Analysis of Key Initiatives/Schemes Introduced in Foreign Trade Policy (“FTP”) - 2023

Jitendra Kumar Panda

Company Secretary

Upendra Kumar
Chartered Accountant

In promotion of the economic essentials of the Country, the Minister of Commerce and Industry has recently
announced the new Foreign Trade Policy ("FTP"), 2023. The earlier FTP which was to end in March, 2020 has
been extended due to the COVID pandemic situation up to March, 2023. As India is on the way of a developed
nation, the policy lays down a framework in order to rationalize India with the global markets. The
Government has taken various initiatives and introduced various different schemes in the policy in order to
make the country one of the top exporting nation in the future. The main aim of the new FTP-2023 is that to
ensure that the exports of both services and merchandise/goods to reach $2 trillion by 2030 and another
important feature is that unlike earlier FTP, there is no sunset provisions for the current FTP-2023. The
sunset refers here that there is no end date of this policy. The advantage of the sunset provision is that the
schemes and the policies will be continued and the exporters will not have any confusion about the continuity
of various schemes mentioned in the policy. However, subsequent revisions/amendments will be done as and
when required. This Article describes and provides some highlights on some important schemes, measures,
benefits and initiatives specified in the current FTP, 2023.

SOME KEY FEATURES/INITIATIVES OF THE FTP, 2023

(A) EASE OF DOING BUSINESS, REDUCTION IN TRANSACTION COST AND E-INITIATIVES

(1) Online approvals without physical interface

- There will be automatic approval of various permissions under FTP, 2023 based on process
simplification and technology implementation.
- There will be reduction in processing time and immediate approval of applications under
automatic route for exporters.
(2) Reduction in user charges for MSMEs under AA and EPCG
- Application fee being reduced for Advance Authorization ("AA") and Export of Promotion of
Capital Goods ("EPCG") Schemes.
 - Will benefit most of the exporters who are MSMEs.
(3) E-Certificate of Origin ("CoO")
- Revamp of the e-Certificate of Origin platform proposed
- To provide for self-certification of CoOs as well as automatic approval of CoOs, where
feasible.
- Initiatives for electronic exchange of CoO data with partner countries envisaged.
(4) Paperless filing of export obligation discharge applications
All authorisation redemption applications are to be paperless. This is in addition to application
process for issuance being already paperless. With this, the entire lifecycle of the authorization shall
become paperless
(B) DISTRICTS AS EXPORT HUBS INITIATIVE

- Districts will be identified as Export Hubs which aims to boost India's foreign trade by
decentralizing export promotion.
- Greater level of awareness and commitment regarding exports at the district level.
- Create institutional mechanisms at the State and District level to strategize exports (State Export
Promotion Committee & District Export Promotion Committee).
- Preparation and execution of District Export Action Plans (DEAPs) outlining the action plan to
promote identified products and services.
- Training, handholding, and outreach programs by Directorate General of Foreign Trade field offices
in coordination with District Industries Centers.
- Infrastructure and logistics development intervention in the district level.
(C) E-COMMERCE EXPORTS

(1) Facilitation for E-Commerce exports

All benefits and facilities under FTP, 2023 will be extended to e-Commerce exports. Guidelines are
being formulated to facilitate further exports under e-Commerce to streamline e-Commerce export
facilitation. Special outreach and training activities will be conducted for small e-commerce
exporters
(2) Dak Niryat facilitation
Dak Ghar Niryat Kendras shall be operationalised throughout the country to work in a hub-and-
spoke model with Foreign Post Offices ("FPOs") to facilitate cross-border e-Commerce and to enable
artisans, weavers, craftsmen, MSMEs in the hinterland and land-locked regions to reach
international markets.
(3) E-Commerce Export Hubs
In order to help e-commerce aggregators for easy stocking, customs clearance and returns
processing, designated hubs with warehousing facility will be notified. There will be facility to be
allowed for last mile activities such as labelling, testing, repackaging etc.
(D) INITIATIVES FOR BOOSTING MANUFACTURING

-The Prime Minister Mega Integrated Textile Region and Apparel Parks ("PM MITRA") Scheme has been
added as an additional scheme eligible to claim benefits under Common Service Provider ("CSP") Scheme of
EPCG.

- The dairy sectors are to be exempted from maintaining Average Export Obligation in order to
support dairy sector to upgrade the technology.
 - Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and
Recycling, Rainwater harvesting system and Rainwater Filters, and Green Hydrogen are added to
Green Technology products – will now be eligible for reduced Export Obligation requirement under
EPCG Scheme.
- Special Advance Authorisation Scheme will be extended to export of Apparel and Clothing sector
under HBP on self-declaration.
- Fruits and Vegetables exporters are being included for double weightage for counting export
performance under eligibility criteria for Status House certification.
(E) FOCUS SPECIAL CHEMICALS, ORGANISMS, MATERIALS, EQUIPMENT AND
TECHNOLOGIES ("SCOMET") LICENSING PROCEDURE

Under the FTP, 2023, for export of dual use items under SCOMET consolidated at one place for ease of
understanding and compliance by industry. The SCOMET policy emphasizes India's export control in line with
its International commitments under various export control regimes to control trade in sensitive and dual use
items including software and technology. Some recent policy changes introduced such as general
authorizations for export of certain SCOMET items to streamline licensing of these items to make export of
SCOMET items globally competitive. Focus is being given on simplifying policies to facilitate export of dual
use high end goods/technology such as UAV/Drones, Cryogenic Tanks, Certain chemicals etc.

ANALYSIS OF SOME SCHEMES INTRODUCED IN FTP, 2023

There are some key pillars focused in the current FTP, 2023. One of the key pillar or feature of the policy is
"Incentives to Remission". What is the idea for introducing Incentives to Remission? Or What is the
reason behind it? Kindly refer below in this regard:-

(A) INCENTIVES TO REMISSION

Earlier FTP i.e. 2015-20 had a scheme by the name of Merchandise Exports from India Scheme ("MEIS"). The
specialty of this scheme is that this provides export linked subsidy. The export linked subsidy means the
amount of subsidy/incentive provides to the exporter is connected to the value of exports. For example:

- If an exporter exports goods worth of $100-then he will be provided an incentive of

$5.
- similarly for an export goods worth of $200, the incentive will be $10 and
- for export of goods worth of $500, the incentive will be $25.
Here, the value of the incentive is linked with the value of exports and varied accordingly.

The problem in MEIS was it was violating the provisions of compliance of the World Trade Organisation
("WTO"). India is a signatory to one of the agreement entered with the WTO named Agreement on Subsidies
and Countervailing Measures (SCM). Under SCM, if a country has a per capita income of more than $1,000
for three consecutive years, they are not allowed to provide export linked subsidy. However, after 2013 India
has a per capita income of more than $1,000. Hence, in the FTP for 2015-20, the MEIS was violating the
provisions of the agreement entered with the WTO. Hence, some of other countries like USA dragged India to
Dispute Resolution Body under WTO and filed a complaint against such schemes of India and the Export
Council of Dispute Resolution Body found that India was actually violating the provisions of the SCM.
Therefore, MEIS was withdrawn by the Government and in such place Remission of Duties and Taxes on
Exported Products ("RoDTEP") has been introduced.

Under RoDTEP, whenever exporter will purchase some products, the Goods and Service Tax ("GST") will be
paid at the local level, state level or central level. These taxes are further refunded by the exporter by way of
input tax credit. However, some of the exporters are not covered under the provisions of GST or the products
are not covered under the provisions of GST like, Petrol/Diesel or consumption of electricity. Hence, they will
not be entitled for such input tax credit. In such case the market price of the export products will be high and
the export competitiveness will be low. In order to address this, the Government has introduced RoDTEP
which includes Remission on Embedded Taxes. It means if any taxes paid on a product which is not covered
under GST, the same will not be included in the market price of the exported products. The advantage of
RoDTEP is the agreement entered with WTO is not violated anymore. The tax will be remitted or refunded
back to the exporter. It is a WTO compliant scheme. Similarly, another scheme has been introduced named
Remission of State and Central Taxes and Levies ("RoSCTL"). This is relating to export of textile and
garments products.

In this way the export will be promoted and the export competitiveness will be higher. In place of providing
incentives on exports, the Government will be remitted or refunded the embedded taxes on the products.

Further in the context of FTP, 2023, another announcement has been done by the Government is "Amnesty
Scheme" with regard to EPCG.

(B) AMNESTY SCHEME

The Amnesty Scheme has been introduced with regard to EPCG Scheme AA Scheme. The Government has
introduced the Amnesty Scheme in order to minimize the disputes raised during the FTP 2009-2014 for not
fulfilling the export obligations specified under EPCG and AA Schemes. The main aim of introducing the
Scheme is to lesser the burden of the Exporter regarding to the unfilled export obligations and it will promote
export of the country to the international markets.

Let us understand the concept of EPCG and AA Schemes. Under EPCG, if a manufacturer or exporter
manufactures a product and for such manufacturing he is importing a capital good like a machinery. Under
EPCG, no import duties will require to be paid on import of such capital goods. However, one condition in this
regard is that the manufacturer will do export a worth of six (6) times of such import duties in the next six (6)
years. Hence, there is an export obligation on the manufacturer for availing such benefits under EPCG
Scheme.

Some key changes are also made in the EPCG Scheme under the new FTP, 2023--

♦ The PM MITRA scheme has been added as an additional scheme eligible to claim benefits under the
CSP Scheme of EPCG.
♦ Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and
Recycling, Rainwater harvesting system and Rainwater Filters and Green Hydrogen are added to
Green Technology products – will now be eligible for reduced Export Obligation requirement under
EPCG.
Similarly under AA Scheme, there is also an export obligation on the manufacturer. In this case, if a
manufacturer import a raw material or input which is used in the product, there will be no import duties on
such raw material or input. However, the manufacturer is to ensure that the product in which the raw material
is used, must be exported within 18 months.

Hence, there are export obligations under both the aforesaid schemes. In case, the obligation is not fulfilled by
the manufacturer/exporter, then the Government levies interest or penalty for that. In order to address this,
the Government announced the Amnesty Scheme in FTP, 2023. The features of the scheme inter-alia includes-

- The pending cases of default in meeting the export obligations between 2009-2014 can now be
regularized by paying all custom duties that were exempted;
- Maximum interest is capped at 100% of such duties exempted; and
- No interest is payable on portion of additional custom duties and special additional custom duties
exempted etc.
Therefore, the Amnesty Scheme may provide relief to the importers who could not fulfill export obligations
under AA and EPCG Schemes and also provide comfort to the manufacturers/exporters due to reduction in
interest and penalty. In this way the export competitiveness will be higher and more exports will be done to
the international markets.
CONCLUSION

The FTP, 2023 is to be dynamic and responsive to the emerging trade essentials. There are being made wider
engagement with States and Districts to promote exports from the grassroots and focus on E-commerce
exports to streamline processes and make it easier for exports to grow in e-commerce space. Sector specific
targets are being made to achieve the goal of a two trillion-dollar merchandise and service exports by 2030.
There will be steps making Indian Rupees a global currency and facilitating International Trade settlement in
Rupees. In a nutshell, the new FTP, 2023 has been introduced aiming to promote exports more and more from
India and framing a strategic vision to make India one of the top exporting nation in future.

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