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Schemes For Encouraging Exports
Export Incentives for Manufacturer
   Indigenous inputs w/o payment of excise duty
   No excise duty charged on final product
   Imported inputs w/o payment of customs duty
   No export duty on export of final product
   Fast finance at concessional interest rates
   Exemption from income tax
   Exemption from SALES TAX on final product (refund of
    CST paid on inputs in certain cases)
Input Duty Relief Scheme

   Various schemes – to obtain duty free inputs OR get
    refund later
   Some schemes – unit has to be isolated from domestic
    production units
   e.g. EOU, STP, EHTP and SEZ
Salient features of SEZ scheme
•   Duty free import/domestic procurement of goods for development,
    operation and maintenance of SEZ units
•   100% Income Tax exemption on export income for SEZ units under
    Section 10AA of the Income Tax Act for first 5 years, 50% for next
    5 years thereafter and 50% of the ploughed back export profit for
    next 5 years.
•   Exemption from minimum alternate tax under section 115JB of the
    Income Tax Act.
•   External commercial borrowing by SEZ units upto US $ 500 million
    in a year without any maturity restriction through recognized
    banking channels.
•   Exemption from Central Sales Tax.
•   Exemption from Service Tax.
•   Single window clearance for Central and State level approvals.
•   Exemption from State sales tax and other levies as extended by the
    respective State Governments
Salient features of SEZ scheme
•   Exemption from customs/excise duties for development of
    SEZs for authorized operations approved by the BOA.
•   Income Tax exemption on income derived from the business
    of development of the SEZ in a block of 10 years in 15 years
    under Section 80-IAB of the Income Tax Act.
•   Exemption from minimum alternate tax under Section 115 JB
    of the Income Tax Act.
•   Exemption from dividend distribution tax under Section 115O
    of the Income Tax Act.
•   Exemption from Central Sales Tax (CST).
•   Exemption from Service Tax (Section 7, 26 and Second
    Schedule of the SEZ Act).
Salient features of EOU scheme
•   No license required for import.
•   Exemption from Central Excise Duty in procurement of capital goods, raw-
    materials, consumables spares etc. from the domestic market.
•   Exemption from customs duty on import of capital goods, raw materials,
    consumables spares etc.
•   Reimbursement of Central Sales Tax (CST) paid on domestic purchases.
•   Supplies from DTA to EOUs treated as deemed exports.
•   Reimbursement of duty paid on furnace oil, procured from domestic oil
    companies to EOUs as per the rate of drawback notified by the Directorate
    General of Foreign Trade.
•   Facility to retain 100% foreign exchange proceeds in EEFC Account.
•   Facility to realize and repatriate export proceeds within twelve months
•   100% Foreign Direct Investment permisisible.
•    Exchange earners foreign currency (EEFC) Account
Salient features of EOU scheme
•   Re-export of imported goods found defective, goods imported from
    foreign suppliers on loan basis etc.
•   Exemption from industrial licensing requirement for items reserved
    for SSI sector.
•   Profits allowed to be repatriated freely without any dividend
    balancing requirement
•   Access to Domestic Market upto 50% of FOB value of export on
    concessional rate of duty.
•   Duty free goods to be utilized in two years. Further extension
    granted on liberal basis.
•   Job work on behalf of domestic exporters for direct export allowed.

•   Conversion of existing Domestic Tariff Area ( DTA) unit into an
    EOU permitted
   Supplies made to EOU by Indian supplier are ‘deemed
    exports’ and supplier is entitled to benefits of ‘deemed
    export’
   Supplies to SEZ are ‘exports’ and all export benefits are
    available
   Restrictions under Companies Act on managerial
    remuneration are not applicable
   Have to achieve +ve NFE (Net Foreign Exchange
    Earnings).
   A= FOB value of exports
   B = CIF Value of all imported inputs and capital goods
    and all payments made in foreign exchange




                NFE = A – B
EOU                                  SEZ
•   EOU unit can be set up at any      SEZ unit has to be located
    of over 300 places all over         within the specified zones
    India                               developed
•   Fast Track Clearance Scheme        Customs clearance for export
    (FTCS) for clearances of            and import is obtained within
    imported consignments               the zone itself
•   Minimum investment in plant        No such limit
    and machinery and building =
    Rs 1 crore. This should be
    before commencement of             Difficult to exit
    commercial production
•   Easy to exit
STP / EHTP unit
   Concept of STP/EHTP is similar to EOU/SEZ.
   Administered by Ministry of Information Technology.
   STP/EHTP unit can be set up as an EOU unit anywhere in
    India or as a SEZ unit at specified developed locations in
    India.
   A software development firm qualifies as STP/EHTP unit.
   Can import goods on loan from clients for specific
    period.
   Can export software electronically or through physical
    transport.
   Other schemes –domestic producers are also entitled to
    get inputs/capital goods free of taxes, e.g.
         Advance License scheme
         Duty Entitlement Pass Book scheme (DEPB)
         Duty Free Replenishment Certificate scheme (DFRC)
         EPCG scheme
         Rebate of duty on inputs if final product is exempt from duty
         Under duty drawback scheme, custom/excise duty paid on inputs is
          returned as rebate
   Next Topic
                    INCO terms
Schemes for encouraging exports
Schemes for encouraging exports

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Schemes for encouraging exports

  • 2. Export Incentives for Manufacturer  Indigenous inputs w/o payment of excise duty  No excise duty charged on final product  Imported inputs w/o payment of customs duty  No export duty on export of final product  Fast finance at concessional interest rates  Exemption from income tax  Exemption from SALES TAX on final product (refund of CST paid on inputs in certain cases)
  • 3. Input Duty Relief Scheme  Various schemes – to obtain duty free inputs OR get refund later  Some schemes – unit has to be isolated from domestic production units  e.g. EOU, STP, EHTP and SEZ
  • 4. Salient features of SEZ scheme • Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units • 100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. • Exemption from minimum alternate tax under section 115JB of the Income Tax Act. • External commercial borrowing by SEZ units upto US $ 500 million in a year without any maturity restriction through recognized banking channels. • Exemption from Central Sales Tax. • Exemption from Service Tax. • Single window clearance for Central and State level approvals. • Exemption from State sales tax and other levies as extended by the respective State Governments
  • 5. Salient features of SEZ scheme • Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA. • Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act. • Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act. • Exemption from dividend distribution tax under Section 115O of the Income Tax Act. • Exemption from Central Sales Tax (CST). • Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).
  • 6. Salient features of EOU scheme • No license required for import. • Exemption from Central Excise Duty in procurement of capital goods, raw- materials, consumables spares etc. from the domestic market. • Exemption from customs duty on import of capital goods, raw materials, consumables spares etc. • Reimbursement of Central Sales Tax (CST) paid on domestic purchases. • Supplies from DTA to EOUs treated as deemed exports. • Reimbursement of duty paid on furnace oil, procured from domestic oil companies to EOUs as per the rate of drawback notified by the Directorate General of Foreign Trade. • Facility to retain 100% foreign exchange proceeds in EEFC Account. • Facility to realize and repatriate export proceeds within twelve months • 100% Foreign Direct Investment permisisible. •  Exchange earners foreign currency (EEFC) Account
  • 7. Salient features of EOU scheme • Re-export of imported goods found defective, goods imported from foreign suppliers on loan basis etc. • Exemption from industrial licensing requirement for items reserved for SSI sector. • Profits allowed to be repatriated freely without any dividend balancing requirement • Access to Domestic Market upto 50% of FOB value of export on concessional rate of duty. • Duty free goods to be utilized in two years. Further extension granted on liberal basis. • Job work on behalf of domestic exporters for direct export allowed. • Conversion of existing Domestic Tariff Area ( DTA) unit into an EOU permitted
  • 8. Supplies made to EOU by Indian supplier are ‘deemed exports’ and supplier is entitled to benefits of ‘deemed export’  Supplies to SEZ are ‘exports’ and all export benefits are available  Restrictions under Companies Act on managerial remuneration are not applicable
  • 9. Have to achieve +ve NFE (Net Foreign Exchange Earnings).  A= FOB value of exports  B = CIF Value of all imported inputs and capital goods and all payments made in foreign exchange NFE = A – B
  • 10. EOU SEZ • EOU unit can be set up at any  SEZ unit has to be located of over 300 places all over within the specified zones India developed • Fast Track Clearance Scheme  Customs clearance for export (FTCS) for clearances of and import is obtained within imported consignments the zone itself • Minimum investment in plant  No such limit and machinery and building = Rs 1 crore. This should be before commencement of  Difficult to exit commercial production • Easy to exit
  • 11. STP / EHTP unit  Concept of STP/EHTP is similar to EOU/SEZ.  Administered by Ministry of Information Technology.  STP/EHTP unit can be set up as an EOU unit anywhere in India or as a SEZ unit at specified developed locations in India.  A software development firm qualifies as STP/EHTP unit.  Can import goods on loan from clients for specific period.  Can export software electronically or through physical transport.
  • 12. Other schemes –domestic producers are also entitled to get inputs/capital goods free of taxes, e.g.  Advance License scheme  Duty Entitlement Pass Book scheme (DEPB)  Duty Free Replenishment Certificate scheme (DFRC)  EPCG scheme  Rebate of duty on inputs if final product is exempt from duty  Under duty drawback scheme, custom/excise duty paid on inputs is returned as rebate
  • 13. Next Topic  INCO terms

Editor's Notes

  1. On cotton yarns and fabrics – basic duty of 10 %, and some other duties. On cotton fiber, there is no duty. On synthetic filament – basic duty 10 %, CVD 10 %, spl CVD 4 % ; fabrics – basic duty 10 %, CVD 10 %, .
  2. First EPZ in Kandla in 1965; SEZ policy was announced in Apr 2000, SEZ Act 2005
  3. Started in 1981