Export Promotion and Incentives

APRIL 2013

The various incentives/exemptions
available to exporters in India :

  Sales Tax/VAT Exemption

Excise Exemption

Duty Drawback

Income Tax Concessions

Import Concessions

Special Economic Zones

Free Trade & Warehousing Zones

Star Export Houses

EOUs(Export Oriented Units), Electronic Hardware Technology Parks(EHTPs), Software
Technology Parks(STPs),Bio-Technology Parks(BTPs)
Deemed Exports

. Sales Tax/VAT Exemption VAT at zero rate and full credit of input tax is also available to a dealer directly selling to an exporter provided the same goods are actually exported.The exporter needs to provide the following documents as evidence of goods exported:    Copy of export contract or order from a foreign buyer Copy of the customs clearance certificate Copy of the commercial invoice issued to the foreign buyer  Copy of Bill of Lading/Air-Way Bill  Proof of payment from the foreign purchaser or letter of credit .

 The supplier.   Copy of Confirmed Export Order Copy of Bill of Lading/Air-Way Bill .The application has to be supported by the following documents:  Copy of Customs Certified Shipping Bill  Copy of Customs Certified Invoice   Copy of Letter of Credit Form 'H'. can submit the following documents with his VAT return to justify zero rating of his particular sale to the exporter:  Purchase order from exporter. on the other hand.‘ H ’ form   The exporter can make use of 'H Forms' supplied by the CST (Central Sales Tax) authorities that are being continued even now in the VAT regime. .

. excise duty is governed by the provisions of the Central Excise Act. 1944. Excise Exemption  Excise is a tax on production or manufacture of goods.Exporters can avail excise clearance in the following ways:  Exports under Claim of Excise Rebate  Export under Bond . In India. It is a duty levied on the production of goods and the liability of payment of excise duty arises immediately upon manufacture of goods.

Procedure for Filing the Rebate Claim and its Sanction 1. Application in the prescribed form 2. Original copy of duly ARE-I/ARE-II duly endorsed by the Customs Officer certifying the export of the consignment 6.Export under Bond Under Rule 19 of Central Excise Rules. an exporter is permitted to remove excisable goods for export without payment of excise duty by executing a bond (legal undertaking) in favor of the excise authorities for the amount of the excise duty payable. Duly attested copy of shipping bill (export promotion copy) 5. Duplicate copy of ARE-I/ARE-II in sealed cover received from Customs Officer 3. disclaimer certificate in case where the claimant is other than the exporter. . . Duly attested copy of Bill and Lading 4.

Duty Drawback Duty drawback is an incentive given to the exporters of different categories of goods under the “ Customs and Central Excise Duty Drawback Rules. 1995” The duty drawback scheme is administered by the Directorate of Duty Drawback in the Ministry of Finance. Government of India. -There are two types of drawback rates:  All Industry Rates  Brand/Special Brand Rates .

. For undertaking commencing operation from the notified Special Economic Zones (SEZs) on or after 1st April. the tax holiday is available for a total period of seven assessment years. 1961 undertaking operating from a Special Economic Zone (SEZ ) that manufactures articles/things or computer software are eligible for deduction of export profits. 2002.Income Tax Concessions  Under Section 10A of the Income Tax Act. comprising of a deduction of 100% of export for five years followed by deduction of 50% of export profits for subsequent two years.

Import Concessions The Government of India has several schemes in place that allow the exporters to import inputs/ capital goods at concessional rates of import duty. The schemes are discussed below:    Export Promotion Capital Goods Scheme (EPCG) Duty Free Import Authorization Scheme Duty Exemption Passbook Scheme (DEPB) .

(including spares for pre production.Export Promotion of Capital Goods Scheme (EPCG) what are capital goods?  Capital goods are the things you need . printing press for magazine/newspaper. to be fulfilled in 6 to 8 years reckoned from Authorization issue-date. big agro-harvesting vehicles.in order to manufacture your products or give your services. production and post production) Examples: Textile machines. expensive lab instruments for medicines.  What is Export Promotion Capital Goods Scheme? (EPCG)  Under EPCG scheme.  This EPCG is part of India’s EXIM policy (Export-import) . you can import these instruments (capital goods) at only 5% customs duty (some times zero duty). sophisticated computer-server for your call center etc. But it is subject to an export obligation ranging from 6 to 8 times of duty saved on capital goods imported under EPCG scheme.

.Duty Free Import Authorization Scheme This scheme is the latest improvement announced in the Annual Supplement 2006 to the FTP 2004-09. 2. The new scheme seeks to clubs the Advance Licensing scheme and the Duty Free Replenishment Certificate and were to come into effect from May 1. The FOB/FOR value and quantity of exports/supplies. the value of the item shall be indicated 3. The aggregate CIF value of imports.Advance License can be issued for the following:    Physical exports Intermediate supplies Deemed exports . 4. The names and description of items to be imported and exported/supplied. . 2006. The quantity of each item to be imported or wherever the quantity cannot be indicated.An Advance License contains: 1.

 The scheme launched in 1997 is likely to be replaced by some superior alternative that is being worked out through a dialogue with the export community. . The objective of DEPB is to neutralize the incidence of Customs duty on the import content of the export product.  The DEPB is valid for a period of 24 months from the date of issue. exporters are allowed to claim customs duty credit as a specified percentage of FOB value of exports made in freely convertible currency. Under the DEPB. The neutralization shall be provided by way of grant of duty credit against the export product.Duty Entitlement Passbook (DEPB) Scheme  Under DEPB (Duty Entitlement Passbook) Scheme.

clean and green environment . Information Technology  Strong telecommunication backbone  A unique work environment that powers the city  Optic-fiber cable network  On-site sub-station for failsafe power  Rail station onsite to provide for easy cost effective transport options  Pollution-free.

the Government of India formulated the Special Economic Zone policy on 1/4/2000. Under the current foreign trade policy.Special Economic Zones  In order to create an internationally competitive and smooth working environment for exports in India. Special Economic Zone (SEZ) is defined as a specifically delineated duty free enclave that is deemed to be foreign territory for the purposes of trade operations and duties and tariffs. Goods and services going into the SEZ area from DTA (Domestic Tariff Area) are to be treated as exports and goods coming from the SEZ area into DTA are to be treated as imports. .

100% Foreign Direct Investment in manufacturing sector allowed through automatic route. cCont…  .  Reimbursement of Central Sales Tax paid on domestic purchases. Exemption from customs duty on import of capital goods.  Supplies from DTA (Domestic Tariff Area) to SEZ units treated as deemed exports. trading or service activity. barring a few sectors.  SEZ unit to be positive net foreign exchange earner within three years.  100% income tax exemption for a block of five years. consumables. raw materials.   Facility to realize and repatriate export proceeds within 12 months. spares etc. 50% tax exemptions for two years and up to 50% of the profits ploughed back for the next three years under Section 10-A of Income Tax Act.  SEZ units may be for manufacturing. The following facilities/incentives are available to units in SEZs:   No license required for import.

 Full freedom for sub-contracting including sub-contracting abroad.  No fixed wastage norms. goods imported from foreign suppliers on loan basis etc.  Job work on behalf of domestic exporters for direct export allowed.  Support services like banking.  Re-export imported goods found defective.  In-house customs clearance.  No routine examination by Customs of export and import cargo. Facility to retain 100% foreign exchange receipts in EEFC(exchange earner’s foreign currency) Account.  Domestic Sales on full duty subject to import policy in force. post office clearing agents etc.  No separate documentation required for Customs and Exim Policy. .

Free Trade and Warehousing Zones The units functioning out of such zones will be extended from:  Income Tax Exemption as per Section 80-IA of the Income Tax Act  Exemption from Service Tax  Free foreign exchange currency transactions  Other benefits as applicable to units in Special Economic Zones .

Bio-Technology Parks(BTPs) are eligible for applying for status as Star Export Houses.Agri Export Zone(AEZs).  Fixation of Input-Output norms on priority within 60 days.  They enjoy exemption from furnishing of Bank Guarantee in schemes under the foreign trade policy. The remittance. needs to be received through banking channels. however.  100% retention of foreign exchange in EEFC account. service providers. Software Technology Parks(STPs). Export Oriented Units (EOUs).  They are allowed exemption from compulsory negotiation of documents through banks.  They are entitled for consideration under the Target Plus Scheme.Star Export Houses -Under the current foreign trade policy Merchants as well as Manufacturer exporters. Electronic Hardware Technology Parks(EHTPs).  They are allowed license/certificate/permissions and Customs clearances for both imports and exports on self-declaration basis. .and Units located in Special Economic Zones(SEZs).  They are permitted enhancement in normal repatriation period from180 days to 360 days.

dyes. Cont…. Supply of goods to any project or purpose in respect of which the Ministry of Finance.Deemed Exports           Supply of goods against Advance License/Advance License for annual requirement. . including in unassembled/disassembled condition as well as plants. Supply of goods to the power projects and refineries not covered in (vi) above. tools. Supply to projects funded by UN agencies. Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding. Supply of goods to Export Oriented Units. accessories. Supply of goods to projects financed by multilateral or bilateral agencies. Supply of capital goods. Supply of marine freight containers by 100% EOU. machinery. Supply of capital goods to holders of licenses under the Export Promotion Capital Goods (EPCG) scheme.

refund of terminal excise duty will be given. . In other cases.Deemed exports are allowed the following privileges:  Advance License for intermediate supply/deemed export / DFRC (Duty Free Replenishment Certificate) / DFRC for intermediate supplies  Deemed Export Drawback  Exemption from terminal excise duty where supplies are made against International Competitive Bidding.

Thank You .