EXPORT INCENTIVE

Export Incentives
The Government of India has framed several schemes to promote exports and to obtain foreign exchange. These schemes grants incentive and other benefits. The few important export incentives, from the point of view of indirect taxes are briefed below:Free trade area
Free trade area is a type of trade bloc, a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods and services traded between them. It can be considered the second stage of economic integration. Countries choose this kind of economic integration form if their economical structures are complementary. If they are competitive, they will choose customs union.[citation needed]
Description
Unlike a customs union, members of a free trade area do not have a common external tariff (same policies with respect to non-members), meaning different quotas and customs. To avoid evasion (through re-exportation) the countries use the system of certification of origin most commonly called rules of origin, where there is a requirement for the minimum extent of local material inputs and local transformations adding value to the goods. Goods that don't cover these minimum requirements are not entitled for the special treatment envisioned in the free trade area provisions.
Cumulation is the relationship between different FTAs regarding the rules of origin — sometimes different FTAs supplement each other, in other cases there is no cross-cumulation between the FTAs. A free trade area is a result of a free trade agreement (a form of trade pact) between two or more countries. Free trade areas and agreements (FTAs) are cascadable to some degree — if some countries sign agreement to form free trade area and choose to negotiate together (either as a trade bloc or as a forum of individual members of their FTA) another free trade agreement with some external country (or countries) — then the new FTA will consist of the old FTA plus the new country (or countries).
Within an industrialized country there are usually few if any significant barriers to the easy exchange of goods and services between parts of that country. For example, there are usually no trade tariffs or import quotas; there are usually no delays as goods pass from one part of the country to another (other than those that distance imposes); there are usually no differences of taxation and regulation. Between countries, on the other hand, many of these barriers to the easy exchange of goods often do occur. It is commonplace for there to be import duties of one kind or another (as goods enter a country) and the levels of sales tax and regulation often vary by country.
The aim of a free trade area is to so reduce barriers to easy exchange that trade can grow as a result of specialisation, division of labour, and most importantly via (the theory and practice of) comparative advantage. The theory of comparative advantage argues that in an unrestricted marketplace (in equilibrium) each source of production will tend to specialize in that activity where it has comparative (rather than absolute) advantage. The theory argues that the net result will be an increase in income and ultimately wealth and well-being for everyone in the free trade area. However the theory refers only to aggregate wealth and says nothing about the distribution of wealth. In fact there may be significant losers, in particular among the recently protected industries with a comparative disadvantage. The proponent of free trade can, however, retort that the gains of the gainers exceed the losses of the losers.
Qualifying for a free trade agreement
To determine eligibility for a free trade agreement (FTA), importers must obtain product information from the all suppliers within the supply chain. An automated solution should be in place for an importer to solicit his/her suppliers. Once supplier documentation is received the importer must determine the eligibility of the product based on the many rules of origin surrounding the products Harmonized Schedule Number. Each free trade agreement will qualify an importer's products in different ways, however the basis of the qualification surrounds the idea that the finished product must have a minimum percentage of local/regional content.
Under the North American Free Trade Agreement (NAFTA), qualifying rules include De Minimis, Regional Value Content, and Tariff Shift.
De Minimis states that the finished good must be less than or equal to 7% of the transaction value of the product
Regional Value Content is a calculated percentage of the value of the product that represents its North American content
Tariff Shift is a substantial transformation that takes place in a NAFTA country
A finished good must qualify under one of these rules to be eligible for free trade under NAFTA. This is just one example of a qualification for a free trade agreement. If a certificate of origin is present from a supplier demonstrating that the good originated in a country under the associated free trade agreement, no further calculations are needed.
When qualifying products for an FTA, the use of an automated system allows importers to stay up-to-date on international compliance regulations, as well as solicit suppliers via the web instead of manually. A functional solution should also perform the required calculations for the associated FTA during the Bill of Material (BOM) analysis, ensuring correct eligibility.
ADVANCE LICENCE

Advance Licence
4.1.3
An Advance Licence is issued to allow duty free import of inputs, which are physically incorporated in the export product (making normal allowance for wastage). In addition, fuel, oil, energy, catalysts etc. which are consumed in the course of their use to obtain the export product, may also be allowed under the scheme.
Duty free import of mandatory spares upto 10% of the CIF value of the licence which are required to be exported/ supplied with the resultant product may also be allowed under Advance Licence.

Advance Licences are issued on the basis of the inputs and export items given under SION. However, they can also be issued on the basis of Adhoc norms or self declared norms as per para 4.7 of Handbook.

Duty free import of mandatory spares upto 10% of the CIF value of the licence which are required to be exported/ supplied with the resultant product may also be allowed under Advance Licence.
Advance Licence can be issued for:-


a)
Physical exports:- Advance Licence may be issued for physical exports including exports to SEZ to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s) for import of inputs required for the export product.


b)
Intermediate supplies:- Advance Licence may be issued for intermediate supply to a manufacturer-exporter for the import of inputs required in the manufacture of goods to be supplied to the ultimate exporter/deemed exporter holding another Advance Licence


c)
Deemed exports:- Advance Licence can be issued for deemed export to the main contractor for import of inputs required in the manufacture of goods to be supplied to the categories mentioned in paragraph 8.2 (b), (c), (d) (e) (f),(g) (i) and (j) of the Policy.


In addition, in respect of supply of goods to specified projects mentioned in paragraph 8.2 (d) (e) (f), (g) and (j) of the Policy, an Advance Licence for deemed export can also be availed by the sub-contractor of the main contractor to such project provided the name of the sub contractor(s) appears in the main contract.
Such licence for deemed export can also be issued for supplies made to United Nations Organisations or under the Aid Programme of the United Nations or other multilateral agencies and paid for in foreign exchange.


4.1.4
Advance Licence is issued for duty free import of inputs, as defined in paragraph 4.1.1 subject to actual user condition. Such licences (other than Advance Licence for deemed exports) are exempted from payment of basic customs duty, additional customs duty, education cess, anti dumping duty and safeguard duty, if any.
Advance Licence for deemed export shall be exempted from basic customs duty ,additional customs duty and education cess only. However in case of supplies to EOU/SEZ/ EHTP/STP/ BTP under such licences, anti-dumping duty and safeguard duty shall also be exempted.

4.1.5
Advance Licence and/or materials imported there under shall not be transferable even after completion of export obligation.

4.1.6
Advance Licences (including Advance Licence for deemed exports and intermediate supply) shall be issued with a positive value addition.

However, for exports for which payments are not received in freely convertible currency, the same shall be subject to value addition as specified in Appendix-32 of Handbook (Vol.1).

4.1.7
Advance Licence shall be issued in accordance with the Policy and procedure in force on the date of issue of licence and shall be subject to the fulfilment of a time bound export obligation as may be specified.

4.1.8
The facility of Advance Licence shall also be available where some or all of the inputs are supplied free of cost to the exporter.

In such cases, for calculation of value addition, the notional value of free of cost inputs along with value of other duty-free inputs shall be taken into consideration. However, if all the inputs are supplied free of cost, it shall be covered under paragraph 4.2.7 of the Policy.
Export Obligation
4.1.9
The period for fulfilment of the export obligation under Advance Licence shall be as prescribed in the Handbook (Vol.1). Supplies to SEZ would also be counted for fulfillment of export obligation under the Advance Licence for physical exports.
Advance Licence for Annual Requirement
4.1.10
Advance Licence can also be issued on the basis of annual requirement for physical exports, intermediate supplies or deemed exports.

One to Five Star Export House shall be entitled for the Advance Licence for annual requirement.

However, if the status holders are holding the certificate as merchant exporter, they are also entitled to the Advance Licence for Annual Requirement provided they agree to the endorsement of the name(s) of the supporting manufacturer(s) on the relevant licence.


The entitlement under this scheme shall be upto 200% of the FOB value of export in the preceding licensing year. Such licence shall have positive value addition.



Advance Release Orders
4.1.11
An Advance Licence holder, holder of advance licence for annual requirement and holder of DFRC intending to source the inputs from indigenous sources/State Trading Enterprises/ EOU/SEZ/ EHTP/STP/BTP units in lieu of direct import has the option to source them against Advance Release Orders denominated in foreign exchange/ Indian rupees.

The transferee of a DFRC shall also be eligible for ARO facility. However, supplies may be obtained against the licence from EOU/ EHTP/ BTP/STP/SEZ units, without conversion into ARO.
Back-to-Back Inland Letter of Credit
4.1.12
An Advance Licence holder, holder of advance licence for annual requirement and holder of DFRC may, instead of applying for an Advance Release Order, avail of the facility of Back-to-Back Inland Letter of Credit in accordance with the procedure specified in Handbook (Vol.1).
Prohibited Items
4.1.13
Prohibited items of imports mentioned in ITC(HS) shall not be imported under the licence issued under the scheme.



Admissibility of Drawback
4.1.14
In the case of an Advance Licence, the drawback shall be available in respect of any of the duty paid materials, whether imported or indigenous, used in the goods exported, as per the drawback rate fixed by Ministry of Finance (Directorate of Drawback). The Drawback shall however be restricted to the duty paid materials as mentioned in the licence.
DEPB (Duty Entitlement Pass Book )
It is an export incentive scheme of Indian Government provided toExporters in India
Duty Entitlement Pass Book Scheme in short DEPB is an export incentive scheme. Notified on 1/4/1997, the DEPB Scheme consisted of (a) Post-export DEPB and (b) Pre-export DEPB. The pre-export DEPB scheme was abolished w.e.f. 1/4/2000. Under the post-export DEPB, which is issued after exports, the exporter is given a duty entitlement Pass Book Scheme at a pre-determined credit on the FOB value. The DEPB rates is allows import of any items except the items which are otherwise restricted for imports. Items such as Gold Nibs, Gold Pen, Gold watches etc. though covered under the generic description of writing instruments, components of writing instruments and watches are thus not eligible for benefit under the DEPB scheme.
The DEPB Rates are applied on the basis of FOB value or value cap whichever is lower. For example, if the FOB value is Rs.700/- per piece, and the value cap is Rs.500/- per piece, the DEPB rate shall be applied on Rs.500/-. The DEPB rate and the value cap shall be applicable as existing on the date of exports as defined in paragraph 15.15 of Handbook (Vol.1).
DEPB Scheme is issued only on post-export basis and pre/export DEPB Scheme has been discontinued. The provisions of DEPB Scheme are mentioned in Para 4.3 and 4.3.1 to 4.3.5 of the Foreign Trade Policy or Exim Policy. One significant change in the new DEPB Scheme is that in terms of Para 4.3.5 of the Exim Policy even excise duty paid in cash on inputs used in the manufacture of export product shall be eligible for brand rate of duty drawback as per rules framed by Department of Revenue which was not mentioned in the earlier DEPB Scheme.
Benefits of DEPB Rates
The benefit of DEPB schemes is available on the export products having extraneous material up to 5% by weight. In such cases, extraneous material up to 5% shall be ignored and the DEPB rate as notified for that export product is be allowed.
Review of DEPB Rates
The Government of India review the DEPB rates after getting the appropriate a export import data on FOB value of exports and CIF value of inputs used in the export product, as per SION. Such data and information is usually obtained from the concerned Export Promotion Councils.

Implementation of the DEPB Rates
Some additional facilities as listed below have been provided for better implementation of the DEPB Rates
DEPB rates rationalized to account for the changes in Customs duties.
Caps fixed on certain items but there would be no verification of Present Market Value (PMV) on such items.
A number of ports have been added for availing facilities under the Duty Exemption Scheme, including DEPB.
The threshold limit of Rs. 200 million for fixing new DEPB rates removed.
Provisional DEPB Rate
The main objective behind the provisional DEPB rates is to encourage diversification and to promote export of new products. However, provisional DEPB rates would be valid for a limited period of time during which exporter would furnish data on export and import for regular fixation of rates.
Maintenance of Record
It is necessary for Custom House at ports to maintain a separate record of details of exports made under DEPB Schemes.
Port of Registration
The exports/imports made from the specified ports given shall be entitled for DEPB.
Sea Ports: Mumbai, Kolkata, Cochin, Dahej, Kakinada, Kandla, Mangalore, Marmagoa, Mundra, Chennai, Nhavasheva, Paradeep, Pipavav, Sikka, Tuticorin Vishakhapatnam, Surat (Magdalla), Nagapattinam, Okha , Dharamtar and Jamnagar.
Airports: Ahmedabad, Bangalore, Bhubaneshwar Mumbai, Kolkata Coimbatore Air Cargo Complex, Cochin, Delhi, Hyderabad, Jaipur, Srinagar, Trivandrum, Varanasi, Nagpur and Chennai.
ICDs : Agra, Ahmedabad, Bangalore, Bhiwadi, Coimbatore, Daulatabad, (Wanjarwadi and Maliwada), Delhi, Dighi (Pune), Faridabad, Guntur, Hyderabad, Jaipur, Jallandhar, Jodhpur, Kanpur, Kota, Ludhiana, Madurai and the land Customs station at Ranaghat Mallanpur, Moradabad, Meerut Nagpur, Nasik, Gauhati (Amingaon), Pimpri (Pune), Pitampur (Indore), Rudrapur (Nainital), Salem Singanalur, Surat, Tirupur, Udaipur, Vadodara, Varanasi, Waluj, Bhilwara, Pondicherry ,Garhi-Harsaru, Bhatinda, Dappar, Chheharata (Amritsar), Karur, Miraj and Rewari.
LCS: Ranaghat, Singhabad , Raxaul , Jogbani, Nautanva ( Sonauli), Petrapole and Mahadipur.
The exports made to the following Special Economic Zones (SEZ) are also entitled to DEPB.
SEZ : Santacruz , Kandla, Kochi, Vishakhapatnam, Chennai, FALTA, Surat, NOIDA
Credit under DEPB and Present Market Value
In respect of products where rate of credit entitlement under DEPB Scheme comes to 10% or more, amount of credit against each such export product shall not exceed 50% of Present Market Value (PMV) of export product. During export, exporter shall declare on shipping bill that benefit under DEPB Scheme would not exceed 50% of PMV of export product.
However PMV declaration shall not be applicable for products for which value cap exists irrespective of DEPB rate of product.
Utilization of DEPB credit
Credit given under DEPB Schemes is utilized for payment of indian customs duty including capital goods, which are free to import.
Re-export of goods imported under DEPB Scheme
In case of return of any exported goods, which has been found defective or unfit for use may be again exported according to the exim guidelines as mentioned by the Department of Revenue.
In such cases 98% of the credit amount debited against DEPB for the export of such goods is generated by the concerned Commissioner of Customs in the form of a Certificate, containing the amount generated and the details of the original DEPB. On the basis of certificate, a fresh DEPB is issued by the concerned DGFT Regional Authority. It is important to note that the issued DEPB have the same port of registration and shall be valid for a period equivalent to the balance period available on the date of import of such defective/unfit goods.


Export Promotion Capital Goods Scheme

EPCG Scheme
5.1
The scheme allows import of capital goods for pre production, production and post production (including CKD/SKD thereof as well as computer software systems) at 5% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of licence. Capital goods would be allowed at 0% duty for exports of agricultural products and their value added variants.
However, in respect of EPCG licences with a duty saved of Rs.100 crore or more, the same export obligation shall be required to be fulfilled over a period of 12 years.
In case CVD is paid in cash on imports under EPCG, the incidence of CVD would not be taken for computation of net duty saved provided the same is not Cenvated .
The capital goods shall include spares (including refurbished/ reconditioned spares) , tools, jigs, fixtures, dies and moulds. EPCG licence may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the licence holder.
Second hand capital goods without any restriction on age may also be imported under the EPCG scheme.
Spares (including refurbished/ reconditioned spares), tools, refractories, catalyst and consumable for the existing and new plant and machinery may also be imported under the EPCG scheme .

However, import of motor cars, sports utility vehicles/ all purpose vehicles shall be allowed only to hotels, travel agents, tour operators or tour transport operators whose total foreign exchange earning in current and preceding three licencing years is Rs 1.5 crores. However, the parts of motor cars, sports utility vehicles/ all purpose vehicles such as chassis etc cannot be imported under the EPCG Scheme.



5.1A
Spares (including refurbished/ reconditioned spares), tools, spare refractories, catalyst & consumable for the existing plant and machinery may also be imported under the EPCG Scheme subject to an export obligation equivalent to 8 times of duty saved to be fulfilled over a period of 8 years reckoned from the date of issuance of licence.



EPCG for Projects
5.1B
An EPCG licence can also be issued for import of capital goods for supply to projects notified by the Central Board of Excise and Customs under S.No 441 of Customs Exemption Notification No 21/2002 dated 01.03.2002 wherein the basic customs duty on imports is 10% with a CVD of 16%.

The export obligation for such EPCG licences would be eight times the duty saved. The duty saved would be the difference between the effective duty under the aforesaid Customs Notification and the concessional duty under the EPCG Scheme.

Eligibility
5.2
The scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers.
Conditions for import of Capital Goods
5.3
Import of capital goods shall be subject to Actual User condition till the export obligation is completed.
Export obligation
5.4
The following conditions shall apply to the fulfillment of the export obligation:-


(i)
The export obligation shall be fulfilled by the export of goods capable of being manufactured or produced by the use of the capital goods imported under the scheme.
The export obligation may also be fulfilled by the export of same goods, for which EPCG licence has been obtained, manufactured or produced in different manufacturing units of the licence holder/specified supporting manufacturer (s).
When Capital Goods are imported for pre/ post- production or license is taken for import of spares, the license holder shall fulfill the export obligation by export of products manufactured from the plant / project to which the pre/ post- production capital goods/ spares are related.
The import of capital goods for creating storage and distribution facilities for products manufactured or services rendered by the EPCG licence holder would be permitted under the EPCG Scheme.
The export obligation under the scheme shall be, over and above, the average level of exports achieved by him in the preceding three licensing years for same and similar products except for categories mentioned in Handbook (Vol.1).
Alternatively, export obligation may also be fulfilled by exports of other good(s) manufactured or service(s) provided by the same firm/company or group company/ managed hotel which has the EPCG licence.
However, in such cases, the additional export obligation imposed under EPCG scheme shall be over and above the average exports achieved by the unit/company/group company/ managed hotel in preceding three years for both the original and the substitute product(s) /service (s) even in cases where the average is exempt for the substitute product (s)/ service (s) as given in para 5.7.6 of the Handbook (Vol 1).
The incremental exports to be fulfilled by the licence holder for fulfilling the remaining export obligation can include any combination of exports of the original product/ service and the substitute product (s)/ service (s). The exporter of goods can opt to get the export obligation refixed for the export of services and vice versa.



The licencee can also opt for the re-fixation of the balance export obligation based on 8 times of the duty saved amount for the CIF value in proportion to the balance Export obligation under the scheme. The guidelines for the re-fixation of export obligation is given in para 5.19 of the Handbook (Vol 1).



The aforesaid facilities shall only be available to manufacturer exporters/ service provider on all the licences where export obligation period including extended export obligation period is valid on the date of application . In this regard, exports made only on or after submission of application for alternate item and/ or re-fixation of the export obligation based on duty saved amount will be taken into account for fulfillment of export obligation.



(ii)
The export obligation under the scheme shall be, in addition to any other export obligation undertaken by the importer, except the export obligation for the same product under Advance Licence, DFRC, DEPB or Drawback scheme.


(iii)
The export obligation can also be fulfilled by the supply of ITA-1 items to the DTA provided the realization is in free foreign exchange.


(iv)
Exports shall be physical exports. However, deemed exports as specified in paragraph 8.2 (a), (b), (d), (f), (g) & (j) of Policy shall also be counted towards fulfilment of export obligation alongwith the usual benefits available under paragraph 8.3 of the Policy.
Royalty payments received in freely convertible currency and foreign exchange received for R& D services shall also be counted for discharge under the EPCG scheme. Payment received in rupee terms for the port handling services, in terms of Chapter 9 of the Foreign Trade Policy shall also be counted for export obligation discharge under the Scheme.





Provision for BIFR units
5.5.1
Any firm/company registered with BIFR or any firm/ company acquiring a unit, which is under BIFR shall be allowed EO extension as per the rehabilitation package prepared by the operating agency subject to subsequent approval of BIFR.
However, in cases where the rehabilitation package does not specify the EO extension period, a time period upto 12 years reckoned from the date of issue of licence would be permitted on merits of the case for fulfillment of export obligation.
Similarly, small-scale SSI units shall also be entitled for similar facility as per the rehabilitation scheme of the concerned State government. However, in cases where the State rehabilitation scheme does not specify the export obligation extension period, a time period upto 12 years reckoned from the date of issue of licence would be permitted on merits of the case for fulfillment of export obligation
EPCG for agro units
5.5.2
In the case of EPCG licences issued to agro units in the agri export zones, a period of 12 years reckoned from the date of issue of the licence would be permitted for the fulfillment of export obligation.
The agro units in the agri export zones would also have the facility of moving the capital good (s) imported under the EPCG within the agri export zone.
An LUT/ Bond in lieu of BG may be given for EPCG licence granted to units in the Agri Export Zones provided the EPCG licence is taken for export of the primary agricultural product (s) notified in Appendix 15 or their value added variants.

Indigenous Sourcing of Capital Goods and benefits to Domestic Supplier
5.6
A person holding an EPCG licence may source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying capital goods to EPCG licence holders shall be eligible for deemed export benefit under paragraph 8.3 of the Policy.
Benefits to Domestic Supplier
5.7
In the event of a firm contract between the EPCG licence holder and domestic manufacturer for such sourcing, the domestic manufacturer may apply for the issuance of Advance Licence for deemed exports for the import of inputs including components required for the manufacturer of said capital goods.


The domestic manufacturer may also replenish the inputs including components after supply of capital goods to the EPCG licence holders.
Fixation of Export Obligation
5.7A
In case of direct imports, the export obligation relating to the EPCG licence shall be reckoned with reference to the duty saved value on the CIF value of capital goods (including spares, jigs, fixtures, dies and moulds) actually imported. In case of domestic sourcing, the export obligation relating to EPCG shall be reckoned with reference to the notional Customs duties saved on the FOR of capital goods (including spares, jigs, fixtures, dies and moulds).

5.8
Service provider in Agri export zone shall have the facility to move or shift the capital goods within the zone provided he maintains accurate record of such movements. However, such equipments shall not be sold or leased by the licence holder.
Maintenance of Average exports under EPCG
5.9
As per the provisions of para 5.4(i) , the EPCG licence holder would have to maintain the average level of exports equivalent to the average of the exports in the preceding three licencing years for the same and similar products except for exempted categories given in Handbook (Vol 1) during the entire period of export obligation.
Notwithstanding the above, the licence holder shall maintain at least 75% of the average exports in any particular year (s) provided the same is offset by excess exports to fulfil the average in other year (s).
Technological Upgradation of existing EPCG machinery
5.10
EPCG licence holders can opt for Technological Upgradation of the existing capital good imported under the EPCG licence.
The conditions governing the Technological Upgradation of the existing capital good are as under:


(i)
The minimum time period for applying for Technological Upgradation of the existing capital good imported under EPCG is 5 years from the date of issuance of the licence.


(ii)
The minimum exports made under the old capital good must be 40% of the total export obligation imposed on the first EPCG licence


(iii)
The export obligation would be refixed such that the total export obligation mandated for both the capital goods would be the sum total of 6 times the duty saved on both the capital goods.


(iv)
The procedure governing the replacement of capital good is given in para 5.20 of the Handbook (Vol1).
Promotional Measures

Assistance to States for Infrastructure Development of Exports (ASIDE)
3.1
The State Governments shall be encouraged to participate in promoting exports from their respective States. For this purpose, Department of Commerce has formulated a scheme called ASIDE.
Suitable provision has been made in the Annual Plan of the Department of Commerce for allocation of funds to the states on the twin criteria of gross exports and the rate of growth of exports.
The States shall utilise this amount for developing infrastructure such as roads connecting production centres with the ports, setting up of Inland Container Depots and Container Freight Stations, creation of new State level export promotion industrial parks/zones, augmenting common facilities in the existing zones, equity participation in infrastructure projects, development of minor ports and jetties, assistance in setting up of common effluent treatment facilities, stabilizing power supply and any other activity as may be notified by Department of Commerce from time to time.
Market Access Initiative (MAI)
3.2
The Market Access Initiative (MAI) scheme is intended to provide financial assistance for medium term export promotion efforts with a sharp focus on a country and product.

The financial assistance is available for Export Promotion Councils, Industry and Trade associations , Agencies of State Governments , Indian Commercial Missions abroad and other eligible entities as may be notified from time to time,.

A whole range of activities can be funded under the MAI scheme. These include market studies, setting up of showroom/ warehouse, sales promotion campaigns, international departmental stores, publicity campaigns, participation in international trade fairs, , brand promotion, registration charges for pharmaceuticals and testing charges for engineering products etc. Each of these export promotion activities can receive financial assistance from the Government ranging from 25% to 100% of the total cost depending upon the activity and the implementing agency, as indicated in the detailed guidelines. The full text of the guidelines can be seen at http://commerce.nic.in/ .



Marketing Development Assistance (MDA)













Meeting Legal expenses for Trade related matters
3.2.1














3.2.1.1
The Marketing Development Assistance (MDA) Scheme is intended to provide financial assistance for a range of export promotion activities implemented by export promotion councils, industry and trade associations on a regular basis every year.

As per the revised MDA guidelines with effect from 1st April,2004 assistance under MDA is available for exporters with annual export turnover upto Rs 5 crores.

These include participation in Trade Fairs and Buyer Seller meets abroad or in India, export promotion seminars, etc

Further, assistance for participation in Trade Fairs abroad and travel grant is available to such exporters if they travel to countries in one of the four Focus Areas, such as , Latin America, Africa, CIS Region, ASEAN countries, Australia and New Zealand.
For participation in trade fairs, etc, in other areas financial assistance without travel grant is available.

Financial assistance would be provided to deserving exporters on the recommendation of Export Promotion Councils for meeting the cost of legal expenses relating to trade related matters.



Towns of Export Excellence
3.3
A number of towns in specific geographical locations have emerged as dynamic industrial clusters contributing handsomely to India's exports. It is necessary to grant recognition to these industrial clusters with a view to maximizing their potential and enabling them to move higher in the value chain and tap new markets.


Selected towns producing goods of Rs. 1000 crore or more will be notified as Towns of Exports Excellence on the basis of potential for growth in exports. However for the Towns of Export Excellence in the Handloom, Handicraft, Agriculture and Fisheries sector, the threshold limit would be Rs 250 crores.


Common service providers in these areas shall be entitled for the facility of the EPCG scheme.

The recognised associations of units will be able to access the funds under the Market Access Initiative scheme for creating focused technological services.

Further such areas will receive priority for assistance for rectifying identified critical infrastructure gaps from the ASIDE scheme.
The notified towns of export excellence are listed in Appendix 41.

Brand Promotion and Quality
3.4.1
The Central Government aims to encourage manufacturers and exporters to attain internationally accepted standards of quality for their products. The Central Government will extend support and assistance to Trade and Industry to launch a nationwide programme on quality awareness and to promote the concept of total quality management.
Test Houses
3.4.2
The Central Government will assist in the modernisation and upgradation of test houses and laboratories in order to bring them at par with international standards.
Quality Complaints/ Disputes
3.4.3
The Regional Sub-Committee on Quality Complaints (RSCQC) set up at the Regional Offices of the Directorate General of Foreign Trade shall investigate quality complaints received from foreign buyers. The guidelines for settlement of quality complaints, in particular, and such other complaints, in general, is given in Appendix- 37 of Handbook (Vol.1).
Trade disputes affecting trade relations
3.4.4
If it comes to the notice of the Director General of Foreign Trade or he has reason to believe that an export or import has been made in a manner that



(i)
is gravely prejudicial to the trade relations of India with any foreign country; or


(ii)
Is gravely prejudicial to the interest of other persons engaged in exports or imports;


(iii)
has brought disrepute to the country;



The Director General Foreign Trade may take action against the exporter or importer concerned in accordance with the provisions of the Act, the Rules and Orders made thereunder and this Policy.

STAR EXPORT HOUSES
Star Export House
3.5.1
Merchant as well as Manufacturer Exporters, Service Providers, Export Oriented Units (EOUs) and Units located in Special Economic Zones (SEZs), Agri Export Zone (AEZ's), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio Technology Parks (BTPs) shall be eligible for applying for status as Star Export Houses.

Status Category
3.5.2
The applicant shall be categorized depending on his total FOB/FOR export performance during the current plus the previous three years.:

Category

Performance (in rupees)
One Star Export House
15 crore
Two Star Export House
100 crore
Three Star Export House
500 crore
Four Star Export House
1500 crore
Five Star Export House
5000 crore







Note
1.
Units in Small Scale Industry/Tiny Sector/Cottage Sector, Units registered with KVICs/KVIBs, Units located in North Eastern States, Sikkim and J&K, Units exporting handloom/ handicrafts/hand knotted or silk carpets, exporters exporting to countries in Latin America/CIS/sub-Saharan Africa as listed in Appendix-17C, units having ISO 9000 (series)/ ISO 14000 (series) /WHOGMP/HACCP/SEI CMM level-II and above status granted by agencies listed in Appendix-28A, exports of services and exports of agro products shall be entitled for double weightage of exports made for grant of Star Export House status.

2.
Exports made on re-export basis shall not be counted for the purpose of recognition.

3.
Exports made by a subsidiary of a limited company shall be counted towards export performance of the limited company for the purpose of recognition only if the limited company has a majority share holding in the subsidiary company.

Privileges
3.5.2.1
A Star Export House shall be eligible for the following facilities:


i)
Licence/certificate/permissions and Customs clearances for both imports and exports on self-declaration basis.


ii)
Fixation of Input-Output norms on priority within 60 days;


iii)
Exemption from compulsory negotiation of documents through banks. The remittance, however, would continue to be received through banking channels;


iv)
100% retention of foreign exchange in EEFC account;


v)
Enhancement in normal repatriation period from 180 days to 360 days.


vi)
Entitlement for consideration under the Target Plus Scheme


vii)
Exemption from furnishing of Bank Guarantee in Schemes under this Policy.


Validity Period
3.5.3
All status certificates issued or renewed on or after 01.09.2004 shall be valid from 1st April of the licensing year during which the application for the grant of such recognition is made upto 31st March, 2009, unless otherwise specified. On the expiry of such certificate, application for renewal of status certificate shall be required to be made within a period as prescribed in the Handbook (Vol.1). During the said period, the star export house shall be eligible to claim the usual facilities and benefits.


Services exports




Export Promotion Council for Services
3.6.1




3.6.2
Services include all the 161 tradable services covered under the General Agreement on Trade in Services where payment for such services is received in free foreign exchange. A list of services is given in Appendix-36 of Handbook (Vol.1). All provisions of this Policy shall apply mutatis mutandi to export of services as they apply to goods, unless otherwise specified.
Service exporters are required to register themselves with the Federation of Indian Exporters Organisation. However, software exporters shall register themselves with Electronic and Software Export Promotion Council.


In order to give proper direction, guidance and encouragement to the Services Sector, an exclusive Export Promotion Council for Services shall be set up.

The Services Export Promotion Council shall:


(i)
Map opportunities for key services in key markets and develop strategic market access programmes for each component of the matrix.


(ii)
Co-ordinate with sectoral players in undertaking intensive brand building and marketing programmes in target markets.


(iii)
Make necessary interventions with regard to policies, procedures and bilateral/ multilateral issues, in co-ordination with recognised nodal bodies of the services industry.
Common Facility
Centres
3.6.3
Government shall promote the establishment of Common Facility Centres for use by home-based service providers, particularly in areas like Engineering & Architectural design, Multi-media operations, software developers etc., in State and District-level towns, to draw in a vast multitude of home-based professionals into the services export arena.

SERVED FROM INDIA SCHEME
Objective
3.6.4.1
The objective is to accelerate the growth in export of services so as to create a powerful and unique 'Served From India' brand, instantly recognized and respected the world over.
Eligibility
3.6.4.2
All Service providers who have a total foreign exchange earning of at least Rs.10 lakhs in the preceding or current financial year shall be eligible to qualify for a duty credit entitlement.

For individuals who are service providers, the total foreign exchange earned criteria would be Rs.5 lakhs in the preceding financial year.
Entitlement


Hotels & Restaurants
3.6.4.3


3.6.4.4
All Service providers (other than hotels and restaurants) shall be entitled to duty credit equivalent to 10% of the foreign exchange earned by them in the preceding financial year.

Hotels of one-star and above (including managed hotels and heritage hotels) approved by the Department of Tourism, and other Service providers in the tourism sector registered with the Department of Tourism, shall be entitled to duty credit equivalent to 5% of the foreign exchange earned by them in the preceding financial year.

Stand-alone restaurants will be entitled to duty credit equivalent to 20% of the foreign exchange earned by them in the preceding financial year.

Note: In the case of one and two star hotels and stand-alone restaurants, the foreign exchanged earned through International Credit Cards and sources as may be notified only shall be taken into account for the purposes of computation of duty credit entitlement under the scheme.
Imports allowed
3.6.4.5
Duty credit entitlement may be used for import of any capital goods including spares, office equipment and professional equipment, office furniture and consumables, provided it is part of their main line of business.

In the case of hotels and stand-alone restaurants, the duty credit entitlement may also be used for the import of food items and alcoholic beverages.
Non Transferability
3.6.4.6
The entitlement and the goods imported shall be non-transferable.
Healthcare & Education
3.6.4.7
In order to enable Healthcare and Educational Institutions to have world-class state-of-the-art infrastructure, service providers in these sectors shall, as for other service sectors, be entitled to duty credit equivalent to 10% of the foreign exchange earned by them in the previous financial year.


(i)
The foreign exchange turnover for Healthcare Institutions would include amounts earned through medical treatment, surgery, testing, consultancy and health care provided by the institution.


(ii)
The foreign exchange turnover for Educational Institutions would include amounts earned through the courses and consultancy provided by the institution.


(iii)
In either case, it will not include foreign exchange remittances through any other source including equity participation, donations etc.


(iv)
The capital goods and the consumer goods imported under the duty free entitlement shall have a nexus with the activities of the healthcare or educational institutions concerned.



Special provisions
3.6.4.8
Government reserves the right in public interest to specify from time to time the category or type of service exports which shall not be eligible for calculation of either eligibility or of entitlement.

Similarly, Government may from time to time also notify the goods which shall not be allowed for import under the duty free entitlement certificate issued under the scheme.

TARGET PLUS SCHEME
Objective
3.7.1
The objective of the scheme is to accelerate growth in exports by rewarding Star Export Houses who have achieved a quantum growth in exports. High performing Star Export Houses shall be entitled for a duty credit based on incremental exports substantially higher than the general annual export target fixed (Since the target fixed for 2004-05 is 16 %, the lower limit of performance for qualifying for rewards is pegged at 20% for the current year.).
Eligibility Criteria
3.7.2
All Star Export Houses (including Status Holders as defined in para 3.7.2.1 of Exim Policy 2002-07) which have achieved a minimum export turnover in free foreign exchange of Rs 10 crores in the previous licencing year are eligible for consideration under the Target Plus Scheme .
Entitlement
3.7.3
The entitlement under this scheme would be contingent on the percentage incremental growth in FOB value of exports in the current licencing year over the previous licencing year, as under:



Percentage incremental growth
Duty Credit Entitlement (as a % of the incremental growth)


20% and above but below 25%
5%


25% or above but below 100%
10%


100% and above
15% (of 100%)


Note:
(1)
Incremental growth beyond 100% will not qualify for computation of duty credit entitlement.


(2)
For the purpose of this scheme, the export performance shall not be transferred to or transferred from any other exporter. In the case of third party exports, the name of the supporting manufacturer/ manufacturer exporter shall be declared.


(3)
Exporters shall have the option to apply for benefit either under the Target Plus Scheme or under the Vishesh Krishi Upaj Yojana, but not both in respect of the same exported product/s. Provided that in calculating the entitlement under Para 3.7.3 the total eligible exports shall be taken into account for computing the percentage incremental growth but the duty credit entitlement shall be arrived at on the eligible exports reduced by the amount on which the benefit is claimed under para 3.8.2.


(4)
All exports including exports under free shipping bill verified and authenticated by Customs and Gems& Jewellery shipping bills but excluding exports specified under para 3.7.5, shall be eligible for benefits under the Target Plus Scheme.



Applicant Companies
3.7.4
Companies which are Star Export Houses as well as part of a Group company shall have an option to either apply as an individual company or as a Group based on the growth in the Group's turnover as a whole. (For the purpose of this scheme the definition of Group Company' as given in Chapter 9 will be applicable. Furthermore , only such companies of the Group as are Star Export Houses will be considered).
If a Group company chooses to apply based on the export of one or more of its individual Star Export House companies, the entitlement would be calculated considering the export performance of the applicant company during the previous licencing year and current licencing year. It shall be necessary that the adjusted export performance of all the Star Export House companies of the Group during the current licencing year does not fall below the combined performance of all Star Export House companies of the Group in the previous licencing year.

In case the Group chooses to apply based on the overall growth in Group's turnover (i.e the turnover of all the Star Export House companies) , any one of the Star Export House companies of the Group may file an application on behalf of all the Star Export House companies of the Group.




3.7.5

The following exports shall not be taken into account for calculation of export performance or for computation of entitlement under the scheme:



(a)
Export of imported goods covered under Para 2.35 of the Foreign Trade Policy or exports made through transshipment.



(b)
Export turnover of units operating under SEZ/EOU/EHTP/STPI/ BTP Schemes or products manufactured by them and exported through DTA units



(c)
Deemed exports (even when payments are received in Free Foreign Exchange and payment is made from EEFC account).



(d)
Service exports



(e)
Rough, uncut and semi polished diamonds and other precious stones



(f)
Gold, silver, platinum and other precious metals in any form, including plain jewellery thereof. However exports of studded jewellery and any item as may be notified from time to time will be counted for the entitlement under the scheme.



(g)
Export performance made by one exporter on behalf of another exporter
Imports allowed
3.7.6
The Duty Credit may be used for import of any inputs, capital goods including spares, office equipment, professional equipment and office furniture provided the same is freely importable under ITC (HS), for their own use or that of supporting manufacturers as declared in Appendix 17 D.
Agricultural products listed in Chapter 1 to 24 of ITC (HS) except as may be notified from time to time, shall not be permissible for imports under this scheme.
Cenvat/ Drawback
3.7.7
Additional customs duty/excise duty paid in cash or through debit under Target Plus shall be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of Revenue.
Special Provision
3.7.8
Government reserves the right in public interest, to specify from time to time the category of exports and export products, which shall not be eligible for calculation of incremental growth/ entitlement.

Similarly, Government may from time to time also notify the list of goods, which shall not be allowed for import under the duty credit entitlement certificate issued under the scheme.

VISHESH KRISHI UPAJ YOJANA
(SPECIAL AGRICULTURAL PRODUCE SCHEME)
Objective
3.8.1
The objective of the scheme is to promote export of fruits, vegetables, flowers, minor forest produce, and their value added products, by incentivising exporters of such products.
Entitlement
3.8.2
Exporters of such products shall be entitled for duty credit scrip equivalent to 5% of the FOB value of exports for each licencing year commencing from 1st April, 2004 . The scrip and the items imported against it would be freely transferable.
Imports allowed
3.8.3
The Duty Credit may be used for import of inputs or goods including capital goods, as may be notified, provided the same is freely importable under ITC(HS).
Imports from a port other than the port of export shall be allowed under TRA facility as per the terms and conditions of the notification issued by Department of Revenue.
Cenvat/ Drawback
3.8.4
Additional customs duty/excise duty paid in cash or through debit under Vishesh Krishi Upaj Yojana shall be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of Revenue.
Special Provision
3.8.5
Government reserves the right in public interest, to specify from time to time the export products which shall not be eligible for calculation of entitlement.


Duty Drawback Drawback Claim FormIn case of drawback parcels, the exporters need to file prescribed application Form (in quadruplicate). Its format is at Annexure 26.Form AR4This Form is to be filled in quadruplicate in case of goods to be exported by post under excise rebate. The duplicate copy of these duly processed Forms should be affixed with sufficient postage stamps at the rate of Rs. 0.20 per packet, before presentation to Post Office. (Also see ‘declarations’ in Chapter 6.)Customs Declaration FormThe CDF is used for export by post, and available in post offices.Booking at the Post OfficesParcels of trade goods including those against which customs duty drawback claim is being made, may be presented to any post office in India for dispatch to any permissible destination abroad. However, all parcels must be addressed to the branch or correspondent of the exporter’s bank in the country concerned, unless the goods are covered by a Letter of Credit (L/C) or where advance payment has been received or specially permitted by the RBI. The parcel should be made up according to given specifications and properly addressed and weigh to the specified limits as detailed in the book ‘Export – What, Where, How’ by Paras Ram. These parcels are routed through the main post offices of exchange located at Bombay, Calcutta, Delhi, Jaipur and Madras or through the sub-offices of exchange at Ahmedabad, Bangalore and Cochin, etc.Declare on the outer packing carrying the address of the consignee, in bold letters the words: “Drawback Export”.DocumentsThe drawback parcels should be accompanied with the following documents: -(i) Drawback Claim Form (in quadruplicate) as at Annexure 26.(ii) PP Form (in duplicate) duly countersigned by the exporter’s bank or RBI. In case of jewellery items, it should be countersigned by the customs as well.(iii) Export licence, Quota certificate, if applicable.(iv) AR4 Form, in duplicate, duly processed by the Central Excise Authorities.(v) Invoice (two copies)(vi) Customs declaration form (triplicate). One copy of this form should be pasted on the parcel.(vii) A self-addressed envelope (with sufficient) postage stamps affixed on it to cover charges of registration and transmission back to the sender (exporter). Every care should be taken to attach the envelope carefully in order to avoid its loss in transit.The following additional documents should also be sent along with parcel.(i) Commercial invoice for canalised items must be got endorsed by the Canalising Agency concerned.(ii) Packing list in case there is more than one parcel in one consignment.(iii) Quality control and pre-shipment inspection certificate, if required.(iv) Any other document prescribed for the export/claim of drawback for/against the concerned product.Processing at Post OfficeThe booking clerk at the Post Office will receive the parcel and issue necessary receipt. The number and date of parcel will be entered in the concerned forms. He will also return the 4th copy of the Drawback Claim Form to the exporter.All parcels will, then, be passed on to the Foreign Post Office concerned for customs clearance before the final dispatch to overseas destinations.Customs ExaminationDate of Receipt. The date of receipt of the aforesaid Drawback Claim form by the Customs from the Post Offices, shall be the date of filing of drawback claim for the purpose of interest payable on delayed payment of drawback, under section 75A of the Customs Act. An intimation of the same shall be given by the Customs to the exporter.Deficiency Memo. In case the Drawback Claim Form is not complete in all respects, a Deficiency Memo will be issued within 15 days of the receipt from Post Offices. When the exporter complies with the requirements specified in the deficiency memo within 30 days of its return, he shall be issued an acknowledgment by the Customs. The date of such acknowledgment shall be deemed to be the date of filing of claim for the purpose of time permitted for payment of drawback and interest thereon, if any.If the claim contents including the fulfillment of requirements in the Deficiency Memo issued, if any, are correct as declared, the same will be certified in Form ‘D’. The Customs will also attest the original PP Form and one copy of the invoice. Thereafter, the parcels will be returned to the Foreign Post Office with recommendation for allowing their dispatch out of India. The supdt., FPO will thereafter certify the actual dispatch in Drawback Claim Form, return a copy of the form to the exporter and two copies to the Drawback Section in the Customs and Central Excise Department for necessary action regarding payment of drawback.The original PP Form duly attested will be forwarded by the Customs directly to the Reserve Bank of India. The invoice (one copy) duly authenticated will be returned by the Customs to the postal department for onward delivery to the concerned exporter.Payment of DrawbackThe export should simultaneously follow the drill explained at stage 2 in Chapter 2 for opening a bank account and drawback ledger account etc so that the cheque for drawback amount could be sent here.The exporter may also collect the cheque personally.But contact the concerned Custom House attached to the Foreign Post Offices for further details as the procedure may slightly differ depending upon local conditions.


Deemed ExportsThe Indian suppliers are entitled for the following benefits in respect of deemed exports:
Refund of excise duty paid on final products
Duty drawback
Imports under DEEC scheme
Special import licenses based on value of deemed exports
The following categories are treated as deemed exports for seller if the goods are manufactured in India:
Supply of goods against duty free licences under DEEC scheme
Supply of goods to a 100 % EOU or a unit in a free trade zone or a unit in a software technology park or a unit in a hardware technology park
Supply of goods to holders of licence under the EPCG scheme
Supply of goods to projects financed by multilateral or bilateral agencies or funds notified by the Finance Ministry under international competitive bidding or under limited tender systems in accordance with the procedures of those agencies or funds where legal agreements provide for tender evaluation without including customs duty
Supply of capital goods and spares upto 10% of the FOR value to fertilizer plants under international competitive bidding
Supply of goods to any project or purpose in respect of which the Ministry of Finance permits by notification the import of goods at zero customs duty along with benefits of deemed exports to domestic supplies
Supply of goods to power, oil and gas sectors in respect of which the Ministry of Finance permits by notification benefits of deemed exports to domestic supplies