HELPING CLIENTS KEEP MORE OF WHAT THEY EARN

2015-2020
FOREIGN TRADE POLICY

- ANALYSIS

Export Promotion
Measures

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EXPORT PROMOTION SCHEMES

 Two major schemes i.e. Service Exports from India Scheme for increasing export of
service and Merchandise Export from India Scheme for increasing export of
merchandise has been introduced against multiplicity of existing schemes like FPS, FMS,
SFIS etc. The duty credit scrips and goods imported/domestically procured against
them shall be freely transferable (Earlier, Scrips under SFIS were not transferable and
were subject to actual user condition).

 The duty credit scrips can be utilised for payment of:

• Custom duties for import of goods
• Excise duties on domestic procurement of goods including capital goods
• Service Tax on Input Services

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 MERCHANDISE EXPORT FROM INDIA SCHEME (MEIS)

 Existing multiple schemes namely Focus Product Scheme, Market Linked Focus Product
Scheme, Focus Market Scheme etc have been merged into one scheme called
Merchandise Export from India Scheme.

 Under this scheme, Export of goods notified vide Public Notice 2/2015-20 dated
01.04.2015 shall be rewarded @ 2% to 5% depending on country/market of export. This
reward will be calculated on realized FOB value of export or FOB value as given in
Shipping bill whichever is less.

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 MERCHANDISE EXPORT FROM INDIA SCHEME (MEIS)

 The Countries/Markets, export to which will be eligible for benefit has been categorised
into 3 groups as follows:
Group A - 30 Countries mainly of Europe, USA and Canada
Group B – 139 Countries mainly of Africa, Latin America and few Asian countries
Group C – 70 Countries not included above

 Direct export from EOU/EHTP/STP/SEZ are now eligible for benefit under MEIS.

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 MEIS vs FPS/FMS/VKGUY

MEIS FPS/FMS/VKGUY

Duty Payable CENVAT^ Drawback^ Payable CENVAT^ Drawback^

through Debit through Debit
under Scrip under Scrip
BCD* √ X √ X - -
CVD** √ √ √ √ √ √
Excise Duty √ √ √ √ √ √
Service Tax √ √ √ √ √ √

* Basic Custom Duty ** Additional Custom Duty ^ either CENVAT or DRAWBACK can be availed 5
SPECIAL PROVISIONS FOR MEIS

Export of goods through courier or foreign post office using e-Commerce

 Goods being Handicraft/Handloom Products, Customised Garments, Leather

Footwear, Toys, Books and Periodicals of FOB value up to Rs. 25000 per consignment
when exported via courier or foreign post office using e-Commerce, are eligible for
reward under MEIS.

 If value of such goods exceeds Rs. 25000 per consignment, then MEIS benefit will be
restricted to value of Rs. 25000 only.

 Such goods can be exported through Foreign Post Office at New Delhi, Mumbai &
Chennai in manual mode.

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SERVICE EXPORT FROM INDIA SCHEME (SEIS)

 SEIS has replaced the earlier Served from India Scheme (SFIS). Under this scheme Export
from India, of Services notified under Public Notice 03/2015-20 will be eligible for
benefit @ 3% or 5% (10% under SFIS) of Net Foreign Exchange Earned.

 For being eligible to obtain benefit under SEIS, the following conditions must be
fulfilled:
• Service Provider must be located in India
• The service must be supplied from India to any other country or to consumers of any
other country. Hence, condition of Indian Service Provider has been removed.
• Service provider must have Net free foreign earnings(NFFE) of atleast US$ 15,000 in
the preceding financial year (For individual and sole proprietorship NFFE should be
US$ 10,000)

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SEIS vs SFIS

SEIS SFIS
Payable CENVAT^ Drawback^ Payable through CENVAT^ Drawback^
Duty through Debit Debit under
under Scrip Scrip

BCD* √ X √ X - -
CVD** √ √ √ X - -
Excise
√ √ √ √ √ √
Duty
Service
√ √ √ X - -
Tax

* Basic Custom Duty ** Additional Custom Duty ^ either CENVAT or DRAWBACK can be availed
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TRANSITIONAL PROVISION

 An exporter claiming benefit under FPS/MLFPS/FMS/VKGUY/SFIS so far, can still claim

benefit under the respective scheme, in respect of exports upto 31.03.2015. However,
applications for the same will have to be made till 30.06.2015 in the manner laid down in
FTP/ HBP 2009-14.

 For exports on or after 1.04.2015, exporter will be eligible to claim benefit under
MEIS/SEIS only.

 Schemes not merged into MEIS (SHIS, IEIS and Agri Infrastructure incentive scheme) will
be governed by the provisions of FTP/HBP 2009-14.

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 COMMON PROVISIONS FOR MEIS & SEIS

 Duty on import of capital goods under lease financing as per FTP provision can be paid by
utilizing duty credit scrip.

 Transfer of export performance is not permitted. However, MEIS rewards can be claimed
either by the supporting manufacturer or by the company/ firm who has realised the
foreign exchange directly.

 Duty credit scrips can be utilised for payment of custom duties in cases where Advance
Authorisation holder or EPCG holders fails to fulfill Export Obligation (EO) only for those
goods which are permitted to be imported under the respective reward schemes. However,
penalty/ interest will be paid in cash. Further, scrips can be utilised for payment of
composition fee, application fee under FTP and payment of value shortfall in EO for
regularisation of Bonafide Default in EO.
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COMMON PROVISIONS FOR MEIS & SEIS

 A risk management system will be in operation in the DGFT headquarters, where 10% of
cases against each RA can be selected on random basis and be called for documents
details etc. RA may ask for original proof in case of documents digitally uploaded for
verification. Also in case of any discrepancy/ or over claim, applicant shall be allowed to
rectify them/ refund over claim in cash with interest.

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STATUS HOLDER

 Status Holders are business leaders who have excelled in international trade and have
successfully contributed to country’s foreign trade. Any exporter having an IEC shall be
eligible for recognition as status holder.

 Status recognition depends upon export performance in current and preceding 2

Financial Years (previously current and preceding 3 Financial Years).

 For granting status, export performance is necessary in 2 out of 3 years (2 out of 4

years earlier).

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 STATUS HOLDER

The criteria for export performance for recognition of status holder has been changed from
Rupees to US dollar

New Nomenclature* Old Nomenclature

Export Performance Export Performance
Status Category FOB/FOR (as converted) Status Category FOB/FOR Value(Rs in
value (in US $ Million) Crore)

One Star Export House 3 Export House 20

Two Star Export House 25 Star Export House 100

Three Star Export House 100 Trading House 500

Four Star Export House 500 Star Trading House 2500

Premier Trading 7500
Five Star Export House 2000
House

* export made by subsidiary of a limited company will not be counted for export performance anymore 13
STATUS HOLDER- PRIVILEGES

 Authorization and custom clearances on self certification basis.

 Input output norms may be fixed on priority within 60 days by Norms Committee.

 Exemption from furnishing BG under schemes of FTP, compulsory negotiation of

documents through banks.

 Permission to establish Export Warehouses for 2 stars and above Export Houses and
benefit of Accredited Clients Programme to 3 stars and above Export Houses.

 Entitlement to export freely exportable items on free of cost basis for export
promotion subject to an annual limit of Rs. 10 Lakhs or 2% of average export realization
during preceding three licensing years whichever is higher.

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 HELPING CLIENTS KEEP MORE OF WHAT THEY EARN

2015-2020
FOREIGN TRADE POLICY

- ANALYSIS

Advance
Authorisation

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ADVANCE AUTHORISATION - Export Obligation Period
Extension
 Earlier, Advance authorization holder was allowed one EO Extension of 6 months from
the date of expiry of original EO period on payment of composition fee of 0.5% of
shortfall of EO.
Now, the RA has been given the discretionary power to grant a 2nd Extension of 6
months, on pro-rata basis, subject to the condition that Authorisation holder has fulfilled
50% EO in both quantity & value. Composition fee @ 0.5% per month on unfulfilled EO
shall be levied.

 The extension will also be granted to Authorisations issued under FTP 2009-2014.

 The application of 2nd extension shall be supported by CA/CE certificate certifying the
utilized imported/domestically procured inputs are with applicant.

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ADVANCE AUTHORISATION - Duty Exemption

Imports against Advance Authorisation are now eligible for exemption from
Transitional Product Specific Safeguard Duty as well in addition to BCD, CVD, EC, Anti
Dumping Duty & Safeguard Duty

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 HELPING CLIENTS KEEP MORE OF WHAT THEY EARN

2015-2020
FOREIGN TRADE POLICY

- ANALYSIS

Export Promotion
Capital Goods

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EXPORT PROMOTION CAPITAL GOODS

Promotion of Domestic Industry :

 In case of indigenous sourcing of Capital Goods, specific EO shall be 75% of the

stipulated EO (6 times the duty saved on capital goods).

 Earlier, the Specific EO for indigenous procurement was 90% of the stipulated EO.

Conversion of EOU/Relocated SEZ unit to DTA Unit :

 Guidelines for maintenance of Average Export Obligation and Specific Export

Obligation have been specified under the new policy, for those cases where EOU/SEZ
unit converts into DTA unit and obtains EPCG authorisation.

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EXPORT PROMOTION CAPITAL GOODS

Reduction in compliance/formalities for EPCG Authorisation holders :

 The time period for application for extension in EO period has been increased
from 30 days to 75 days from date of expiry of original EO period

 The EPCG authorization holders are now required to maintain true and proper
records of supplies towards EO fulfillment for a period of 3 years (earlier 2 years)
from date of redemption.

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EXPORT PROMOTION CAPITAL GOODS

Leniency in compliance/formalities for EPCG Authorisation holders :

 Henceforth, an Authorisation Holder has the option to obtain installation certificate

confirming receipt of capital goods either from the jurisdictional Central Excise
Authority or an independent Chartered Engineer subject to conditions.

 The initial 6 months period for submission of Installation Certificate can now be
extended by another 12 months by the Licencing Authorities.

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EXPORT PROMOTION CAPITAL GOODS

Restricted imports for EPCG:

Authorization under EPCG shall not be issued for import of any Capital Goods (including
Captive plants and Power Generator sets of any kind) for:

 Export of electrical energy (power)

 Supply of electrical energy (power) under deemed exports

 Use of power (energy) in their own unit

 Supply/export of electricity transmission services

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EXPORT PROMOTION CAPITAL GOODS

Changes in definition relevant to EPCG :

 “Supporting Manufacturer” for EPCG Scheme shall be one in whose premises/factory

Capital Goods imported/procured under EPCG authorization is installed.

Implication: Any person in whose premises the imported capital goods are installed will
be known as supporting manufacturer whether or not he is engaged in manufacturing .

 The definitions of “Actual User”, "Actual User (Industrial)” and "Actual User (Non-
Industrial)“ has been amended to include both Natural and Legal Persons having
definitive Postal Address.

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 HELPING CLIENTS KEEP MORE OF WHAT THEY EARN

2015-2020
FOREIGN TRADE POLICY

- ANALYSIS

Deemed Export

24
DEEMED EXPORT

Supply by Manufacturer qualifying as deemed export:

 Supply of goods against Advance Authorisation / Advance Authorisation for annual
requirement / DFIA;
 Supply of goods to EOU / STP / EHTP / BTP
 Supply of capital goods against EPCG Authorisation
 Supply of marine freight containers by 100% EOU (Domestic freight containers-
manufacturers) provided said containers are exported out of India within 6 months or
such further period as permitted by customs

Implication: Earlier, the above 4 categories of supplies made by contractor/sub

contractor amounted to deemed export. Now, these supplies will qualify as deemed
export when supplied by manufacture only.

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DEEMED EXPORT

Supply by Main contractor/Sub Contractor qualifying as deemed export:

 Supply of goods to projects financed by multilateral or bilateral Agencies / Funds.

 Supply of good for specified projects including mega power project.

 Supply of goods to United Nations/International organizations for their official use or

projects funded by it.

 Supply of goods to nuclear power projects subject to the conditions specified in this
regard.

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DEEMED EXPORT

Exemption from TED:

 Exemption from Terminal Excise Duty has been extended to supply of goods to United
Nations/International Organizations or project funded by it.

Conditions for Deemed Export Benefits:

 Third party supplies are not eligible for Deemed Export Benefits.

 Third Party Export means exports made by an exporter or manufacturer on behalf of

another exporter(s).

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DEEMED EXPORT

Risk Management and Internal Audit Mechanism

A risk management system has been introduced wherein an Internal Audit Team headed
by a Joint DGFT shall scrutinize, on random basis, cases where Deemed Export benefit
have been granted.

Further, the RA has been granted a discretionary power to reassess any case where
erroneous/in-eligible payment has been made/claimed. The RA can also initiate recovery
proceedings to recover the erroneous/in-eligible amount along with interest @15% p.a.

Penal Action
Penalty proceedings for mis-declaration/mis-representation of facts shall be in addition to
the recovery proceedings stated above.

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 HELPING CLIENTS KEEP MORE OF WHAT THEY EARN

2015-2020
FOREIGN TRADE POLICY

- ANALYSIS

EOU/STPI/BTP/EHTP
Units

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POSITIVE MEASURES FOR EOU/STPI/BTP/EHTP UNITS

 If any EOU/EHTP/STP/BTP unit is unable to achieve NFE due to adverse market

condition or genuine hardships affecting functioning, in such a case the BOA may
extend the five year block period for maintaining positive NFE for a period of upto one
year.
Such extension was earlier granted only for reason of economic slowdown.

Implication: The new FTP has liberalized the policy for maintaining positive NFE by
shifting from Economic perspective to individual perspective.

 The process of De-bonding/Exit of STO/ EHTP unit which has not availed any duty
benefit at the time of procurement of raw material, capital goods etc has been
proposed to be simplified.

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POSITIVE MEASURES FOR EOU/STPI/BTP/EHTP UNITS

 An EOU is now permitted to set up warehousing facilities outside the EOU premises
and outside the jurisdiction of DC, in order to reduce the lead time for the delivery of
goods overseas and to address unpredictability of supply orders, however it must
comply to the provisions related to export warehousing and the terms and conditions
of notification issued by Department of Revenue.

 Any transferred goods may be returned by the transferee unit to the transferor unit in
case of rejection by the former without payment of duty.

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POSITIVE MEASURES FOR EOU/STPI/BTP/EHTP UNITS

 Inter Unit transfer of goods and services on case to basis may be approved by the
Approval Committee in respect of a group of EOUs/EHTPs/STPs/BTP Units which
source inputs centrally in order to obtain bulk discount and/or reduce cost of
transportation.

 Henceforth, EOU/EHTP/STP/BTP unit may procure spares/ components up to 2% of

the value of manufactured articles cleared in the DTA during the preceding year and
supply the same to the consignee/buyer for the purpose of after-sale service after
payment of applicable duty. However, such clearance in the DTA should not exceed
the overall entitlement of 50% of FOB value of exports for the unit.

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STRINGENT MEASURES FOR EOU/STPI/BTP/EHTP UNITS

 Validity of LOP/LOI
EARLIER

3 Years 3 Years

Initial Validity Extension by competent authority Extension in exceptional circumstances

by BOA

NOW

2 Years 1 Year 1 Year

Initial Validity Extension by DC for Extension by UAC Further Extension by

Valid reasons provided 2/3rd of BOA
activities are
complete

 Export proceeds will now be realized in 9 months (earlier 12 months)

(DC – Development Commissioner, BOA – Board of Approval, UAC – Units Approval Committee )
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 HELPING CLIENTS KEEP MORE OF WHAT THEY EARN

2015-2020
FOREIGN TRADE POLICY

- ANALYSIS

Denied Entity List

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DENIED ENTITY LIST

 An Authorisation holder on violation of any condition, non fulfillment of EO in time or

failure to deposit requisite amount within time as demanded in notice by department,
he shall be liable to action in accordance to FT (D&R) Act, FTP and any other law for the
time being in force.

 A firm may be placed under DEL list by the concerned RA. On issuance of such order,
firm may be denied renewal of licence certificate, scrips or any other instruments.
Further any new licence, certificate, scrips; instruments will be blocked from issue.

 DEL order may be placed in temporary suspension for a period of not more than 60 days
at a time.

 A firms name can be removed from DEL list by concerned RA on completion of EO or

payment of penalty or fulfillment of demands notice of the Concerned RA as the case
may be.

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 HELPING CLIENTS KEEP MORE OF WHAT THEY EARN

2015-2020
FOREIGN TRADE POLICY

- ANALYSIS

Governance
Initiatives

36
SIMPLIFICATION OF PROCEDURE & TRADE FACILITATION

 Documents required to be verified by Chartered Accountant/ Company Secretary / Cost

Accountant and submitted to DGFT can now be uploaded digitally if the same
documents are digitally signed by the concerned CA / CS / CWA.

 It is proposed to have online message exchange with CBDT for PAN data and Ministry of
Corporate Affairs for CIN and DIN data eliminating the need for seeking information
from IEC Holders for subsequent amendments and updation.

 TED applications will now be filed online.

 Various E-Governance measures have been proposed like Online Issuance of EODC,
facility to pay application fee using Debit/Credit Card etc.

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SIMPLIFICATION OF PROCEDURE & TRADE FACILITATION

 In order to reduce transaction cost and time, DGFT has taken steps towards processing
paperless applications. Various documents relating to exporter & importer profile will be
uploaded online and these documents will not be required to be submitted repeatedly
with each application.

The number of mandatory documents required export & import are reduced to only three
each

 Facility of online submission of documents for various applications under DGFT is being
implemented. The exporter need not file any hard copy of applications & documents
excepting architectural, machine drawings which may be difficult to scan & upload

38
 THANK
YOU
20. HELPING CLIENTS KEEP MORE OF WHAT THEY EARN