are
 first warehoused against Bill of Entry for Warehousing and
 then cleared for home consumption against an authorisation issued subsequently.
Note: The facility is however not available to "restricted items" or “items traded through STEs”.
Re-import of Goods
repaired Abroad
NOT requiring
Authorization
Capital goods, equipment, components, parts and accessories, whether imported or indigenous, except those
restricted under ITC (HS) may be
 sent abroad for repairs, testing, quality improvement or upgradation or standardization of technology and
 re-imported without an Authorization.
Import of Goods
used in Project
Abroad NOT
requiring
Authorization
After completion of projects abroad, project contractors
 may import, without an authorization,
 goods including capital goods used in the project provided they have been used for at least 1 year.
Import of Goods
requiring LUT or
BG
(i) Whenever goods are imported duty free or otherwise specifically stated,
 importer shall execute prescribed Letter of Undertaking (LUT) or Bank Guarantee (BG) or Bond
 with Customs Authority before clearance of goods.
(ii) In case of indigenous sourcing (domestic purchase),
 authorization holder shall furnish Letter of Undertaking (LUT) or Bank Guarantee (BG) or Bond
 to concerned Regional Authority (RA) before sourcing material from indigenous supplier / nominated agency
as per the prescribed procedures.
Import of Samples
and Gifts
(i) Import of Samples: Import of samples shall be governed by Handbook of Procedure.
(ii) Import of Gifts: Import of gifts shall be ‘free’ where such goods are otherwise freely importable under ITC (HS).
In other cases, import shall be permitted against authorization issued by DGFT.

Import of Passenger
Baggage
Bonafide household goods and personal effects may be imported as part of passenger baggage as per limits, terms
and conditions thereof in the Baggage Rules framed under Customs.
Import of Goods
through Courier /
Post
(i) Import through International Courier Terminal or Foreign Post Office are permitted as per Notifications issued by
Department of Revenue (DOR).
(ii) However, importability of such items shall be regulated by FTP - ITC (HS).
PROVISIONS FOR EXPORT UNDER FTP
Export of Spares Warranty spares (whether indigenous or imported) of plant, equipment, machinery, automobiles or any other goods,
[except those restricted under ITC (HS)] may be exported
 along with main equipment or
 subsequently but within contracted warranty period of such goods subject to approval of RBI.
Export of
Replacement Goods
(i) Goods or part thereof on being exported and found defective / damaged or otherwise unfit for use may be replaced
free of charge by the exporter.
(ii) Such goods shall be allowed clearance by Customs Authorities, provided that such replacement goods are not
mentioned as restricted items for export in ITC (HS).
Export of Repaired
Goods
(i) Goods or parts exported and found defective, damaged or otherwise unfit for use may be imported for repair and
subsequently re-exported.
(ii) Such goods shall be allowed clearance without an authorization and in accordance with Customs Notification.
Export of Samples
and Gifts
(i) Export of Samples: Export of samples shall be governed by Handbook of Procedure.
(ii) Export of Gifts: Goods, including edible items, of value upto Rs.5,00,000 in a licensing year, may be exported as a
gift. However, items mentioned as restricted for exports in ITC (HS) shall not be exported as a gift, without an
authorization.
Export of Passenger
Baggage
(i) Bonafide baggage may be exported.
(ii) However, items mentioned mentioned as restricted in ITC (HS) shall require an authorization.
Export of Goods
through Courier /
Post
(i) Export through International Courier Terminal or Foreign Post Office are permitted as per Notifications issued by
Department of Revenue (DOR).
(ii) However, exportability of such items shall be regulated by FTP - ITC (HS).
Notes: Value limit for exports through Courier shall be Rs.5,00,000 / Consignment. Value limit stipulated on exports
through Post has been removed. Value limit of Rs.5,00,000 is applicable ONLY in case of exports through Courier.
Movement of (i) Consignments of items meant for exports shall NOT be withheld / delayed for any reason by any agency of

Export Goods Central Government / State Government.
(ii) In case of any doubt, authorities concerned may ask for an undertaking from exporter and release such
consignment.
Denomination of
Export Contracts
and Realization of
Export Proceeds
(i) All export contracts and invoices shall be
 denominated either in freely convertible currency or Indian rupees but
 export proceeds shall be realised in freely convertible currency.
(ii) However, there are some exceptions where export proceeds can be in Indian rupees (discussed in “Refund Chapter
of GST”).
Non-Realization of
Export Proceeds
(i) Consequence of Non-Realization of Export Proceeds: If an exporter fails to realize export proceeds within time
specified by RBI, he shall, without prejudice to any liability or penalty under any law in force, be liable to
 return all benefits / incentives availed against such exports and
 action in accordance with provisions of FT (D&R) Act, Rules and Orders made thereunder and FTP.
(ii) Request for write-off by RBI: In case an exporter is unable to realize the export proceeds for reasons beyond his
control (force-majeure), he may approach RBI for writing-off the unrealised export proceeds.
(iii)Realization through Insurance Cover: The payment realized through insurance cover as said below would be
eligible for benefits under FTP.
(a) Payment through ECGC Cover would count for benefits under FTP: Export Credit Guarantee Corporation
(ECGC) covers risk of credit sales in exports.
(b) Payment through General / Private Insurance Companies: Amount of insurance cover for transit loss by
General Insurance and Private Approved Insurance Companies in India would be treated as payment realized
for exports under various export promotion schemes.
Example: Export is made under Advance Authorization Scheme, but the shipment is lost during transit.
However, insurance company has compensated the lost. In such case, the export can be accounted for
fulfilment of export obligation.
Third Party Exports Third Party Exports (as defined in FTP) shall be allowed under FTP. “Third Party Exports” means exports made by
an exporter (merchant exporter) or manufacturer (manufacturer exporter) on behalf of another exporter (person who
otherwise was obliged to export)
In such cases,
(i) Export documents such as Shipping Bills shall indicate name of both Exporter / Manufacturer and Third Party
Exporter.

(ii) Bank Realization Certificate (BRC), Guaranteed Remittance Declaration (submitted to RBI), Export Order and
Export Invoice should be in the name of Third Party Exporter.
Example 1: CD Corporation, a merchant exporter, procured order of goods from a customer in USA. It approached
AB Corporation, a manufacturer, for execution of the said order. Shipping Bills relating to the consignment bear the
name of CD Corporation. Bank Realization Certificate, Export Order and Invoice are also in the name of CD
Corporation. Comment whether AB Corporation would be deemed as the exporter under FTP.
The given scenario is a case of third-party exports. Third-party exports means exports made by an exporter or
manufacturer on behalf of another exporter(s). The conditions for being allowed as third-party exports under FTP are:
(a) Export documents such as shipping bills shall indicate name of both exporter or manufacturer (as the case may be)
and third party exporter(s).
(b) BRC, Export Order and Invoice should be in the name of third party exporter.
In the above case, though BRC, Export Order and Invoice are in the name of CD Corporation (third party exporter),
the Shipping Bill does not have the name of AB Corporation (manufacturer). Therefore, AB Corporation will not be
treated as the exporter in this case. CD Corporation shall be treated as exporter of the consignment.
Example 2: Mr. DK is EPCG Authorization Holder (issued to him by DGFT). It entitles him to procure (import) CG
duty-free, with corresponding obligation of exporting goods upto 6 times of ‘duty saved’. Mr. DK imports duty-free
goods, installed them in his factory and start manufacturing of goods.
During April, Mr. DK export goods worth Rs.10 lakhs. These exports are considered towards discharge of his Export
Obligation (EO). During April, Mr. DK manufactures goods but failed to get export order. Mr. DK sells his
manufactured goods to Mr. VK (having export orders with him). Mr. VK exports goods of Mr. DK.
Exports made by Mr. VK (exporter) on behalf of Mr. DK (another exporter) is Third Party Exports if
(a) Export document (i.e. Shipping Bill) indicates name of both manufacturer (Mr. DK) and third party exporter (Mr.
VK);
(b) BRC, Export Order and Invoice should in name of Third Party Exporter (Mr. VK).
Such exports will be considered towards discharge of export obligation of Mr. DK (EPCG Holder).

EXPORTERS – REGISTRATION CUM MEMBERSHIP CERTIFICATE
Registration Cum
Membership
Certificate (RCMC)
RCMC is certificate evidencing registration of exporter as a member of any Export Promotion Council (EPC).
(i) Export Promotion Council (EPC) are the organization of exporters, set up with the objective to promote and
develop Indian exports.
(ii) EPC have been set up to promote and develop export of the country. These EPCs are expected to monitor and
encourage exports and to assist and guide the exporter. Their main aim is to project India's image abroad as
reliable supplier of high quality goods and services.
(iii)EPC are non-profit autonomous organizations (registered as companies or registered society)
(iv)Each council is responsible for promotion of a particular group of products.
(v) Few examples of EPC are Engineering Export Promotion Council, Apparel Export Promotion Council, Gem &
Jewellery EPC, etc.
(vi)Some Commodities Board like Coffee Board, Tea Board, Tobacco Board etc. are also considered as EPC.
RCMC from EPC or
FIEO
(i) If an exporter is single product exporter and EPC is available for his product, then RCMC can be obtained from
that respective EPC.
(ii) If an exporter is single product exporter but no EPC of his product, then RCMC can be obtained from Federation
of Indian Export Organization (FIEO)
(iii)If an exporter is multi product exporter and there are multiple EPCs, then RCMC can be obtained from that EPC
which is concerned with the product of his main line of business. And in case main line of business is yet to be
settled, they have an option to obtain RCMC from FEIO.
RCMC is
Mandatory or
Optional
(i) If an exporter intends to obtain export incentives (any benefit / concession), then RCMC is mandatory for such
exporter.
(ii) If an exporter does NOT intends to obtain export incentives (any benefit / concession), then RCMC is optional for
such exporter.

EXPORTERS – STATUS HOLDERS
Meaning of Status
Holders
Status Holders are business leaders who have excelled in international trade and have successfully contributed to
India’s Foreign Trade.
(i) All exporters of goods, services and technology having an import-export code (IEC) number shall be eligible for
recognition as a status holder.
(ii) Status recognition depends upon Export Performance
Eligible Exporters
for Status Holders
Status Holder Exporters are Exporters who are granted ‘Status Certificate’ (i.e. recognition based on Export
Performance) in terms of FTP. Exporter who are eligible to claim Status Certificate (i.e. recognition) are
(i) Exporter of Goods (manufacturer exporter as well as merchant exporter)
(ii) Exporter of Services
EOU Units as well as SEZ Units
Status Certificate
(i.e. Recognition)
for Status Holders
An exporter will get Status Recognition only when he has achieved specified level of Export Performance. Different
Status Recognition is given depending upon achievement of Export Performance.
Status Holder Export Performance (FOB Value / FOR Value)
1 Star Export House 30,00,000 USD = 3 Million USD
2 Star Export House 2,50,00,000 USD = 25 Million USD
5 Star Export House 200,00,00,000 USD = 2,000 Million USD
Notes:
(i) Computation of Export Performance:
(a) For Actual Export: Export Performance is counted on the basis of FOB Value (Free on Board Value) of Export
Earnings in Free Foreign Exchange.
(b) For Deemed Export: Export Performance is counted on the basis of FOR Value (Free on Road Value) of Exports
in Indian Rupees shall be converted in US $ at exchange rate notified by CBIC, as applicable on 1st April of
each FY.
Particulars Counting in Export Performance
 Actual Exports and Deemed Exports  Both Actual Exports (FOB Value) and Deemed Exports (FOR
Value) will be counted in Export Performance

 Exports made on re-export basis
(Export, Re-import and then Re-export)
 Re-export will NOT be counted in Export Performance
 Exports by Holding Company and
Subsidiary Company
 Exports by Holding Company and Subsidiary Company will
be clubbed for determining Export Performance
 Exports by EOU / SEZ Unit and DTA
Unit
 Exports by EOU / SEZ Unit and DTA Unit will be clubbed for
determining Export Performance
(ii) Achievement of Export Performance:
(a) For Gem & Jewellery Sector: Export Performance should be during Current Financial Year + Previous 2
Financial Years
(b) For Other Sectors: Export Performance should be during Current Financial Year + Previous 3 Financial Years
Example: PJ Ltd. manufacturing ready-made garments is submitting “Application for Status Recognition” on 30th
September 2018 for 1 Star Trading House. PJ Ltd. shall achieve of export performance of 30,00,000 USD during
Current FY 2018-19 (6 months period upto time of submission of application) and also in Previous 3 FY (FY 2017-
18, 2016-17 and 2015-16).
(iii)Minimum 2 Years Export Performance:
Export Performance is necessary in 2 Years out of 4 Years.
Benefits of Status
Certificate (i.e.
Recognition)
General Benefits to All Star Houses
(i) Simplified Procedures – Self-Declaration: Authorization and Custom Clearances for both imports and exports on
self-declaration basis
(ii) Quick Fixation of Import Export Norms: Fixation of input output norms on priority i.e. within 60 days
(iii)Exemption from BG: Exemption from furnishing of BG in schemes under FTP unless specified otherwise
anywhere in FTP.
(iv)Relaxation in FEMA: Permitted period for realization of export proceeds is more compared to what is permissible
period for non-status holder.
(v) Free of Cost Exports for Export Promotion: Allowed to export on FOC (Free of Cost) basis subject to limit
mentioned below:
Export of Annual Limit for Export Promotion (FOC)
(a) Gem and Jewellery Sector
(b) Articles of Gold and Precious Metals Sector
Lower of following:
 2% of Average Annual Export Realization during

Preceding 3 Licensing Years;
 Rs.1 Crore
Supplies of Pharma Products, Vaccines and
Lifesaving Drugs to Health Programs of
International Agencies such as UN, WHO and
Government Health Programmes
(a) Pharma Products by Pharmaceutical
Companies
(b) Any other case
Important Note: Such FOC supplies shall not be entitled to any export incentives under any Export Promotion
Scheme.
Example: AJ Ltd., ready-made garments exporter, is a status holder. Its average export realization during
preceding 3 licensing years had been Rs.1,500 lakhs. It wants to export certain goods for export promotion on free
of cost basis which are worth Rs.32 lakhs. Can it do so?
Entitlement of exports for Export Promotion on FOC basis is 2% * 1500 lakhs = Rs.30 lakhs. Thus, only exports
worth Rs.30 lakhs can be made on FOC basis for export promotion. Balance exports of Rs.2 lakhs shall be made on
normal basis.
Special Benefits to Notified Star Houses
(i) Establishment of Export Warehouses: 2 Star / 3 Star / 4 Star / 5 Star Export Houses shall be permitted to establish
Export Warehouses as per Department of Revenue (DOR) guidelines. Goods can be taken to Warehouse for
subsequent export therefrom without payment of taxes.
(ii) Benefit of ‘Authorized Economic Operator’ (AEO): 3 Star / 4 Star / 5 Star Export Houses shall be entitled to get
benefit of AEO operating under Accreditation Programme of CBIC
(iii)Self-Certification as to ‘Made In India’ to qualify for Preferential Treatment: Manufacturers who are 3 Star / 4
Star / 5 Star Export Houses will be enabled to self-certify their manufactured goods as originating from India with
a view to qualify for preferential treatment under different
 Preferential Trade Agreements (PTA)
 Free Trade Agreement (FTA)
 Comprehensive Economic Partnership Agreements (CECA)

REWARD SCHEMES
REWARD SCHEMES – MEIS & SEIS
Merchandise Exports from India Scheme (MEIS) Service Exports from India Scheme (SEIS)
MEIS is for Exporter of Goods Reward Scheme SEIS is for Exporter of Services
MEIS is to promote manufacture and export of Notified
Goods to Notified Countries
Objective of
Reward Scheme
SEIS is to encourage and maximize export of Notified
Services to Any Country
Exporter of Goods holding IEC Eligible Person
under Reward
Scheme
Exporter of Services
(a) Holding IEC AND
(b) Current Year Minimum Net Forex Earning is
 10,000 $ for Individual / Sole Proprietorship
 15,000 $ for All Other Persons
Taking goods outside India to a place outside India Meaning of
Export under
Reward Scheme
(a) Supply of a Service from India TO any Other Country
(b) Supply of a Service from India TO Service Consumers
of any Other Country in India
Export of Notified Goods TO Notified Countries
(Group A Country / Group B Country / Group C Country
+ Landing Certificate act as proof of export)
Coverage of
Reward Scheme
Export of Notified Services
TO Any Country or
TO Service Consumers of any Other Country in India
Scrip Value MEIS is equal to
Notified Rate (Generally 7%)
*
FOB Value (Lower of FOB Value declared in Shipping Bill
OR FOB Value as actually realized)
Benefit of Reward
Scheme
Scrip Value SEIS is equal to
Notified Rate (Generally 5%)
*
Annual Net For-Ex Earnings
Claim for scrip under MIES is submitted for each
Shipment in Form ANF-3A (Shipment-wise)
Claim of Reward
Scheme
Claim for scrip under SIES is submitted for each Year in
Form ANF-3B (Annual basis)

Common Points for MEIS and SEIS
(A) Form of Rewards – Scrip: Rewards / incentives provided under these Schemes are provided in the form of Scrip (which is the Export
Incentive).
(i) Duty Credit Scrip is earned as a specific % of exports.
(ii) Duty Credit Scrip is just like “E-Credit Ledger” or “E-Wallet”
(iii)Duty Credit Scrip is used for payment of duty / tax and some other amounts. And if such duty / tax has been paid using Credit Scrip,
then such goods are duty paid goods.
(B) Utilization of Scrip:
(i) Importable Items using Scrip: All items (freely importable or restricted) can be imported under these Scrips. However, there are
certain items which are not allowed for import using these Scrips.
(ii) Validity Period for using Scrip: Duty credit scrip issued shall be valid for 24 months from the date of issued and must be valid on the
date on which actual debit of duty is made. Revalidation of duty credit scrip is NOT permitted unless covered by Handbook of
Procedures.
(iii)Payment of Taxes / Duties / Other Payment using Scrip: Following payment can be paid using Duty Credit Scrip
(a) Payment of Customs Duties for import of inputs or goods including Capital Goods as per Department of Revenue (DOR)
Notification except for payment of Customs Duties for import of specified items can be paid through the duty credit scrip
(b) Payment of Excise Duties on domestic procurement of inputs or goods including Capital Goods as per Department of Revenue
(DOR) Notification can be paid through the Duty Credit Scrip
(c) Any Customs Duty becoming payable on account of any default in fulfillment of Export Obligations (EO) under Advance
Authorization Scheme or EPCG Scheme, etc. can be paid through the Duty Credit Scrip
However, interest and penalty CANNOT be paid through the Duty Credit Scrip
(d) Application Fee (payable under FTP) can be paid through the Duty Credit Scrip
(e) Composition Fee (payable under FTP) can be paid through the Duty Credit Scrip
Important Note: Duty Credit Scrip CANNOT be used to pay GST (CGST + SGST/UTGST OR IGST on Domestic Purchases or IGST
on Imports). Duty Credit Scrip CANNOT be used to even to pay GST Compensation Cess on Domestic Purchases of on Imports.
(C) Transferability of Scrip: Scrip is freely transferrable
(i) Scrip is movable property and thus goods as per Section 2(52) of CGST Act, 2017
(ii) Sale of scrip is supply of goods and thus GST is levied. However, GST rate on scrip at present is 0%.

MERCHANDISE EXPORTS FROM INDIA SCHEME (MEIS)
MEIS (Notified
Goods to Notified
Countries)
Exports of notified goods to notified markets are rewarded under Merchandise Exports from India Scheme (MEIS).
Notes:
(i) Where MEIS is available to all countries, then ‘proof of landing of goods’ shall NOT be required. Where MEIS is
available to notified countries only, then ‘proof of landing of goods’ shall be required.
(ii) All exporters while filing export shipments under Shipping Bills are required to declare his intent to claim
benefit under MEIS. It is mandatory as per Handbook of Procedures.
Eligible Exporter MEIS is applicable to all exporter of goods holding IEC i.e. Normal Export Units as well as Dedicated Export Units –
EOU / SEZ.
Notes: Ineligible Categories under MEIS
(i) Supplies made from DTA Units to SEZ Units. For example, if DTA Unit selling to SEZ Unit which is further
selling to USA, then this supply is not eligible export in hands of DTA Unit for purposes of MEIS; however, this
supply is eligible export in hands of SEZ Unit for purposes of MEIS.
(ii) Deemed Exports
(iii) Export Products which are subject to Minimum Export Price or Export Duty
(iv) Exports through Trans-shipment, meaning thereby exports that are originating in third country but trans-
shipped through India.
(v) Export of Imported Goods covered under ‘Import for Export’ provisions.
(vi) SEZ / EOU / EHTP / STP / FTWZ Products exported through DTA units
(vii) Exports made by units in FTWZ
Scrip Value Scrip Value shall be specified % of FOB Value of notified goods exported to notified markets. Basis of computation of
scrip value shall be lower of following
(i) FOB Value of exports as declared in the Shipping Bill OR
(ii) FOB Value of exports realized
Note: Exports of goods through Notified Courier or Foreign Post Office of FOB Value Rs.5,00,000 per Consignment
shall be entitled for rewards under MEIS. If the value of exports is more than Rs.5,00,000 per Consignment, then MEIS
reward would be limited to FOB Value of Rs.5,00,000 per Consignment.
Example: Determine reward under MEIS from the following information where rate of reward is 7%
(i) Export of Item A: FOB Value declared in Shipping Bill is Rs.6,00,000. FOB Value realized due to exchange gains is Rs.6,30,000.

(ii) Export of Item B: FOB Value declared in Shipping Bill is Rs.2,00,000. FOB Value realized due to exchange loss is Rs.1,80,000.
(iii)Export of Item C through Foreign Post Office: FOB Value is Rs.5,50,000.
(iv)Export of Item D through Courier: FOB Value is Rs.4,50,000
(v) Export of Item E liable to Export Duty: FOB Value is Rs.2,00,000
(vi)Supplies of Item A made to SEZ Units: Rs.1,00,000
Computation of MEIS Reward – Duty Credit Scrip
Particulars Amount (Rs.)
(i) Export of Item A (Lower of Declared FOB Value - Rs.6,00,000 OR Realized FOB Value - Rs.6,30,000) 6,00,000
(ii) Export of Item B (Lower of Declared FOB Value - Rs.2,00,000 OR Realized FOB Value - Rs.1,80,000) 1,80,000
(iii)Export of Item C through Foreign Post Office (FOB Value - Rs.5,50,000 subject to maximum of Rs.5,00,000) 5,00,000
(iv)Export of Item D through Courier (FOB Value - Rs.4,50,000 subject to maximum of Rs.5,00,000) 4,50,000
(v) Export of Item E liable to Export Duty: FOB Value is Rs.2,00,000 Ineligible
(vi)Supplies of Item A made to SEZ Units: Rs.1,00,000 Ineligible
Total FOB Value 17,30,000
MEIS Reward @ 7% (Scrip Value under MEIS) 1,21,100
SERVICE EXPORTS FROM INDIA SCHEME (SEIS)
SEIS’ (Notified
Services to All
Countries)
Exports of notified services to any market are rewarded under Service Exports from India Scheme (SEIS).
Eligible Exporter SEIS is applicable to all service providers in India. In order to be eligible for Duty Credit Scrip Entitlement under
SEIS, following conditions shall be satisfied:
(i) Holder of IEC: Service Provider shall have to have an active IEC at the time of rendering such services for which
rewards are claimed.
(ii) Requirement of ‘For-Ex Earning’: Claim for SEIS Scrip is made on Annual basis. For being eligible, Service
Provider shall fulfil the following criteria as to Minimum Forex Earning in the year of rendering service (i.e.,
Current Year)
(a) Service Provider being Individual / Sole Proprietorship: Minimum “Net Forex Earning” in the year of
rendering service shall be 10,000 $

(b) Other Service Provider: Minimum “Net Forex Earning” in the year of rendering service shall be 15,000 $
Notes:
 For-Ex through International Credit Cards shall be considered: Free Foreign Exchange earned through
International Credit Cards and other instruments, as permitted by RBI shall also be taken into account for
computation of value of exports.
 Deemed Net Forex Earning (NFE) – Receipts in Indian Rupees may also be considered: Payment in Indian
Rupees for service charges earned on specified services, shall be treated as receipt in Deemed Foreign
Exchange as per guidelines of RBI. The list of such services is indicated in Appendix 3E.
(iii) Location of Service Provider: Service Provider must be located in India.
Note: Supply of service through commercial presence in any other Country or through presence of natural
persons in any other Country is NOT eligible for SEIS benefit.
(iv) Mode of Export of Service: Service may be provided in any of following 2 modes only:
(a) Cross Border Trade: Supply of a service from India TO any other country
(b) Consumption Abroad: Supply of a service from India TO service consumers of any other country in India.
(Firms providing educational services to NRI Students making payment in For-Ex are eligible under SEIS.
Also, Hospitals providing health care services to Foreigners visiting India for medical treatment in India
making payment in For-Ex are eligible under SEIS)
Note: If DTA Unit supplying services to SEZ Unit which is further supplying services to USA, then this supply is
not eligible export in hands of DTA Unit for purposes of SEIS; however, this supply is eligible export in hands of
SEZ Unit for purposes of SEIS.
Scrip Value Scrip Value shall be 3% / 5% on the Net Foreign Exchange earned from notified services. It is to be noted that general
rate of rewards is 5%.
Computation of Net Foreign Exchange Earning
Gross Earnings of Foreign Exchange relating to Service Sector in the FY (Refer Note i & Note ii) XXX
Less: Total expenses / payment / remittances of Foreign Exchange relating to Service Sector in
the FY (Refer Note ii)
(XXX)
Net Foreign Exchange Earnings XXX
Notes:
(i) For-Ex Earnings unrelated to provisioning of service shall not be considered: Foreign exchange remittances
other than those earned for rendering of notified services would not be counted for entitlement. Thus, other

sources of foreign exchange earnings such as equity or debt participation, donations, receipts of repayment of
loans etc. and any other inflow of foreign exchange, unrelated to rendering of service, would be ineligible
(ii) For-Ex Earnings and For-Ex Expenses in capacity of SP shall only be considered: If the IEC holder is a
manufacturer of goods as well as service provider, then the For-Ex earnings and For-Ex expenses / payment /
remittances shall be taken into account for service sector only.
Example: VJ Ltd., a service exporter of specified service, requires you to compute its Duty Credit Scrip entitlement for the current FY under
SEIS assuming that notified rate for SEIS is 5%. VJ Ltd. has provided specified service during current year as follows:
(i) Supply from India to US: 50,000 $
(ii) Supply from India to Service Consumer of China and Russia in India: 20,000 $
(iii)Supply from India through Commercial Branch in a city of Australia: 10,000 $
(iv)Supply from India through presence of employees in a city of Japan: 5,000 $.
The total expenses / payments of VJ Ltd. relating to aforesaid supplies are:
(a) 5% of Gross Receipts in Foreign Exchange and
(b) Another 10% of Gross Receipts in India Rupees
VJ Ltd. also informs that it has received Loans of 5,000 $ from US.
Computation of SEIS Reward – Duty Credit Scrip
Particulars Gross FE ($) Expenses in FE ($) Net FE ($)
(i) Supply from India to US: 50,000 $ 50,000 (50,000 *5%) = (2,500) 47,500
(ii) Supply from India to Service Consumer of China and Russia in India: 20,000 $ 20,000 (20,000 *5%) = (1,000) 19,000
(iii)Supply from India through Commercial Branch in a city of Australia: 10,000 $ Ineligible Ineligible Ineligible
(iv)Supply from India through presence of employees in a city of Japan: 5,000 $ Ineligible Ineligible Ineligible
(v) Loan from US Ineligible Ineligible Ineligible
Net Foreign Exchange Earnings 66,500 $
SEIS Reward @ 5% (Scrip Value under MEIS) 3,325 $
Note: VJ Ltd. is eligible for SEIS benefit as its Net Free Foreign Exchange Earnings is US $ 66,500 (i.e. above the requisite threshold limit of US $
15,000 for Body Corporates).

EXPORT PROMOTION SCHEMES
EXPORT PROMOTION SCHEMES – DUTY REMISSION SCHEME & DUTY EXEMPTION SCHEME
Duty Remission Scheme Duty Exemption Scheme
Under Duty Remission Scheme, first tax / duty is collected
and then, later on the same is refundeds
Export Promotion
Scheme
Under Duty Exemption Scheme, tax / duty is NOT
collected and thus, no question of refund
Duty Remission Scheme enables post export
replenishment / remission of duty paid on inputs used in
export product.
[Post-Export Benefit]
Objective of
Export Promotion
Scheme
Duty Exemption Scheme enables duty free import of
inputs required for production and export of export
product.
[Pre-Export Benefit]
Duty Drawback (DBK) Scheme under Customs Law
Inputs imported on payment of import duty, then used in
manufacture of export goods and finally import duty
refunded in cash.
Duty Remission Schemes under GST Law
Export product is exported on payment of IGST (using
ITC or Cash). Thereafter, IGST is refunded in Cash
Export product is exported without payment of IGST
under Bond / LUT. Thereafter, Unutilized ITC is refunded
in Cash
Types of Export
Promotion
Scheme
Advance Authorization (AA) Scheme
Inputs can be imported without payment of duty and then
used in manufacture of export goods. No question of
refund of import duty.
Export Promotion Capital Goods (EPCG) Scheme
Capital Goods can be imported without payment of duty
and then used in manufacture of export goods. No
question of refund of import duty.
Notes: Exporter, after obtaining an export order, will generally import or locally procure goods that are required for the manufacture of the
products to be exported.
(i) Option 1: Procure duty paid inputs, then manufacture export goods and export the same. Finally, claim Duty Drawback after export.
(ii) Option 2: Obtain AA / EPCG and procure duty free inputs / capital goods (where there is an obligation attached as to export). Then
manufacture export goods and export the same. Finally, Export Obligation has to be discharged.

DUTY REMISSION SCHEME
DUTY DRAWBACK
Duty Drawback
(DBK) Scheme
(i) Duty paid inputs used for manufacture of goods in India which are exported. DBK is given of duty paid on
inputs used in manufacture of such goods.
(ii) DBK under Section 75 of Customs Act, 1962 covers import duty paid on imported inputs. Section 75 gives DBK of
Customs Duties (whether Normal Customs Duties or Special Customs Duties) but does NOT gives DBK of IGST
and GST Cess, which are also part of Customs Duties.
Rate of Duty
Drawback under
Duty Drawback
Scheme
DBK under Section 75 is granted as per any of following rates:
(i) All Industry Rate (AIR):
 AIR fixed for most of the export products (Notional rates are notified by Central Government)
 It is applicable to all exporters exporting a particular item.
 Processing of DBK is fast and documentation is less as the rates are notified.
(ii) Brand Rate (BR):
 BR is fixed / determined for export of items where AIR is not fixed and exporter applies for fixation of DBK
rates.
 It is applicable to a particular exporter.
(iii) Special Brand Rate (BR):
 SBR is available in those cases where the amount of DBK (available by application of AIR) is less than 80% of
the actual duties / taxes suffered by the exporter and exporter applies for fixation of DBK rates.
 It is applicable to a particular exporter.
DUTY EXEMPTION SCHEME
ADVANCE AUTHORIZATION FOR INPUTS
Advance
Authorization (AA)
Scheme
AA Scheme enables an exporter to import duty free INPUTS required for manufacture of the Export Product.
Note: AA is issued with Actual User Condition i.e. AA and / or materials imported thereunder shall NOT be
transferrable.
Eligible Inputs for
Advance
Authorization (AA)
Scheme
Eligible Inputs
Eligible Inputs which can be imported duty free using AA Scheme are
(i) Only those inputs, which are physically incorporated in export product, are allowed duty free import under AA
Scheme. Normal allowance for wastage has to be made.

(ii) In addition, fuel, oil, catalyst which is consumed / utilized in the process of production of export product, are
also be allowed duty free import under AA Scheme.
(iii) Mandatory Spares upto 10% of CIF Value which are required to be exported / supplied with resultant product
are also allowed duty free import under AA Scheme.
Ineligible Inputs
Ineligible Inputs which CANNOT be imported duty free using AA Scheme are
(i) Prohibited items as it is mentioned in ITC (HS)
(ii) Items reserved for imports by STE.
(iii) Energy
Eligible Exporters
for Advance
Authorization (AA)
Scheme
AA can be issued either to
(i) Manufacturer Exporter or
(ii) Merchant Exporter tied to Supporting Manufacturer(s).
Manufacturer Exporter tied to Supporting Manufacturer can also apply and obtain AA.
Notes: "Supporting Manufacturer" is one who manufactures goods / products or any part / accessories / components
of a good / product for a merchant exporter
Example: Mr. SRK (merchant exporter) may apply and obtain AA undertaking EO and entitling the supporting
manufacturer, Mr. STR to procure inputs duty free.
Steps for Advance
Authorization (AA)
The following are important steps for AA:
(i) Filing application for AA to Regional Authority of DGFT
(ii) Obtaining AA (within 7 days of application) from DGFT
(iii) Execution of Bond / Bank Guarantee (BG) with Customs prior to starting import.
(iv) Making import of goods free of duty under AA (valid upto 12 months from issuance of AA)
(v) Exports under AA to fulfil Export Obligation i.e. EO (within 18 months from issuance of AA). Exporter may
request for extension of Export Obligation Period (EOP) with DGFT, if needed.
(vi) Update EO fulfilment with DGFT and intimate Customs (within 2 months from expiry of AA)
(vii) Filing application for redemption of AA
(viii) Issuance of Export Obligation Discharge Certificate (EODC) by DGFT (who will also forward EODC to Customs
for Cancellation of Bond / BG)
(ix) Cancellation of Bond / BG executed for import under AA with Customs.
Basis for Issuance AA is issued for inputs in relation to resultant product on the following basis:

of Advance
Authorization (AA)
– SION or Self-
Declaration
(i) AA is issued as per notified Standard Input-Output Norms (SION) which available in Handbook of Procedures
(ii) AA is issued on the basis of Self-Declaration,
 where there is no SION or no valid Ad-hoc Norms for an export product or
 where SION / Ad-hoc Norms have been notified / published but exporter intends to use additional inputs in
the manufacturing process, based on self-declaration by applicant.
Wastage so claimed shall be subject to Wastage Norms as decided by Norms Committee. Applicant shall submit
an undertaking to abide by decision of Norms Committee.
(iii) AA can be applicant specific where prior fixation of Norms is done by the Norms Committee
(iv) AA can be on the basis of Self-Ratification ONLY by exporters holding Authorized Economic Operator (AEO)
Certificate under Accreditation Programme of CBIC
 where there is no SION or no valid Ad-hoc Norms for an export product or
 where SION / Ad-hoc Norms have been notified / published but exporter intends to use additional inputs in
the manufacturing process, based on self-ratification by applicant.
Regional Authority may issue AA and such case need NOT be referred to Norms Committee for ratification of
Norms.
Export Obligation
for Advance
Authorization (AA)
Scheme
Inputs so procured duty free shall carry an obligation to manufacture and export final product, failing which exporter
shall be liable to action (recovery of duty + interest + penalty etc.) under FTP.
Export Obligation (EO) under AA Scheme is in terms of quantity as well as value.
(i) Export Obligation (EO) in terms of QUANTITY:
 EO in terms of quantity will be subject to norms prescribed under in Standard Input Output Norms (SION) as
notified by DGFT.
 Where DGFT has not notified SION for any particular import and export product, then EO in terms of
quantity can also be subject to ‘Ad-hoc Norms’ as prescribed by the Norms Committee on request by the AA
Holder.
(ii) Export Obligation (EO) in terms of VALUE:
 EO in terms of value will depend on the Minimum Value Addition prescribed for the export product.
 In general, 15% Value Addition is prescribed for all the export products, unless different Value Addition
terms are prescribed by DGFT. (For Tea, 50% Value Addition is prescribed)
Computation of Value Addition
Value Addition = (Export Value – Import Value) * 100 / Import Value = (A – B) * 100 / B

Export Value = A = FOB Value of Actual Export realized + FOR Value of Deemed Export
Note:
 Actual Exports (Supply to China)  FOB Value shall be considered
 Deemed Exports (Supply to 100% EOU)  FOR Value shall be considered
Import Value = B = CIF Value of Inputs covered by Authorization + Value of any other input used on which
benefit of DBK is claimed or intended to be claimed.
Note: Facility of AA shall also be available where some or all of the inputs are supplied
Free of Cost (FOC) to Indian exporter by Foreign buyer. In such cases, Notional CIF
Value (as declared before Customs) for such items shall be added to the CIF Value
(Import) and also to the FOB Value (Export) to arrive at Value Addition.
Example 1: Dhanush Ltd. has imported inputs without payment of duty under Advance Authorization. CIF
Value of such inputs is Rs.50,00,000. The inputs are processed and final product is exported. The exports made by
Dhanush Ltd. are subject to general rate of value addition prescribed under AA Scheme. No other input is used
by Dhanush Ltd. in the processing. What should be the minimum FOB Value of the exports made by Dhanush
Ltd. as per provisions of AA.
 General Minimum Value Addition (%) under AA = 15%
 Minimum FOB Value of Exports that is required under AA in order to satisfy Minimum Value Addition
condition = CIF Value of All Inputs + 15% = Rs.50,00,000 + 15% = Rs.57,50,000
Example 2: Compute Value Addition from following details:
(i) Value of inputs covered by Advance Authorization (i.e. Duty Free Import) = Rs.50 lakhs.
(ii) Value of inputs on which DBK facility is claimed (i.e. Duty Paid Import for which subsequent refund will be
claimed) is Rs.25 lakhs.
(iii)FOB Value of Export = Rs.90 lakhs
 Export Value = Rs.90 lakhs
 Import Value = (Rs.50 lakhs + Rs.25 lakhs) = Rs.75 lakhs
 Value Addition (%) = [(90 – 75) * 100 / 75] = 20%
Note: In case of part duty free imports and part duty paid imports, both Advance Authorization and Duty
Drawback will be available. Duty Drawback can be obtained for any duty paid material, whether imported or
indigenous, used in goods exported, as per DBK rate fixed by Department of Revenue, Ministry of Finance.

Advance Authorization can be used for importing duty free material.
Example 3: AB Ltd., an exporter engaged in export of ready-made garments. AB Ltd. has got an export order
worth FOB Value – Rs.500 lakhs. What should be the Maximum CIF Value of imports in order to fulfil Minimum
Value Addition condition?
 Maximum Permissible CIF Value of Imports that is permissible under AA in order to satisfy Minimum Value
Addition condition = [FOB Value of Exports * 100 / (100+15)] = Rs.500 lakhs * 100 / 115 = Rs.434.78 lakhs
Example 4: FOB Value of exports of MSD Ltd. = Rs.500 lakhs. Foreign buyer has supplied goods Free of Cost to
the exporter (MSD Ltd.) for use in manufacture of goods exported. Notional Value of such goods is Rs.100 lakhs.
What should be the Maximum CIF Value of Actual Imports so as to fulfil Minimum Value Addition condition?
 Maximum Permissible CIF Value of Imports that is permissible under AA in order to satisfy Minimum Value
Addition condition = [FOB Value of Exports * 100 / (100+15)] = Rs.500 lakhs * 100 / 115 = Rs.434.78 lakhs
 Maximum Permissible CIF value of Imports shall consist of Actual Imports as well as Notional Value of Free
of Cost inputs supplied by foreign buyer. Thus, Maximum Permissible Value of Actual Imports = Rs.434.78
lakhs – Rs.100 lakhs = Rs.334.78 lakhs
Categories of
Advance
Authorization (AA)
Various categories of authorizations are as follows:
(i) Advance Authorization for Physical Exports (including SEZ Supplies) and Supply against AA, i.e.
Intermediate Supplies:
 Supply to SEZ is considered as ‘Actual Export’: DTA supplier is entitled to obtain AA for duty free
procurement of inputs for manufacture and supply of goods to SEZ.
 AA for Intermediate Supply: AA for intermediate supply is issued to those who intend to supply goods to
another AA Holder who will manufacture the final products to be exported. Export Obligation imposed on
duty free import (or local procurement) on the AA Holder of an ‘Advance Authorization for Intermediate
Supplies’ will be fulfilled by way of supplies to another AA Holder who will export the final product.
Application for grant of AA for Intermediate Supply may be made on the basis of a tie-up arrangement with
an ultimate exporter holding an AA. Such application can be made along with an application for AA (by the
manufacturer exporter) or after issuance of AA (to the manufacturer exporter)

Example: Mr. PJ, a manufacturer exporter of ready-made garments, has obtained AA (with EO of ready-made
garments). Mr. VJ, a manufacturer of fabric, in respect of supplies intended to be made to Mr. PJ (AA Holder
with EO for ready-made garments), Mr. VJ can apply and obtain AA for Intermediate Supplies. This AA for
intermediate supplies by Mr. VJ will entitle him to procure his inputs duty-free.
Export Obligation of Mr. VJ (AA Holder for Intermediate Supplies) shall be discharged by way of supplies to
Mr. PJ (AA holder with EO for ready-made garments). Mr. VJ’s EO is denominated and discharged in Indian
Rupees.
(ii) Advance Authorization for Deemed Exports:
 Certain transactions are Deemed Export transactions as per FTP. For example, supplies to EOU, supply
against International Competitive Bidding (ICB), supply to Notified Projects, etc.)
 DTA Supplier is entitled to obtain AA for duty free procurement of inputs for materialization of such
Deemed Exports
Special Note: Advance Authorization on Annual Requirement
(i) AA on Annual Requirement based on SION only: AA can also be issued for annual requirements. However,
such AA is issued only for items notified in SION i.e. it is NOT available on self-declaration basis.
(ii) AA on Annual Requirement only if there is Export Performance: Only those exporters who are having past
“Export Performance” (atleast in the Preceding 2 FY) are entitled for this AA for Annual Requirement.
(iii) Value Limit on AA for Annual Requirement: Entitlement in terms of CIF Value of Imports shall be HIGHER of
 Rs.1 Crore OR
 300% of [FOB Value of Exports + FOR Value of Deemed Export] in Preceding FY
Example: Compute the entitlement of Advance Authorization for Annual Requirement for an exporter having
export performance in past 5 years. In last FY, FOB Value of Physical Export was Rs.50 Lakhs and FOR Value for
Deemed Exports is Rs.10 lakhs
Since exporter has export performance in past 2 years, he is entitled to AA for Annual Requirement. The
entitlement shall be higher of following two:
 Rs.1 Crore or
 300% of (Rs.50 lakhs + Rs.10 lakhs) = Rs.1.8 Crores
Thus, his entitlement for duty free import of goods shall be to extent of CIF Value of imported goods being Rs.1.8
Crores.

Duties exempted
under Advance
Authorization (AA)
Scheme
Under AA Scheme, following duties are exempted by virtue of Exemption Notification:
(i) Normal Customs Duties are exempted under AA Scheme:
(a) BCD
(b) Social Welfare Surcharge
(c) CVD and Special CVD (at present levied only on limited goods)
(ii) Special Customs Duties are exempted under AA Scheme:
(a) Safeguard Duty
(b) Anti-Dumping Duty
(c) Anti-Subsidizing Duty or Counter-Vailing Duty on Subsidized Articles
(iii) IGST and GST Compensation Cess within Customs Duty are also exempted under AA Scheme:
(a) IGST levied under Section 3(7) of CTA, 1975 on import of goods and
(b) GST Compensation Cess levied under Section 3(9) of CTA, 1975 on import of goods.
Notes:
 Such exemption from IGST and GST Compensation Cess is ONLY upto 31st March 2020.
 Goods imported against an AA will be exempt from the IGST and GST Compensation Cess subject to the
conditions that the Export Obligation (EO) would be fulfilled by making Physical Exports alone i.e. if a
person has imported the goods by claiming the exemption from IGST and GST Compensation Cess under the
AA, then he cannot fulfil his EO by way of Deemed Exports i.e. by supplying the goods to an EOU etc.
Domestic
Procurement of
Inputs AA Holder
AA Holder can procure inputs from indigenous / domestic supplier in lieu of direct import. Specified procedure to be
followed for the same.
Note: Supplier making supply to such AA Holder
(i) Such supply qualifies as ‘Deemed Export’ under FTP. (Refer Deemed Export in FTP)
Accordingly, such supplier may claim related benefits on such supply like entitlement of AA for making such
Deemed Export or Duty Drawback on such supply (called as Deemed DBK), etc.
(ii) Such supply may also qualify as ‘Deemed Export’ under GST law. (Refer Refund Chapter – Section 147 of CGST
Act, 2017)
Accordingly, GST charged on such supply shall be refundable. (Refer Refund Chapter – Section 54 of CGST Act,
2017 + Rule 89 of CGST Rules, 2017).

DUTY FREE IMPORT AUTHORIZATION FOR INPUTS
Purpose and Scope
of DFIA Scheme
DFIA is issued to allow duty free import of inputs used in production of export goods.
Notes:
(i) DFIA Scheme is issued to allow duty free import of inputs. In addition, import of oil and catalyst which is
consumed / utilized in the process of production of export product, may also be allowed under DFIA Scheme.
(ii) DFIA Scheme can be obtained ONLY for the products covered under SION.
Duties exempted
under DFIA
Scheme
(i) Exemption under DFIA Scheme is only and only to BCD
(ii) All other Customs Duties including IGST and GST Compensation Cess shall be payable
Post Export Benefit
under DFIA
Scheme
DFIA is allowed on post-export basis i.e. it is Replenishment of Inputs used in manufacture of export goods.
Notes:
(i) Under AA Scheme, a person can import the inputs first and make the export of resultant products later on.
(ii) Under DFIA Scheme, he can export the goods and then import the inputs as replenishment of the inputs used in
the manufacture of the export products.
ADVANCE AUTHORIZATION SCHEME VS. DUTY FREE IMPORT AUTHORIZATION SCHEME
Particulars Advace Authorization (AA) Scheme Duty Free Import Authorization (DFIA) Scheme
Minimum Value
Addition
15% (in general) 20% (in general)
SION Fixed
SION NOT Fixed
 AA Scheme is applicable
 AA Scheme is applicable
 DFIA Scheme is applicable
 DFIA Scheme is NOT applicable
Exemption from Duties  BCD and Other Customs Duties are exempted
 IGST and GST Compensation Cess is also
exempted but till 31-03-2020
 Only BCD is exempted
 Other Customs Duties (including IGST and GST
Compensation Cess) are payable
Transferability AA is NOT transferrable DFIA is transferrable
EXPORT PROMOTION CAPITAL GOODS FOR CAPITAL GOODS
Export Promotion
Capital Goods
Objective of the EPCG Scheme is to facilitate import of Capital Goods for producing quality goods and services to
enhance India’s export competitiveness. EPCG scheme under FTP enables up-gradation of technology of the

(EPCG) Scheme indigenous industry.
EPCG Authorization Scheme enables an exporter to import duty free CAPITAL GOODS required for manufacture of
the Export Product. It is important to note that even an EXPORTER OF SERVICE can also obtain EPCG
Authorization.
Notes: EPCG Authorization is issued with Actual User Condition i.e. EPCG Authorization and / or capital goods
imported thereunder shall NOT be transferrable.
Eligible Capital
Goods for Export
Promotion Capital
Goods (EPCG)
Scheme
Eligible Capital Goods
(i) Capital Goods (whether in assembled condition or in CKD / SKD form)
(ii) Computer Systems and Software which are a part of the Capital Goods being imported
(iii) Spares
(iv) Moulds & Dies, Jigs, Fixture, Tools and Refractories for Furnace Lining
(v) Catalysts for initial charge plus one subsequent charge
Notes: The above CG should satisfy below conditions:
(a) CG imported shall have nexus with export goods. Nexus certificate shall be obtained from Chartered Engineer.
Such nexus should be there with export goods can with pre-production process or production process or post-
production process.
(b) CG may assembled or unassembled i.e. CG may be imported in CKD / SKD form and then, assembled in India.
(c) CG may be new or old i.e. Second Hand CG may also be imported.
Eligible Exporters
for Export
Promotion Capital
Goods (EPCG)
Scheme
EPCG can be issued either to
(i) Manufacturer Exporter or
(ii) Merchant Exporter tied to Supporting Manufacturer(s).
(iii) Service Providers
(iv) Common Service Provider (CSP) subject to prescribed condition
Notes: "Supporting Manufacturer" for EPCG shall be the one in whose premises / factory Capital Goods are imported
/ procured under EPCG Authorization is installed.
Example: Mr. SRK (merchant exporter) may apply and obtain EPCG undertaking EO and entitling the supporting
manufacturer, Mr. STR to procure and install Capital Goods duty free in his factory.
Steps for Export
Promotion Capital
Goods (EPCG)
The following are important steps for EPCG:
(i) Filing application for EPCG to Regional Authority of DGFT
(ii) Obtaining EPCG (within 3 days of application) from DGFT

(iii) Execution of Bond / Bank Guarantee (BG) with Customs prior to starting import.
(iv) Making import of CG free of duty under EPCG (valid upto 18 months from issuance of EPCG)
(v) Import is with Actual User Condition
(vi) Exports under EPCG to fulfil Export Obligation (EO) in addition to maintaining Average Level of Exports
(a) 1st Block of 4 Years: Minimum 50% of Specific Export Obligation
(b) 2nd Block of 2 Years: Balance 50% of Specific Export Obligation
Exporter may request for extension of Export Obligation Period (EOP) with DGFT, if needed.
(vii) Filing application for redemption of EPCG along with necessary documents
(viii) Issuance of Export Obligation Discharge Certificate (EODC) by DGFT (who will also forward EODC to Customs
for Cancellation of Bond / BG)
(ix) Cancellation of Bond / BG executed for import under EPCG with Customs.
Export Obligation
for Export
Promotion Capital
Goods (EPCG)
Scheme
CG so procured duty free shall carry an obligation to manufacture and export final product, failing which exporter
shall be liable to action (recovery of duty + interest + penalty etc.) under FTP.
Export Obligation (EO) under EPCG Scheme is in terms of VALUE. EO in terms of Values are of 2 types as follows:
(i) Specific Export Obligation (SEO) in terms of VALUE: SEO, specific to each EPCG Authorization shall be 6 times
of Duty Saved on import of CG
(a) Computation of Duty Saved: Duty Saved where EPCG Holder opts to pay IGST and Compensation Cess on
imported CG
 ITC claimed for IGST and Compensation Cess paid: Duty Saved = Customs Duties not paid + IGST and
Compensation Cess of which ITC is availed
 ITC NOT claimed for IGST and Compensation Cess paid: Duty Saved = Customs Duties not paid
(b) Time Limit for achieving SEO:
Period from the date of EPCG Authorization Proportion of Total Export Obligation (EO)
 1st Block of 4 Years  Minimum 50%
 2nd Block of balance 2 Years  Balance
Special Note: If EPCG Authorization Holder has fulfilled 75% or more of the SEO and 100% of the AEO till
date, if any, within 3 Years, then remaining EO shall be condoned and the authorization redeemed by
concerned Regional Authority.
Example: AJ Ltd. obtains EPCG Authorization and imports CG on import of which it saved duty of Rs.10
Crores.

 SEO = 6 times Duty Saved on import of CG = 6 * Rs.10 Crores = Rs.60 Crores
 Achievement of SEO:
 In 1st block of 4 Years: AJ Ltd. must achieve SEO of atleast Rs.30 Crores (50% * Rs.60 Crores)
 In 2nd block of 2 Years: AJ Ltd. must achieve balance SEO
(ii) Average Export Obligation (AEO) in terms of VALUE: AEO, based on past export levels is arithmetic mean of
exports of last 3 years. SEO (as mentioned above) shall be, over and above, the Average Level of Exports
achieved by the applicant in the preceding 3 licensing years for the same and similar products within the overall
EO Period.
Example: AJ Ltd. has export turnover of Rs.10 Crores, Rs.20 Crores and Rs.30 Crores during the preceding 3
years. In 4th Year, AJ Ltd. obtains EPCG Authorization and imports CG on import of which it saved duty of Rs.10
Crores.
 SEO = 6 times Duty Saved on import of CG = 6 * Rs.10 Crores = Rs.60 Crores
 AEO = [(10 Crores + 20 Crores + 30 Crores) / 3] = Rs.20 Crores
Thus, EPCG Authorization Holder shall, while maintaining the Average Export Obligation (AEO) each year,
fulfil the Specific Export Obligation (SEO) over the prescribed block period.
Computation of Export Obligation
(i) Export only of goods / services for which EPCG Authorization granted shall be counted. Export of other
products not manufactured out of such CG shall not be counted.
(ii) Export = Physical Exports + Certain Deemed Exports.
Notes: All the following will be considered towards calculation of Export Obligation
(a) Shipments under which inputs were imported duty free (i.e. AA Scheme, DFIA Scheme, DBK Scheme)
(b) Shipments under Reward Schemes (i.e. MEIS / SEIS)
(c) Foreign Exchange received for Research & Development Services
(d) Royalty Payment received by EPCG Holder in Free Convertible Currency
(e) Payment received in Indian Rupee for such services as notified in Appendix 3E.
Export Obligation
for Export
Promotion Capital
Goods (EPCG)
Project Import is special scheme under Indian Customs which allow import of project as goods at concessional rate.
EPCG Authorization can also be issued for import of CG under Scheme for Project Imports
(i) Export Obligation for such EPCG Authorizations would be 6 times of Duty Saved
(ii) Duty Saved would be difference between the Effective Duty under Project Imports and Concessional Duty under

Scheme for Project
Import
the EPCG Scheme.
Note: Other aspects of Export Obligation remain the same as mentioned above.
Example: PK Ltd., a manufacture, wants to import CG in CKD condition from a foreign country and assemble the
same in India. Import of the CG will be under Project Imports. CG will be used for pre-production processes. The final
products of PK Ltd. would be supplied in SEZ. PK Ltd. wishes to sell CG imported by it as soon as the production
process starts. PK Ltd. seeks your advice whether it can avail the benefit of EPCG Scheme for importing the intended
CG.
EPCG Scheme:
EPCG permits exporters to procure CG at concessional rate of customs duty / zero customs duty. In return, exporter is
under an obligation to fulfil the Export Obligation (EO). EO means obligation to export product(s) covered by
Authorization in terms of quantity or value or both, as may be prescribed / specified by Regional Authority.
Eligibility of Import of CG under EPCG Scheme:
(i) Import of CG in CKD condition is allowed. CG may be assembled in India. Thus, CG imported in CKD condition
is eligible.
(ii) CG may be for use in pre-production, production or post-production. Thus, CG intended for use in pre-
production process is eligible.
(iii) Import of CG under EPCG Scheme is subject to ‘Actual User Condition’. Importer of CG under EPCG Scheme are
not allowed to be disposed off till Export Obligation is fulfilled.
Obligation of Export Performance (EO):
(i) Under EPCG Scheme, EO shall be ‘6 times’ of the duty saved. Duty saved would be difference between the
effective duty under Project Imports and concessional duty under the EPCG scheme.
(ii) Supply to SEZ is ‘eligible exports’ for purposes of EPCG Scheme.
(iii) EO shall be fulfilled. Till fulfilment of ‘EO’, CG cannot be disposed off.
Therefore, based on the above discussion, PK Ltd. can import the CG under EPCG Scheme. However, it has to make
sure that it does not sell the CG till the export obligation is completed.
Duties exempted
under Export
Promotion Capital
Goods (EPCG)
Scheme
Under EPCG Scheme, following duties are exempted by virtue of Exemption Notification:
(i) Normal Customs Duties are exempted under EPCG Scheme:
(a) BCD
(b) Social Welfare Surcharge
(c) CVD and Special CVD (at present levied only on limited goods)

(ii) Special Customs Duties are exempted under EPCG Scheme:
(a) Safeguard Duty
(b) Anti-Dumping Duty
(c) Anti-Subsidizing Duty or Counter-Vailing Duty on Subsidized Articles
(iii) IGST and GST Compensation Cess within Customs Duty are also exempted under EPCG Scheme:
(a) IGST levied under Section 3(7) of CTA, 1975 on import of goods and
(b) GST Compensation Cess levied under Section 3(9) of CTA, 1975 on import of goods.
Notes:
 Such exemption from IGST and GST Compensation Cess is ONLY upto 31st March 2020.
 CG imported against an EPCG will be exempt from the IGST and GST Compensation Cess subject to the
conditions that the Export Obligation (EO) would be fulfilled by making Physical Exports alone i.e. if a
person has imported the goods by claiming the exemption from IGST and GST Compensation Cess under the
EPCG, then he cannot fulfil his EO by way of Deemed Exports i.e. by supplying the goods to an EOU etc.
Domestic
Procurement of
Inputs EPCG
Holder
EPCG Holder can procure CG from indigenous / domestic supplier in lieu of direct import. Specified procedure to be
followed for the same.
Note 1: Supplier making supply to such EPCG Holder
(i) Such supply qualifies as ‘Deemed Export’ under FTP. (Refer Deemed Export in FTP)
Accordingly, such supplier may claim related benefits on such supply like entitlement of AA for making such
Deemed Export or Duty Drawback on such supply (called as Deemed DBK), etc.
(ii) Such supply may also qualify as ‘Deemed Export’ under GST law. (Refer Refund Chapter – Section 147 of CGST
Act, 2017)
Accordingly, GST charged on such supply shall be refundable. (Refer Refund Chapter – Section 54 of CGST Act,
2017 + Rule 89 of CGST Rules, 2017).
Note 2: Counting of Export Obligations in case of Domestic Procurement of CG
(i) Export Obligation shall be reckoned with reference to (notional Customs duties saved on FOR Value)
(ii) Export Obligation shall be as follows:
(a) Specific Export Obligation: 75% of what is otherwise applicable i.e. 4.5 times of Duties Saved
Note: In case of direct imports, EO shall be reckoned with reference to Actual Customs Duties saved amount
on CIF Value. In case of domestic sourcing, EO shall be reckoned with reference to Notional Customs Duties

saved on FOR Value.
(b) Average Export Obligation: 100% of what is otherwise applicable i.e. it remains same.
POST EXPORT EPCG DUTY CREDIT SCRIP FOR CAPITAL GOODS
Eligibility of Post
Export EPCG Duty
Credit Scrip
(i) Post Export EPCG Duty Credit Scrip(s) shall be available to exporters who intend to import Capital Goods on full
payment of applicable duties in cash and choose to opt for this scheme.
(ii) Later on, Basic Customs Duty paid on Capital Goods shall be remitted in the form of freely transferable Duty
Credit Scrip(s), similar to MEIS / SEIS Duty Credit Scrip(s).
Export Obligation
under Post Export
EPCG Duty Credit
Scrip
Export Obligation based on Value shall be of 2 types:
(i) Specific Export Obligation (SEO): SEO under this Scheme shall be 85% of the applicable SEO (i.e. 85% of 6 times
Duty Saved) under the EPCG Scheme.
(ii) Average Export Obligation (AEO): AEO continues to remain unchanged i.e. same as AEO under the EPCG
Scheme.
Other Points of Post
Export EPCG Duty
Credit Scrip
(i) Pro-Rata Remission: Duty remission of BCD (in form of Duty Credit Scrip) shall be in proportion to the EO
fulfilled.
(ii) Utilization of Scrip granted under this Scheme is same as MEIS / SEIS Scrip(s): All provisions for utilization of
MEIS / SEIS Scrip(s) issued under FTP shall also be applicable to Post Export EPCG Duty Credit Scrip(s).

EXPORT ORIENTED UNIT SCHEMES
EOU V. SEZ UNIT
100% EOU SEZ Unit
EOUs are governed by provisions of Foreign Trade Policy Governing
Provisions
SEZs are governed by provisions of SEZ Act, 2005
No restrictions i.e. EOUs can exist anywhere Locational
Restrictions
Locational restrictions i.e. SEZs Unit shall be located only
within SEZ (Specified Area)
Service Unit
Manufacturing Unit
Trading Unit
Operational Units Service Unit
Manufacturing Unit
Trading Unit
Basics of EOU Export Oriented Units (EOUs) are Dedicated Export Units undertaking to export their entire production except
permissible sales into Domestic Tariff Area (DTA).
Similar principles as applicable for EOU are applicable for the following:
(i) Electronic Hardware Technology Park (EHTP) Scheme
(ii) Software Technology Park (STP) Scheme
(iii) Bio-Technology Park (BTP) as notified by DGFT on recommendation of Department of Biotechnology
Conditions for
Eligibility for EOU
(i) Dedicated Exports: An undertaking to export their entire production of goods and services except permissible
sales in DTA.
(ii) Eligible Activities: The following activities are eligible
(a) Manufacture of Goods (including Repair, Re-making, Reconditioning, Re-engineering)
(b) Rendering of Services
Note: Trading Units are not covered under these Schemes.
(iii) Minimum Investment: Only projects having a minimum investment of Rs.1 Crore in Plant and Machinery shall

be considered for establishment as EOUs.
Notes:
(a) Minimum Investment is NOT applicable for Handicrafts, Agriculture, Floriculture, Aquaculture, Animal
Husbandry, Information Technology Services, Brass Hardware and Handmade Jewellery Sectors.
(b) Board of Approval (BOA) may also allow establishment of EOUs with a lower investment criteria.
Eligible Exports by
EOU
Following are eligible exports by EOU:
(i) All Goods and Services except Prohibited Exports: EOU / EHTP / STP / BTP Unit may export all kinds of goods
and services except items that are prohibited in ITC (HS).
(ii) Export of Special Goods: Export of Special Chemicals, Organisms, Materials, Equipment and Technologies shall
be subject to fulfilment of the conditions indicated in ITC (HS).
Export Obligations
by EOU
(i) EOU shall be a Positive Net Foreign Exchange Earner except some sector specific units which shall fulfil a higher
value addition criteria.
(ii) Net Foreign Exchange (NFE) Earning shall be calculated cumulatively in blocks of 5 years starting from
commencement of production.
Duty exemption to
EOU
(i) Duty Exemption on Procurement of Goods (including Capital Goods)
Procurement of Goods Duty Exemption
Import of Goods by EOU
(Import of Goods is Inter-State
Supply  BCD + IGST + GST
Cess is leviable)
Exemption of Customs Duty
 Basic Customs Duty is exempted under EN 52/2003 – Customs
Exemption of IGST & GST Cess (ONLY upto 31st March 2020)
 IGST leviable under Section 3(7) of CTA, 1975 is exempted under EN
79/2017 – Customs
 GST Compensation Cess leviable under Section 3(9) of CTA is exempted
under EN 79/2017 – Customs
Domestic Procurement of
Goods from DTA by EOU
(Supply of Goods by DTA to
EOU is Intra-State Supply or
Inter-State Supply  GST is
leviable)
Supply of goods by DTA to EOU would be on payment of applicable GST
taxes. Also, Supply to EOU would qualify as ‘Deemed Export’ as per Section
147 of CGST Act, 2017
 First, GST shall be paid on such ‘Deemed Export’ transactions. (CGST +
SGST / IGST)
 Thereafter, such GST paid is refundable under GST as per Section 54 of

CGST Act, 2017 read with Rule 89 of CGST Rules, 2017. This refund can
be claimed by either DTA Supplier (making Deemed Export Supply) or
Recipient EOU (receiving Deemed Export Supply)
Claim by DTA Supplier:
 DTA Supplier shall not collect GST to the Recipient EOU.
 DTA Supplier when submitting Refund Application shall give an
undertaking from Recipient EOU to the effect that it has no objection
as to DTA Supplier claiming refund.
Claim by Recipient EOU:
 Supplier shall collect GST to the Recipient EOU.
 Recipient EOU shall not book any ITC of GST charged and it shall
apply for refund of GST.
(ii) Duty Exemption on Procurement of Services
Procurement of Services Duty Exemption
Import of Services
(Import of Services is Inter-
State Supply  IGST is
leviable)
 Recipient EOU shall pay IGST on Import of Services under RCM as per
Section 5(3) of IGST Act, 2017
 Thereafter, ITC of IGST is admissible to EOU
Also, Refund of ITC can be claimed by EOU (post export by EOU)
Domestic Procurement of
Services from DTA by EOU
(Supply of Goods by DTA to
EOU is Intra-State Supply or
Inter-State Supply  GST is
leviable)
 DTA Supplier shall pay GST (CGST + SGST or IGST) on Supply of
Services under FCM
 Thereafter, ITC of IGST is admissible to EOU
Also, Refund of ITC can be claimed by EOU (post export by EOU)
Notes: Some of the other benefits apart from Duty Exemption that EOUs get are as follows:
(i) EOU gets 9 months period to realize Foreign Exchange
(ii) 100% FDI is allowed in EOUs, etc.
Supply by EOU to
DTA
Supply by EOU to DTA (within permissible limits) shall be subject to payment of applicable GST and GST Cess, if
any. EOU must also return benefits availed earlier, if it makes supplies into DTA.

Exit from EOU
Scheme
(i) With approval of Development Commissioner, an EOU may opt out of scheme. Such exit shall be subject to
payment of applicable IGST / CGST / SGST / UTGST and Compensation Cess, if any, and industrial policy in
force.
(ii) If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.
Conversion to EOU
Schemes
(i) DTA to EOU: Existing DTA Units may also apply for conversion into an EOU / EHTP / STP / BTP Unit.
(ii) EHTP / STP to EOU or vice versa: Existing EHTP / STP Units, who have applied for conversion / merger to EOU
Unit and vice-versa, can avail exemptions in duties and taxes as applicable.
(iii) Conversion Application to be place before Board of Approval for decision in Certain Cases: Applications for
conversion into an EOU / EHTP / STP / BTP Unit from existing DTA units,
 having an investment of Rs.50 crores and above in Plant and Machinery or
 exporting Rs.50 crores and above annually,
shall be placed before BOA for a decision.

DEEMED EXPORTS
DEEMED EXPORTS
Supply by Manufacturer Supply by Main Contractor / Sub Contractor
(a) Supply of goods against AA Scheme / AA Scheme for Annual
Requirement / DFIA Scheme
(b) Supply of capital goods against EPCG Scheme
(c) Supply of goods to EOUs / STPs / EHTPs / BTPs
(a) Supply of goods to United Nations (UN) or International
Organization (IO) for their official OR
Supply to projects funded by UN or IO approved by Government
of India;
(b) Supply of goods to Nuclear Projects through Competitive
Bidding (National / International)
(c) Supply of goods to projects financed by Multilateral or Bilateral
Agencies / Funds as notified by the Department of Economic
Affairs, Ministry of Finance under International Competitive
Bidding
(d) Supply of goods to any project or purpose in respect of which
the Ministry of Finance, by a notification, permits the import of
such goods at Zero Customs Duty
Note: Deemed Export benefit is for Main Contractors as well as Sub-Contractors
Supply by Main Contractor directly to
Designated Agencies / Projects / Units
 Deemed Exports
Supply by Sub-Contractor to Main
Contractor
 Deemed Exports (Payment for such supply shall be made to Sub-Contractor by Main
Contractor)
Supply by Sub Contractor directly to
Designated Agencies / Projects / Units
 Deemed Exports provided Sub-Contractor is indicated either originally or subsequently in the
Main Contract and Payment Certificate is issued by Project Authority in name of Sub-
Contractor. (Payment for such supply shall be made directly to Sub-Contractor by Project
Authority)

Example: Mr. DK manufactured goods in India and got a contract to supply CG within India to M/s RJ Export Ltd. who is holding EPCG
Authorization. Due to some operational problems, Mr. DK sub-contracted supply of CG to Mr. VK with proper authorization from M/s RJ
Exports Ltd. and included the name of Mr. VK in the main contract of supply before he started supply of goods. Can Mr. VK claim the benefit
of deemed export for supplies made?
As per FTP, supply of domestically manufactured goods by an Indian sub-contractor (Mr. VK) to any Indian / Foreign Main Contractor (Mr.
DK) directly at the designated project’s site shall also be eligible for deemed export benefit provided name of sub-contractor is indicated either
originally or subsequently (but before the date of supply of such goods) in the main contract. In such cases, payment shall be made directly to
the Sub-Contractor (Mr. VK) by the Project Authority (M/s RJ Exports Ltd.). Since aforesaid conditions are fulfilled, Mr. VK can also claim
benefit of deemed exports.
Meaning of
Deemed Exports
"Deemed Exports" refer to those transactions in which
(i) goods supplied do not leave country, and
(ii) payment for such supplies is received either in Indian rupees or in free foreign exchange.
It is important to note that the goods supplied for Deemed Exports must have been manufactured in India.
Deemed Export transaction is one which fulfils following conditions:
(i) Goods are manufactured in India
(ii) Such goods are supplied to specific categories of consumers OR to specified projects (i.e. Domestic goods are
supplied to those who are otherwise eligible to duty free import of goods such as AA Holder, EPCG Holder, etc.)
Special Note: Deemed Exports under GST includes only the supplies notified under Section 147 of the CGST Act,
2017 on the recommendations of the GST Council. The benefits of GST and conditions applicable for such benefits
would be as specified by the GST Council and as per relevant rules and notification. Here in this chapter, discussion
has been restricted to “Deemed Exports” for the purpose for FTP.
Objective of
Deemed Exports
(i) Objective of ‘Deemed Exports’ is to ensure that the Domestic Suppliers are not in disadvantageous position vis-à-
vis Foreign Suppliers in terms of fiscal concessions.
(ii) The underlying theory is that Foreign Exchange Saved must be treated at par with Foreign Exchange Earned, by
placing Domestic Manufacturers at par with Foreign Supplier.
(a) By deeming such supplies export, such supplies are made duty-free.
(b) Duty-free domestic supplies will encourage the customer to opt for Domestic Supplies instead of Import and
thus, it will have effect of import substitution and it will save outflow of foreign exchange.

(c) Finally, it will neutralize the selection between Domestic Supplies and Imports (as both made duty-free now –
Imports were duty-free because of Authorizations issued under FTP and Domestic Supplies becomes duty-
free because of grant of status of ‘Deemed Exports’ under FTP)
Exemption and
Remission Scheme
for Deemed Exports
Recent Amendment
Deemed exports shall be eligible for all / any of the following benefits subject to specified terms and conditions):
(i) Advance Authorization / AA for Annual Requirement / DFIA (Duty free procurement of Inputs): Exemption
from Customs Duties on inputs used in manufacture and supply of Deemed Exports category on basis of AA /
DFIA.
(ii) Deemed Export Duty Drawback (Duty paid procurement and subsequent refund): DBK in form of BCD on
inputs used in manufacture and supply of Deemed Exports category shall be given on Brand Rate basis upto
submission of documents evidencing actual payment of BCD.
However, DGFT has amended the said provision and provided that refund of drawback on the inputs used in
manufacture and supply under the deemed exports category can be claimed
 on 'All Industry Rate' of Duty Drawback Schedule notified by Department of Revenue from time to time
provided no CENVAT credit has been availed by supplier of goods on excisable inputs OR
 on 'Brand Rate basis' upon submission of documents evidencing actual payment of basic custom duties.

VJPJ Education’s Online Store in India – Instamojo
https://www.instamojo.com/vjpjeducation/

Hearty Congratulations!!!
Our Beloved Students who shined in November 2019 Exams!!!
CA Monisha Nithiyanandam
(AIR 20)
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(AIR 40)
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CA Priyanka
CA Sujith
CA Daniel Leo
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CA SreeHarii K
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& …………………..
All the Best to those who are very much
Determined to Fight and Win the Race to become CA!!
Believe
Yourself!!

CA NOTES ON FOREIGN TRADE POLICY

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