Incentives and Promotions for Export

Indian government backs and endorses exports in the following way:

1. Export Promotion Capital Goods Scheme (EPCG): To decrease the price of goods produced for export to contest in the international market, this scheme was launched. Under the EPCG scheme, capital goods imported for manufacture were charged less imports duties subject to an export obligation to be completed over a period of time.

Zero duty EPCG scheme permits import of capital goods for pre-production, production and post-production (involving CKD/SKD, thereof, as well as computer software systems) at Zero Customs duty, subject to an export obligation equal to six times of duty saved on capital goods imported under EPCG scheme, to be achieved in six years calculated from Authorisation issue-date.

The scheme will be accessible for the exporters of engineering and electronic products, apparels and textiles, basic chemicals and pharmaceuticals, plastics, handicrafts, chemicals and allied products, leather and leather products, etc.

2. Duty Entitlement Passbook Scheme (DEPB): This is a scheme accessible for a manufacturer, exporter, Trading House, Export House, Star Trading House and Super Star Trading House. The objective of the scheme was to streamline the import procedures for exporters by offering duty-free access to imported inputs for exporters or manufacturers. The schemes are broader in scope and more flexible than the earlier advances licensing schemes.

Imports utilised for export production were exempted from customs duty as well as from extra duties on imports for an exporter holding Import Export Pass book involving import license. The passbook is useful only to registered manufactured exporters.

The goal of DEPB is to neutralize the incidence of customs duty on import content of export product. Component of customs duty on fuel shall also be factored in the DEPB rate. Component of Special Additional Duty shall also be permitted under DEPB (as brand rate) in instance of non-availment of CENVAT credit. Neutralisation shall be offered by the way of grant of duty credit against export product.

An exporter may apply for credit, at stated percentage of FOB value of exports, made in freely convertible currency. In instance of supply by a DTA unit to a SEZ unit/SEZ Developer/Co-Developer, an exporter may apply for credit for exports made in liberally convertible currency or payment made from foreign currency account of SEZ Unit/SEZ Developer/Co-Developer. Additionally, the exporter shall also be eligible for DEPB benefit in case payment is made in Indian Rupees by SEZ Developer/Co-Developer for supplies received w.e.f. 10.2.2006.

3. Duty Draw Back System: The Duty Drawback system compensates exporters for the tariffs paid on the imported materials and intermediates as well as central excise duties paid on domestically produced generated inputs which enter into export production.

4. Replenishment and Imprest Licenses: These licenses were offered to the exporter to have an access to otherwise limited material, (even imports) or canalized, that too of good quality, for the motive of exports, or to be utilised as a raw material to produce export goods. The goal of this license is to make sure the availability of qualitative raw material in adequate quantity and at the right time at competitive prices for export growth.

Impress licenses are granted based on export contracts or on past export performance and the material must really be used in exports. REP licenses are granted against actual exports after they have occurred, and to the extent that imported material is not needed. The REP entitlement can be legitimately sold on the open market.

5. Advance License: Advance license is issued for the duty-free imports of raw material, consumables, components, intermediates, parts, spares, etc. Advance license may either be quantity-based or value-based.

6. Tax Benefit: To encourage exports, government exempts the export profits from tax under 80 HHC provision of the IT Act.

7. Finance Facility: Credit facility is made accessible to the exporters for purchase, manufacture and packaging before the shipment, as also post-shipment, credit amenities. Medium and long-term credits are also made accessible for the export of capital equipment. Assistance, in the shape of grants, is offered to the export promotion councils, sanctioned organizations, export houses, consultancy organization and individual exporters to conduct:

(i) Market research, commodity research, etc.,

(ii) To send trade delegation and teams,

(iii) For export publicity and spreading of information,

(iv) For setting up of offices and branches in countries abroad,

(v) For taking up in trade fairs and exhibitions, or

(vi) For any other mean which will encourage development of market for Indian goods abroad.

8. Subsidies on Domestic Raw Material: In case the domestic price of material utilised for exports is higher than international price, then there was the provision of offering subsidy to the degree of difference of price. This scheme was launched in 1981 in steel and was termed as the ‘International Price Reimbursement Schemes’ (IPRS), which later involved other imported raw materials like aluminium and copper.

9. Blanket Exchange Permit Scheme: Under this scheme, exporters are permitted, barring a few products, to use 5-10% of their foreign exchange earnings for carrying out export promotion activities.

10. Free Trade Zones and Export Oriented Units: The government has established free trade zone to give impetus to exports. The goal behind this is that in these zones, capital goods can be imported liberally and there will be minimum red-tapism. These zones are treated separately from Domestic Tariff Area (DTA) and have a right to import all their needs, including capital goods and spare parts and raw material, free of import licensing controls and import duties. The initial EPZ was set up in Kandla. Now, India has eleven operating SEZs of which seven are set up by the centre and four are encouraged by the private/joint stake—Kandla, Cochin, Chennai, Surat, Santa Cruz, Indore, Falta, Vishakhapatnam, Noida, Salt Lake (Calcutta) and Jaipur. Approval has already been offered for 35 new SEZs in private/state sector.

The SEZ bill was submitted in parliament in May, 2005, which proposed for the units in SEZ:

(i) A 15-year tax holiday,

(ii) Single window clearance,

(iii) 100% tax exemption for five years,

(iv) 50% for subsequent five years, and

(v) 50% of the ploughed back export for subsequent five years.

The goals of setting up Export-oriented Units are to offer free access to imports of all inputs for such export-oriented units and to develop a single point clearance with relation to industrial licensing and foreign collaboration.

11. Infrastructure Set-Up and Aids:

(i) Export Promotion Council: A number of export promotion councils have been established with a view to help the promotion of exports of particular commodities or groups of products. Few of them are such as Apparel Export Promotion Council, Engineering Export Promotion Council, Cashew Export Promotion Council, Cotton Textile Export Promotion Council, Sports’ Good Export Promotion Council, etc.

(ii) Commodity Board: The government has established an Eight-commodity Board to frame the policies in order to enhance the production and export of respective commodities. These boards are – Coffee, Tea, Spices, Marine Products, Rubber, Tobacco, Agriculture and Processed Food Export Development Authority.

12. Target Plus: This scheme has been launched to acquire growth in exports. According to this scheme, exporters who will acquire a substantial greater growth than that of general export target will become duty-free credit based on their performance. For a growth of more than 20%, duty-free credit will be 5%, for 25% it will be 10% and for 100% it will be 15%, respectively of FOB worth of incremental exports.

To give motivation to trading in India, a scheme is launched to establish Free trades and Warehousing Zones. These zones will have suitable infrastructure to support the import and export of goods and services. Foreign direct investment would be allowed up to 100% in the development and establishment of these zones and their infrastructure amenities.

It is important for you to note that the Foreign Trade Policy 2009-2014 offered exclusive emphasis to agriculture, gems and jewellery, handicraft, handlooms, and footwear. To encourage this, it liberalised the imports of tubers, seeds, bulbs, and planting material and also the export of plant portion, derivatives, and its extracts. Export of medicinal plants and herbal products are likely to get a boost in the process. For the same purpose, it also permitted imports of restricted items. Export-oriented units involved in production or processing of agro, horticulture and aquaculture products are permitted to move inputs and equipment to farms situated in domestic tariff area. To promote handloom and handicraft, the duty-free import of trimmings and embellishments in such sectors have been enhanced to 5% of FOB value of exports. It will be also excused from countervailing duty. Provision was also made for the setup of a new Handicraft Special Zones.

13. Vishesh Krishi Upaj Yojna: The goal of this Yojna is to encourage the exports of flowers, fruits, vegetables, minor forest produce and their value-added products. Exporters of such products will attain duty free credit.

14. Town of Export Excellence: The limit to turn into the Town of Export Excellence have been decreased to Rs. 250 crore from Rs. 1000 crore. FTP gave various benefits to become the Town of Export Excellence. It involves exemption from service tax in proportion to their exported goods and services and permission to keep 100% earnings in exchange earner’s foreign currency account.

15. Served from India: To facilitate the exporter of several kinds of services, the government of India has launched ‘Served from India Scheme’ as a brand. Under this scheme, service providers of over 100 services like Computer-related services, Professional Services, Hotels, Restaurants, Educational Services, Research and Development Services, Communication Services, Construction and associated Engineering Services, Distribution Service, Tourism and Transport-related Services, Environment-related Services, Health-related Social Service, Recreational, Cultural and Sporting Services, etc., are titled for Duty Credit Scrip. Service providers with a total foreign exchange earning of minimum Rs. 10 lakhs in preceding or recent financial year shall qualify for the Duty Credit Scrip. For Individual Service Providers, the criterion is decreased to Rs. 5 lakhs of foreign exchange earnings.

16. Service Export Promotion Council: In order to offer proper direction, guidance and encouragement to the Services Sector, this exclusive council was established by the government of India. Its main goals were to tap the opportunities in key service regions and develop strategic market access programmes, involving brand building in coordination with sectoral players and identified nodal bodies of the services industry.

17. Common Facility Centre: The Common Facility Centres shall be encouraged by the government for use by the home-based service providers, particularly in the regions such as engineering and architectural design, software developers, multimedia operations, etc., at the state and district levels, to draw-in a huge multitude of home-based professionals into the service-export area.

18. Duty Exemption & Remission Scheme: Duty Exemption Schemes facilitate duty-free import of inputs needed for export production. Duty Exemption Schemes comprise:

(i) Advance Authorisation Scheme, and

(ii) Duty Free Import Authorisation (DFIA) Scheme.

A Duty Remission Scheme facilitates post-export replenishment/remission of duty on inputs utilised in export product. Duty Remission Schemes comprise

(i) Duty Entitlement Passbook (DEPB) Scheme, and

(ii) Duty Drawback (DBK) Scheme.

Advance Authorisation Scheme

You must understand that an Advance Authorisation is issued to permit duty-free import of inputs, which are physically included in export product (making normal allowance for wastage). Additionally, fuel, oil, energy, catalysts which are consumed/used to attain export product, may also be permitted. DGFT, by means of Public Notice, may omit any product(s) from the purview of Advance Authorisation. Advance Authorisations are exempted from payment of additional customs duty, basic customs duty, education cess, anti-dumping duty and safeguard duty, if any.

Duty Free Import Authorisation (DFIA) Scheme

DFIA is issued to permit duty free import of inputs, fuel, oil, energy sources, catalysts which are needed for the production of export products. DGFT, by means of Public Notice, may omit any product(s) from the purview of DFIA.

Duty Entitlement Passbook Scheme (DEPB)

The goal of DEPB is to counteract the incidence of customs duty on import content of export product. Component of customs duty on fuel (seeming as consumable in the SION) shall also be factored in the DEPB rate. Components of Special Additional Duty shall also be permitted under DEPB (as brand rate) in instance of non-availment of CENVAT credit. Neutralisation shall be offered by the way of issue of duty credit against export product.

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