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A report on

Duty Exemption / Remission Schemes & Export Promotion Capital Goods Scheme (Foreign Trade Policy)

Submitted to: Mrs. Shikha Sharma

Submitted by: Abhishek Gomber Adi Narayan Reddy Abdulla Urfi

Index

1.

Duty Exemption Schemes Advance Authorisation Scheme Duty Free Import Authorisation

2.

Duty Remission Scheme Duty Entitlement Scheme Duty Drawback Scheme

3. 4. 5.

Export Promotion Capital Goods Scheme Foreign Trade Policy 2009-2014 Conclusion and Suggestions Bibliography

Duty Exemption Schemes

Advance Authorisation Scheme

Duty Free Import Authorisation

Duty Remission Schemes

Duty Entitlement Scheme

Duty Drawback Scheme

Advance Authorisation Scheme:


An Advance Authorisation is issued to allow duty free import of inputs, which are physically incorporated in export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts which are consumed/ utilised to obtain export product, may also be allowed. Advance License is issued under Duty Exemption Scheme to allow import of inputs, which are physically incorporated in the export product Advance License are issued for Physical exports, Intermediate supplies and Deemed exports In order to ensure proper monitoring and utilization of inputs imported against Advance License (except Advance License for deemed exports), a Duty Entitlement Exemption Certificate (DEEC) Book is issued along with the Advance License by DGFT authorities. At the time of import and export against Advance License, entries are made in the DEEC Book by Customs to keep record of the import/export made against it. After completion of export obligation and imports against the Advance License, the DEEC book, Advance License and relevant export/import documents are submitted to Customs for logging (reconciling) of DEEC Book. Thereafter the Advance License, DEEC book and export/import documents are submitted to DGFT authorities for issue of export obligation (EO) discharge certificate. On the basis of EO discharge certificate issued by DGFT, redemption of bond/B.G. filed by the Advance License holder with Customs is allowed. Advance Authorizations are exempted from payment of basic customs duty, additional customs duty, education cess, anti- dumping duty and safeguard duty, if any. Advance Authorisation and / or materials imported there under will be with actual user condition. It will not be transferable even after completion of export obligation. However, Authorisation holder will have option to dispose off product manufactured out of duty free inputs once export obligation is completed. Status Certificate holder and all other categories of exporters having past export performance (in preceding two years) shall be entitled for Advance Authorisation for Annual Requirement.

Duty Free Import Authorisation (DFIA):


DFIA is issued to allow duty free import of inputs, fuel, oil, energy sources, catalyst which are required for production of export product. Pre-export Authorisation shall be issued with actual user condition and shall be exempted from payment of basic customs duty, additional customs duty / excise duty, education cess, anti-dumping duty and safeguard duty, if any. The Authorisation shall be issued on the basis of inputs and export items given under Standard Input and Output Norms (SION). The import entitlement shall be limited to the quantity mentioned in SION. Such Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s) A minimum 20% value addition shall be required for issuance of such Authorisation
DFIA Advance Authorisation Scheme

Transferability Value Addition Basis of Application

Conditional Minimum 20% Only SION Based

Actual User Clause Positive Value Addition SION or Self Declared Basis

Duty Entitlement Passbook Scheme (DEPB):


The objective of Duty Entitlement Pass Book (DEPB) is to neutralise the incidence of Customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product. DEPB Scrips can also be utilized for payment of duty against imports under EPCG Scheme. Further, DEPB Scrips can also be used / debited towards payment of Customs Duty in case of EO defaults for Authorizations. DEPB and / or items imported against it are freely transferable. Transfer of DEPB shall however be for import at specified port, which shall be the port from where exports have been made. The normal validity period of a DEPB Scrip is 12 months and DGFT authority. These scrips are for a certain amount of DEPB credit and can be utilized for adjusting Customs Duties against import of any products into India, without the necessity of any co-relation between the export product and the import goods, i.e. it is not necessary to import only the relevant inputs corresponding to the export product. Commissioners of Customs have, however, been empowered to permit import/export under the scheme from any other place which has not been notified, on case to case basis. The DEPB and/or the items imported against it are freely transferable. No duty drawback is allowed on exports made under DEPB Scheme. DEPB rates are finalized by the DEPB Committee, chaired by Additional DGFT

Export Promotion Capital Goods Scheme (EPCG):


The scheme is available for exporters of engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied products and leather & leather products; Concessional 3 % duty EPCG scheme allows import of EPCG Scheme capital goods for pre production, production and post production at 3 % Customs duty, subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 8 years reckoned from Authorization issue date. In case of agro units, and units in cottage or tiny sector, import of capital goods at 3 % Customs duty shall be allowed subject to fulfillment of export obligation equivalent to 6 times of duty saved on capital goods imported, in 12 years from Authorization issue-date. For SSI units, import of capital goods at 3 % Customs duty shall be allowed, subject to fulfillment of export obligation equivalent to 6 times of duty saved on capital goods, in 8 years from Authorization issue-date, provided the landed cif value of such imported capital goods under the scheme does not exceed Rs. 5 0 lakhs and total investment in plant and machinery after such imports does not exceed SSI limit. However, in respect of EPCG Authorization with a duty saved amount of Rs. 1 00 crores or more, export obligation shall be fulfilled in 12 years. Where the license holder is certified as a superstar trading house, star trading house, etc. by DGFT. In such cases, a mere bond is sufficient. Capital goods imported under EPCG Scheme are subject to actual user condition and the same cannot be transferred/sold till the fulfillment of export obligation specified in the license. In order to ensure that the capital goods imported under EPCG Scheme are utilized in the manufacture of resultant export product, after importation/clearance of capital goods from Customs, the license holder is required to produce certificate from the jurisdictional Central Excise Authority(CEA) or Chartered Engineer(CE) confirming installation of such capital goods in the declared premises.

The normal validity period of EPCG license is 24 months and DGFT authority (who issues the license) is empowered to grant further revalidation. In order to ensure proper accountable of fulfillment of export obligation, the EPCG license holder is required to indicate the EPCG license In cases where the EPCG License holder is unable to maintain the specified level of year wise/block wise EO or overall EO., extension of year wise / block wise EO period upto a maximum of 1 year/block is allowed by DGFT

Foreign Trade Policy 2009-2014


Technological up gradation, EPCG relaxation, DEPB: EPCG Scheme at Zero Duty for engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, and leather. Not available for current beneficiaries of other schemes like TUFS, or Status Holder scheme. To increase the life of existing plant and machinery, export obligation on import of spares, moulds under the EPCG Scheme has been reduced to 50% of the normal specific export obligation. Taking into account the decline in exports, the facility of Re-fixation of Annual Average Export Obligation for a particular financial year in which there is decline in exports from the country has been extended for the 5-year policy period 2009-14. To accelerate exports, additional Duty Credit scrips shall be given to status holders @ 1% of the FOB value of past exports. The Duty Credit scrips can be used for procurement of capital goods. This facility were available till March 31, 2011. Stability/continuity of the Foreign Trade Policy: To impart stability to the policy regime, the Duty Entitlement Passbook (DEPB) Scheme were extended by a year till December 31, 2010. The interest subvention of 2% for pre-shipment credit for 7 sectors extended till March 31, 2010 in Budget 2009. DEPB rate shall also include factoring of custom duty component on fuel where fuel is allowed as a consumable in Standard Input-Output Norms. Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of IT Act has been extended for the financial year 2010-11 in Budget 200910. The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC cover at 95% to the adversely affected sectors is continued till March 2010.

Concession for the marine sector: Fisheries have been included in the sectors which are exempted from maintenance of average export obligations under the EPCG Scheme. Fishing trawlers, boats, ships and other similar items shall not be allowed to be imported under this provision. Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement (DFCE) Scheme for status holders has been given to marine sector. Concession for Gems & Jewellery sector: To neutralise duty incidence on gold jewellery exports, the policy allows duty drawback on these. To make India a diamond international trading hub, it is planned to establish Diamond Bourses, The first one has come up in Mumbai.

Conclusion and Suggestion


Flexibility provided to exporters: Payment of customs duty for export obligation shortfall under Advance Authorisation / DFIA / EPCG Authorisation has been allowed by way of debit of Duty Credit scrips. The payment was allowed in cash only. Import of restricted items, as replenishment, should be allowed against transferred DFIAs. Time limit of 60 days for re-import of exported gems and jewellery items for participation in exhibitions should be extended to 90 days in case of USA. The Export Promotion Schemes should have a correct time period. Once it is applied, it should not be changed before time. The Export Promotion Schemes should not be written off before time, nor they should be extended if they are meant to be written off. Conferences and Seminars should be organized to create awareness in Exporters The bank loan should be provided easily to the Exporter and at low interest rates. So that the bank loan does not becomes burden for Exporter.

Bibliography
Internet Sources:-

1 2 3

www.google.com www.wekipedia.org www.DGFT.gov.in

Other Sources:-

1 2 3

Ministry of Commerce and Trade Federation of Chamber Commerce & Industry (FICCI) Directorate General of Foreign Trade (DGFT)