India's exports special schemes

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FOREIGN TRADE POLICY
PROFESSIONAL OPPORTUNITIES

FOREIGN TRADE POLICY (FTP)
 Issued by the MoC to regulate all import-export
transactions
◦ 5 year policies issued – Current Policy 2009-2014
 Procedural aspects set out in the Handbook of Procedures
accompanying the Policy
◦ Various goods bifurcated into Free/Restricted/Prohibited
 Prescribes necessary registrations, etc for undertaking
such transactions
◦ Obtaining Importer Exporter Code
◦ Necessary licenses in case of restricted goods
 Export Incentive Schemes for :
◦ Exporters of Goods
◦ Service Exporters Supported by appropriate
◦ Deemed Exporters notification from MOF
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FTP issued under Section 5 of the F T (D&R) Act, 1992

FOREIGN TRADE (D& R) ACT, 1992
 Sec 3 – CG to make provisions to facilitate imports and
increase exports
 Sec 5 – Formulate and announce the export and import
policy from time to time
 Sec 6 – CG to appoint DGFT to regulate the Act and
assist in formulation of the Policy
 Provisions in relation to issuance of IEC
 Search/Seizure/Penalty/Confiscation Provisions
◦ Penalty to be Rs. 1000 or 5 times the valur of goods whichever is
more
◦ Adjudicating Authority to settle the amount of penalty
◦ Penalty/confiscation not to interfere with other punishments
 Provisions relating to Appeal/Revision
 Misc. Provisions
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PROFESSIONAL OPPORTUNITIES
Every $ of export results in duty benefit
Value Added Services
◦ Identifying the various transactions undertaken by the client to
determine benefits available under FTP including transaction
structuring
◦ Not all service exporters optimizing benefits
 SFIS
 EPCG
◦ Benefits in relation to Deemed Exports not tapped completely
◦ Review of benefits being availed to identify the most optimum scheme
Compliance Services
◦ Certification
◦ Application preparation and obtaining licences
◦ Litigation
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SIGNIFICANT EXPORT PROMOTION SCHEMES
 Promotional Measures
◦ Served from India Scheme (SFIS)
◦ Focus Market Scheme (FMS)
◦ Focus Product Scheme (FPS)
 Duty Exemption & Remission Schemes
◦ Advance Authorization Scheme
◦ Duty Free Import Authorization Scheme
◦ Duty Entitlement Passbook Scheme
 EPCG Scheme
 Special Schemes
◦ Deemed Exports
◦ Export Oriented Unit (EOU)
◦ Special Economic Zone (SEZ)
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IDENTIFYING APPROPRIATE SCHEME
 Each Scheme has following 4 aspects:
◦ Objective
 Enables clarity on interpretational issues
◦ Eligibility
 Meeting the eligibility criteria is most critical before any further
analysis as to applicability of the Scheme is undertaken
◦ Entitlement
 With a view to optimise the total benefit, it is critical that such
scheme as would result into maximum benefit, considering
commercial requirements is opted
◦ Imports permitted
 Each scheme restricts the nature of goods that can be imported
under the entitlement conferred by the Scheme
◦ Conditions and obligations
 Satisfaction of the conditions is an absolute necessity
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PROMOTIONAL MEASURES
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SERVED FROM INDIA SCHEME…
 Objective
◦ To accelerate the growth in export of services
◦ To create a powerful and unique SFI brand, instantly
recognized and respected world over
◦ Enhance India’s share in global exports of services
◦ Help small scale service providers
 Eligibility
◦ Individual service provider
 who earn forex of at least Rs. 5 lakhs during preceding financial
year
◦ Other service provider
 who earn forex of at least Rs. 10 lakhs during preceding or
current financial year
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Eligible services include all services listed under GATS

…SERVED FROM INDIA SCHEME…
 Duty free entitlement benefit
◦ 10% of the total foreign exchange earned
 Imports allowed
◦ Capital goods including spares;
◦ Office equipment and professional equipment;
◦ Office furniture and consumables
◦ Entitlement cannot be used for payment of duty in relation to
imported vehicles
 Conditions
◦ Goods imported shall be non transferable
 Transferability allowed within the service providers of the Group
Company with actual user condition
◦ Not to include inter alia Foreign exchange remittances related
to
 Financial Services Sector, export proceeds realizations, issuance of
FCBs etc., payments for services received from EEFC etc.
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…SERVED FROM INDIA SCHEME
 Professional Opportunities
◦ Advisory
 Applicability and utility of the scheme in varying fact profiles
 Analysis of impact of relevant Notifications and Circulars
 Eligibility of kind of goods that can be imported – including office
equipment
 Legal and interpretational issues
◦ Execution / Implementation
 Ascertaining eligible service exports of client
 Ascertaining the requirement of imported goods
 Import restrictions, if any, applicable to a particular client
 Getting the SFIS Scrip
 Filing application
 Follow up with Department
 Assistance in utilization of the credit scrip
 Procedural compliances and documentation requirements
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FOCUS MARKET SCHEME…
 Objective
◦ To offset the high freight cost and other disabilities to select
international markets with a view to enhance export
competitiveness
 Entitlement
◦ Duty free credit scrip equivalent to 3% of FOB value of exports
made from Aug. 27, 2009
 Notified countries set out in Appendix 37 C
 Focus Markets (Table 1- American, African, East European, Asian and
CIS-CAR block)
 New Focus Markets (Table 2- Latin American and Asia-Oceania block)
 Eligible exports – all goods to notified countries
◦ Ineligible exports
 Supplies to SEZ units; Service exports; Ores and Concentrates;
 Diamond and other precious, semi precious stones; Gold, silver etc..
 Cereals of all types; Sugar, of all types; Milk & milk products
 Crude / Petroleum Oil
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…FOCUS MARKET SCHEME…
• Imports allowable
• Duty Credit Scrip and goods imported there under are
freely transferable
• Inputs or Capital goods which are otherwise freely
importable under ITC
• Others
• Proof of landing critical for availment of the benefit
• Cenvat / Drawback
• Additional Customs duty / Excise duty paid, can be adjusted as
Cenvat credit or Duty drawback
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…FOCUS MARKET SCHEME
◦ Advisory
 Applicability of the scheme in varying fact profiles
 Eligibility of kind of goods that can be imported
 Representation for addition of specific countries
 Transaction structuring to create eligibility under the scheme
 Identifying countries to which exports are made
 Determining utilisation of credit scrip
 Getting the FMS Scrip
 Follow up with Department
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FOCUS PRODUCT SCHEME…
 Objective
◦ To incentivise export of such products, having high
employment intensity in rural and semi urban areas
◦ To offset the inherent infrastructure inefficiencies and other
associated costs involved in marketing of these products
 Entitlement & Eligibility
◦ Exports of notified products to all countries entitled for duty free
credit scrip equivalent to 2% (5%-special products) of FOB value
of exports for each licensing year
◦ Following exports shall not be taken into account for credit
entitlement
 Deemed exports
 Exports made by SEZ units or SEZ products exported by DTA units
 EOUs / EHTPs / BTPs who’re availing direct tax benefits / exemptions
 Exports through transshipment
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…FOCUS PRODUCT SCHEME…
 Imports allowable
◦ Duty Credit Scrip and goods imported there under are
freely transferable
◦ Inputs or Capital goods which are otherwise freely
importable under ITC
 Others
◦ Cenvat / Drawback
 Additional Customs duty / Excise duty paid, can be adjusted as
Cenvat credit or Duty drawback
◦ This scheme is an alternate option to
 Focus Market Scheme or
 Vishesh Krishi and Gram Udyog Yojana
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…FOCUS PRODUCT SCHEME
◦ Advisory
 Eligibility of kind of goods that can be imported
 Representation for addition of specific products
 Transaction structuring to create eligibility under the scheme
 Ascertaining eligible goods that have been exported
 Getting the FPS Scrip
 Follow up and liasoning with Department
 Assistance in utilization of the credit scrip
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DUTY EXEMPTION AND
REMISSION SCHEMES
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ADVANCE AUTHORIZATION SCHEME
…
(Erstwhile ‘Advance License Scheme’)
 Issued on the basis of
◦ Inputs and export given under Standard Input Output Norms
(SION); or
◦ Adhoc norms or self declared norms
 Para 4.7 of the Handbook of Procedure
◦ Authorization can also be applied for annual requirement for a
particular product group by Status holders and by the other
exporters having at least past two years export performance
 Eligibility
◦ Manufacturer/Exporter as well as Merchant/Exporter tied up
with supporting manufacturer
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… ADVANCE AUTHORIZATION SCHEME …
 Entitlement
◦ Duty free imports of inputs & consumables are allowed for
manufacture of export product
 Normal allowance for wastage available
◦ Duty free imports of spares upto 10% of the CIF value of the
Authorization which are required to be exported
 Imports allowable
◦ All items except prohibited items
 Conditions
◦ Authorization is under actual user condition i.e. materials
imported cannot be transferred, must be incorporated in the
export product
 Option with Authorization holder to dispose off the product
manufactured out of the duty free inputs on completion of export
obligation
 If imports made in higher quantity, then duty alongwith interest to be
paid
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… ADVANCE AUTHORIZATION SCHEME…
• Limitation / Practical Issues
• Strict enforcement of technical characteristics, quality and
specification of inputs gives very little flexibility to exporters
• Problem in auditing of Duty Entitlement Exemption
Certificate (DEEC) after fulfillment of export obligation
• Dual monitoring of export obligation by both DGFT and
Customs with little coordination interse between them
• Payment of high interest on the unutilized quantity of raw
material even in case of bonafide default
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Very widely used Scheme, however, a review of the
effectiveness of this scheme vis-à-vis other schemes
may reveal different results

DUTY FREE IMPORT AUTHORIZATION SCHEME…
 Combined features of
◦ Advance Authorisation Scheme; and
◦ Erstwhile Duty Free Replenishment Certificate Scheme
 Entitlement
◦ Duty free import of inputs which are used in manufacture of export
product as per SION
 Normal allowance for wastage available
 Eligibility
◦ Manufacturer/Exporter as well as Merchant/Exporter tied up with
supporting manufacturer
 Conditions
◦ Minimum 20% value addition required with an export commitment
◦ Actual user condition in case of pre-export authorization
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…DUTY FREE IMPORT AUTHORIZATION SCHEME…
 Benefit
◦ Exemption from following duties on procurement
 Customs, Additional Customs & Excise duty, Education Cess, Anti-
dumping duty & Safeguard duty
 Import allowable
◦ All items except prohibited items
 Transferability
◦ Allows transferability of scrip as well as goods imported
thereunder
 Cenvat facility
◦ Cenvat credit facility available for inputs either imported or
procured indigenously against the Authorization
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…DUTY FREE IMPORT AUTHORIZATION SCHEME
◦ Advisory
 To identify appropriate scheme DFIA Vs. AAS
 Minimum value addition criteria reduces quantum of benefit
 Transferability ensures benefits to producers using domestic inputs
 Whether scrip should be purchased at all by non-exporters
 Calculation of input output norms to confirm eligibility under the
scheme
 Calculation of quantum of value addition
 Preparation and filing of application including all supporting
documentation
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DUTY ENTITLEMENT PASSBOOK SCHEME…
 Objective
◦ To neutralize the incidence of Customs duty on import content of the
export product
 Entitlement
◦ Duty credit on the basis of pre-notified entitlement rates
◦ Such credit can be utilized to import goods without payment of duty
◦ DEPB or Products imported against it are freely transferable
 Advantages
◦ Freely transferable
◦ No actual user condition
◦ Additional Customs Duty/Excise Duty paid in cash or through debit
under DEPB can be adjusted as Cenvat Credit
 Applicability of Drawback
◦ Additional Customs duty / Excise duty paid in cash or through debit
may also be adjusted as Cenvat Credit or Duty Drawback
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…DUTY ENTITLEMENT PASSBOOK SCHEME
◦ Advisory
 Continuous review required for adoption of most appropriate
scheme
 DEPB on the verge of being phased out
 Rates are being revised downwards periodically
 Whether scrip should be purchased at all by non-exporters?
 Analysis of impact of Notifications and Circulars
 Ascertaining eligibility of goods
 Preparation of application, documents & declaration to be
submitted
 Application for grant of credit
 Benefits - before whom to be claimed
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EXPORT PROMOTION
CAPITAL GOODS
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EXPORT PROMOTION CAPITAL GOODS SCHEME…
 Objective
◦ Achieve growth in exports by allowing capital goods to be imported at concessional
rate of duty
 Entitlement
◦ Pre export benefit – import at concessional rate of 3% and 0% customs duty
 Components and spares also eligible to concession
 Eligibility
◦ Manufacturer exporters
◦ Supporting manufacturers
◦ Service providers
 Imports allowed - capital goods, including
◦ spares (including refurbished/reconditioned spares),
◦ tools, jigs,
◦ fixtures,
◦ dies and moulds
◦ Second hand capital goods without any restriction on age
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…EXPORT PROMOTION CAPITAL GOODS SCHEME…
 Benefits
◦ Deemed export benefits on domestic sourcing
◦ Leasing of imported capital goods permissible
 Obligations
◦ Export Obligation to be fulfilled upto 50% by export of goods
manufactured or services rendered, balance can be through
other units/Group Companies
 EO = 8 times duty saved (6 times in 6 years in case of 0% duty)
 To be fulfilled within 8 years from issue of license;
 To be fulfilled within 12 years in case amount of duty saved exceeds
Rs. 100 Cr
 Exports under Advance Authorisation, DFIA, Drawback, etc. can
also be considered towards fulfillment of EO
 Special extended period to achieve EO for BIFR / SSI
◦ Actual user condition till fulfillment of export obligation
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SPECIAL SCHEMES
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DEEMED EXPORTS…
• Concept
• Unique to India
• Specified transactions where goods are not physically exported
outside the country
• Payment for such supplies is received either
• in Indian rupees or
• in free foreign currency
• Objective
• Public Interest
• Encourage exports directly / indirectly
• Benefits
• Deemed Exporters shall be entitled to
• Advance Authorization / DFIA
• Deemed export Drawback
• Refund of Terminal Excise duty
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…DEEMED EXPORTS…
 Entitlement
◦ Following categories of supplies by main contractors / sub-
contractors treated as deemed exports
 Against Advance Authorisation / Advance Authorisation for
annual requirement / DFIA
 To EOU / STP / EHTP / BTP
 Capital goods to EPCG Authorisation holders
 Projects financed by multilateral or bilateral agencies / funds as
notified by the Department of Economic Affairs, Ministry of
Finance under International Competitive Bidding (ICB)
 Supply of goods where legal agreements provide for tender
evaluation without inclusion of Customs duty
 Supply and installation of goods and equipment where bids are
evaluated on the basis of Delivered Duty Paid (DDP) prices for goods
manufactured abroad
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…DEEMED EXPORTS…
 Capital goods to fertilizer plants
 including CG in unassembled / disassembled condition
 plants, machinery, accessories, tools, dies and such goods which are
used for installation purposes till stage of commercial production,
and
 spares to the extent of 10% of FOR value
 To any project or purpose in respect of which the MoF, by
notification, permits import of such goods at zero Customs duty
 To power projects and refineries not covered above (Subject to
ICB)
 Supply of marine freight containers by 100% EOU
 Containers to be exported out of India within 6 months or such
further period as permitted by Customs
 To projects funded by UN Agencies
 To nuclear power projects through competitive bidding as
opposed to ICB
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…DEEMED EXPORTS
◦ Advisory
 What transactions qualify as deemed exports
 Impact of Notifications / Circulars / precedents on varying fact
profiles
 Structuring of transactions as deemed exports
 Legal / Interpretational issues
 Conceptualization and implementation of the transaction to
qualify as deemed exports
 Preparation & maintenance of accounts & documents
 Procedural compliances
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EXPORT ORIENTED UNITS…
 Concept
◦ Unit primarily expected to export
◦ Covers capital goods (including raw material for making
capital goods), raw materials and others
◦ Entitlement to sell upto 50% of FOB value of exports to the
Domestic Tariff Area (DTA)
◦ Sub-contracting to DTA permitted
 Fiscal benefits
◦ Exemption from Customs Duty on import / local procurement
and Excise duty on manufacture for export
◦ Refund of Central Sales tax on inter state procurement of
goods
◦ Exemption from Income tax in respect of export earnings
◦ Leasing of Capital Goods without payment of Customs / Excise
duty
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…EXPORT ORIENTED UNITS…
• Obligation
• The unit should be positive net foreign exchange earner
(NFEE)
• Duty, interest and penalty payable on non fulfillment of
NFEE
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The biggest incentive of Income Tax holiday
fadding out at end of the current fiscal year

SPECIAL ECONOMIC ZONES
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SPECIAL ECONOMIC ZONE
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“Specially delineated
duty free enclave”
“No licence required for import”
“Deemed foreign territory for
trade, operations, duties
and tariff”
“Manufacturing, trading or
service activity allowed”
“SEZ unit to be positive net
foreign exchange earner
within three years”
“Full freedom for subcontracting including
subcontracting abroad”
“Job work on behalf of
domestic exporters for direct
exports allowed”
“No separate documentation required
for Customs and Exim Policy”

KEY PLAYERS
• Development of SEZ
• Developer
• Person responsible for procuring the land on which the SEZ will be set
up and arranging for the construction, development, provision of
infrastructure, operation and maintenance of the SEZ
• Co-developers
• Person who enters into an agreement with the Developer to assist the
Developer in providing infrastructure in the SEZ or undertaking any
other operations as have been authorized by the Board of Approval
• Units in SEZ
• Entrepreneurs
• Units are set up within the SEZ by Entrepreneurs to undertake
manufacturing activities and / or provide services
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OTHER KEY PLAYERS
• Parties involved in the development of a SEZ
• Contractors
• Service Providers and
• Vendors
• Contractors / Service Providers / Vendors
• Application to DC for getting approval
• Post Approval will be eligible for SEZ benefits
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DIRECT TAX BENEFITS - UNITS
◦ Deductions of Profits (Section 10AA)
*Deduction is allowed provided the amount is credited to a Special Reserve
Account which is created and utilized for the business of the unit within 3
years
◦ Deduction available only in respect of profit and gains from
physical exports
Deduction
(% of Profit)
Years
100 0-5
50 5-10
50* 10-15
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INDIRECT TAX BENEFITS
APPLICABLE LAWS EXEMPTIONS
Excise • Goods manufactured and exported out of the SEZ units
• Goods procured from the Domestic Tariff Area into the SEZ
Customs • Goods imported into a SEZ
• Goods exported from a SEZ Unit (other than except DTA
Sale)
• Drawback on goods brought from the DTA into a SEZ Unit
Service tax • Taxable Services exported out of the SEZ units to a place
outside India
• Taxable Services procured from the Domestic Tariff Area
into SEZ
• Drawback on services provided from the DTA into a SEZ
• Drawback on services provided in SEZ by service providers
located outside India
Central Sales tax • Exemption from CST on purchase of goods from DTA
• No exemption on sale by SEZ unit into the DTA
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Indirect tax benefits are available only for
carrying out Authorized Operations

POSITIVE NFE REQUIREMENT
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The unit shall achieve positive Net Foreign Exchange (NFE)
 NFE to be calculated cumulatively for a period of 5 years from
the commencement of production
 NFE to be computed as :-
A - B > 0
A = FOB value of exports
 Includes supply of Information Technology Agreement items and
notified zero duty telecom or electronic items, namely, colour display
tubes for monitors and deflection components for colour monitors or
other items notified by Central Government
 Includes supply to other units and developers in the same or other
SE or EOU/EHTP/STP/BTP
B = CIF value of imported inputs and imported capital goods (for
annual calculation of NFE, the value of imported capital goods and
lump sum payment of foreign technical know-how fee shall be
amortized over 10 years @ 10% of the value)

THANK YOU
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Value-added advise in relation to
the Foreign Trade Policy can
have a direct, unanticipated and
positive impact on the clients
bottom line

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