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“DGFT”

  • Foreign Trade Policy
  • Service Exports from India Scheme (SEIS)
  • Merchandise Export from India Scheme (MEIS)
  • Export Promotion Capital Goods Scheme

Foreign Trade Policy

India’s Foreign Trade Policy (FTP) has conventionally been formulated for five years at a time and reviewed annually. The focus of the FTP has been to provide a framework of rules and procedures for exports and imports and a set of incentives for promoting exports. 

 

Fifteen years ago India occupied a very small space on the global trade canvas. As various sectors of the Indian economy became more competitive globally, exports began to grow remarkably. India’s merchandise exports recorded a Compounded Annual Growth Rate (CAGR) of 8.1 percent over the last decade i.e. from 2006-07 to 2016-17, which includes the recent period of decline due to the global slowdown in the post 2008-09 period. Similarly, as the economic growth rate of the country picked up, so did imports, which grew at a CAGR of 7.5 percent over the same period.

 

Today, foreign trade has begun to play a significant part in the Indian economy reflecting its increasing integration in globalisation. While the merchandise trade deficit has been at a manageable level in recent period, partly on account of low global petroleum prices, the country needs to remain vigilant and vigorously continue to pursue the strategy of promoting exports, enhancing domestic availability of key products and rationalising our import policies.

 

The trade performance of a country is so closely and inextricably linked with its overall economic performance that trade policy cannot be treated as a simple matter of maneuvering the export or import of a product. Foreign trade policy has a direct connect with domestic economic policies.

 

Exports constitute the last segment of long sectoral value chains. A foreign trade policy that addresses only the front-end of exports without recognizing the characteristics of the back-end is incomplete and, likely to be unworkable. At the same time, development of an appropriate ecosystem for the front-end can create a pull effect for the sector in question. In each case, action lies in several departments and stakeholder institutions. The biggest challenge, therefore, continues to be to properly anchor key elements of the foreign trade policy in the overall economic policy and to ensure that the framework of rules, procedures and incentives for trade is contextualised within a composite approach to economic development.

 

Government of India had initiated several measures to re-energise the economy particularly through initiatives such as “Make in India”, “Digital India”, “Skill India”, “Startup India”, Swachh Bharat etc., which today are in an advanced stage of implementation. As the already visible impact of these measures intensifies, India will become more competitive across several product areas with improved export prospects. The unprecedented FDI flows into India and growing manufacturing of products like cell phones, telecom products etc. are a reflection of this trend.

 

The FTP for 2015-2020, therefore, endeavours to build synergies with such initiatives, and lays emphasis on a “whole-of-Government” approach to foreign trade policy. Accordingly, the approach seeks out a vision with its attendant goals and objectives followed by the strategies and actions identified as necessary to achieve that vision, and finally, set out a framework of incentives.

 

Extensions & Amendments to the FTP 2015-20 and the Handbook of Procedures

The Government of India has vide Notification No. 57/2015-2020 dated 31st March 2020 and Public Notice No. 67/2015-20 dated 31st March 2020 announced extension of validity of the FTP 2015-20 and the Hand Book Procedure thereon until 31st March 2021.

Service Exports from India Scheme (SEIS)

Service Exports from India Scheme (“SEIS”), an incentive scheme for eligible service exports, was introduced in the Foreign Trade Policy (2015-20) replacing the Served from India Scheme (SFIS). It is introduced to increase exports of notified service, in place of plethora of schemes earlier, with different conditions for eligibility and usage. This policy has also extended SEIS benefits to units located in SEZs with an aim to boost exports from SEZs.

 

SEIS provides more rewards to the service exporters, to offset infrastructural inefficiencies and associated costs involved, and to provide exporters a level playing field.

Eligibility CriteriaParticulars
Monetary

Minimum net free foreign exchange earnings in the relevant financial year for:-

  • Individual/Sole Proprietor : $10,000
  • Others : $15,000
Non- Monetary
  • Export of services outside India [Cross Border Trade];
  • Rendering of services to the service consumer of any other country in India [Consumption Abroad];
  • Benefit is only available for export of services;
  • Service provider should have an active IEC at the time of export of services; and
  •  Notified services are eligible for benefit.

Ineligible categories under SEIS

Following shall not be taken into account for calculation of entitlement under the scheme:-

  1. Foreign exchange remittances
    • Related to financial services sector
    • Raising of all types of foreign currency loans;
    • Export proceeds realization of clients;
    • Issuance of foreign equity through ADRs / GDRs or other similar instruments;
    • Issuance of foreign currency bonds;
    • Sale of securities and other financial instruments; and
    • Other receivables not connected with services rendered by financial institutions.
    • Earned through contract/regular employment abroad (e.g. labour remittances)
  2. Payments for services received from EEFC account;
  3. Foreign exchange turnover by healthcare institutions like equity participation, donations etc;
  4. Foreign exchange turnover by educational Institutions like equity participation, donations etc;
  5. Export turnover relating to services of units operating under EOU / EHTP / STPI / BTP schemes or supplies of services made to such units;
  6. Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI / BTP units with turnover of DTA service providers;
  7. Foreign exchange earnings for services provided by airlines, shipping lines service providers plying from any foreign country X to any foreign country Y routes not touching India at all; and
  8. Service providers in telecom sector.

Entitlement and Utilization

EntitlementUtilization
Irrespective of constitution or profile, a service provider of notified services shall be eligible for incentive in the form to Duty Credit Scrip at notified rates on net foreign exchange earned.Scrips can be utilised for the payment of basic custom duty on import of inputs or goods.
The present rates of reward are 5% and 7% depending upon nature of services. Before 1st November 2017, the rates of reward was 3% and 5%.Freely Transferable
FTP relaxes the actual user condition that makes the scrips freely transferable. It means that the scrips can be sold in the open market.

Option available with the Importer Companies

There are circumstances where exporters receive duty credit scrip as an export benefit from DGFT Authorities. Due to non-utilization of duty credit scrip, an exporter can sell such duty credit scrip in the open market at a discounted value to an importer.  It will assist an importer in saving basic custom duties on import of goods.

For better understanding, please refer below for the pictorial presentation:

Time Limit for filing application

  • SEIS application shall be filed within a period of 12 months from the end of relevant financial year of claim period. For instance, for the financial year 2018-19, due date for filing of SEIS application is 31st March 2020. In case of delay, late cut between 2% -10% will be levied depending upon period of delay.
  • The application cannot be filed after 2years from the due date.
ParticularsCredit allowed on or before the due dateLate cut rate to be imposedNet eligibility
If Application is being received within 6 months from the last date of filing100%2%98%
If Application is being received after 6 months but before 1 year from the last date of filing100%5%95%
If Application is being received after a period of 12 months but before 2 year from the last date of filing.100%10%90%
  • The application is filed online for a financial year on annual basis using digital signature.

Extension for SEIS Application

Due date for filing of SEIS Application for FY 2018-19 has been extended to 31st December 2020

Validity Period of Duty Credit Scrips

Duty Credit Scrip shall be valid for a period of 24 months from the date of issue.

Requirement

  1. Mandatory Requirement
    • Importer Exporter Code (“IEC”)
    • Registration cum Membership Certificate (“RCMC”): The Membership Certificate is issued by Export Promotion Councils/Commodity board/Development authority or other competent authority as prescribed in FTP.
    • Digital Key: Required for filing online SEIS Application on DGFT Portal. 
  2. Documentation
    • Master Service Agreements entered into with clients for rendering of services;
    • Sale invoice register for the financial year along with copy of invoices;
    • Foreign Exchange Inward Remittance Certificates (FIRCs)/Bank Advice evidencing the receipt of foreign exchange from Customers;
    • Co-relation sheet of foreign exchange received against invoices raised during the financial year; and
    • Details of foreign currency expenditures related to services made during the financial year.

How do we assist our clients?

  • Conduct extensive evaluation of services in order to determine eligibility of services for SEIS incentive. If needed, we perform cost benefit analysis for client.
  • Assistance in collation of documents for SEIS application.
  • Preparation & filing of SEIS Application.
  • Obtaining incentive from DGFT Department.
  • Registration of the License with the custom department.
  • Assistance in selling of scrips in market.
  • Online transfer of scrips by recording the details on the DGFT website.

Notified Service and Rate of Reward

Public Notice 45/2015-2020 dated 05.12.2017 has notified the services and admissible rate in Appendix 3D. Kindly note that the mentioned rates pertains to two periods, i.e. 01.04.2017 to 30.10.2017 & 01.11.2017 to 31.03.2018. The present rates of reward are 5% and 7%. However, the category of services and the rate schedule is yet to be notified for the financial year 2019-20. 

For list of services, click on – PN45Eng

Merchandise Export from India Scheme (MEIS)

MEIS is a key export promotion scheme which seeks to promote export of notified goods manufactured / produced in India. MEIS incentives are available at 2, 3, 4 and 5% of the FOB value of exports. At the time of introduction on April 1, 2015, MEIS covered 4914 tariff lines at 8 digits. Keeping in mind the global economic downturn and the adverse environment 9 faced by exporters, it was expanded to include additional lines, and currently it covers 7914 lines, all with global coverage. The last expansion of the scheme took place on Nov. 24, 2017 when MEIS rates of Readymade Garments and Made Ups were enhanced from the existing 2% to 4% for the exports taking place between Nov. 1, 2017 and June 30, 2018. It is now proposed to enhance MEIS benefits by an additional 2% for all labour intensive and MSME sector products for the period Nov. 1, 2017 to June 30, 2018.

 

MEIS originates from the benefits provided to exporters of India in the earlier scheme of Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip and VKGUY in the FTP 2009-14. It is introduced in the FTP 2015-20 for offsetting the infrastructural inefficiencies faced by exports of specified goods provides a level playing field. There is perhaps a need to streamline and fine-tune such programs to more precisely target the distortion being addressed.

 

This scheme is other than Duty Drawback. Duty drawback enables exporter to obtain a refund of customs duty paid on imported goods, whereas MEIS is the additional export incentive given as 2% – 7% on FOB value of eligible export.

Eligibility Criterion

  • All exporters from India who are exporting the manufactured goods notified in the Appendix 3B-MEIS Schedule to notified markets.
  • Export of goods through courier or foreign post office, as notified in Appendix 3C, of FOB value upto Rs 5,00,000 per consignment shall be entitled for rewards under MEIS.
  • SEZ Units & EOU Units are also eligible to claim benefits under the MEIS Scheme.
  • There is no minimum turnover criteria to claim MEIS.
  • Only those Shipping Bills are eligible for MEIS Scheme in which there is a “Declaration of Intent” & Scheme reward option is ticked as “YES”.

Entitlement and Utilization

EntitlementUtilization
Exports of notified goods/products with ITC[HS] code, to notified markets as listed in Appendix 3B, is eligible for reward in the form to Duty Credit Scrip at notified rates on realized FOB value of exports.Scrips can be utilised for the payment of basic custom duty on import of inputs or goods.
MEIS rate of rewards varies from product to product and is in the range of 2% to 5% for most items. In some cases, MEIS rate is 7% also.

Freely Transferable

FTP relaxes the actual user condition that makes the scrips freely transferable. It means that the scrips can be sold in the open market.

Option available with the Importer Companies

There are circumstances where exporters receive duty credit scrip as an export benefit from DGFT Authorities. Due to non-utilization of duty credit scrip, an exporter can sell such duty credit scrip in the open market at a discounted value to an importer.  It will assist an importer in saving basic custom duties on import of goods.

For better understanding, please refer below for the pictorial presentation:

Time Limit for filing application for Duty Credit Scrips

  • Application for obtaining Duty Credit Scrip under MEIS shall be filed within a period of :
    1. Twelve months from the Let Export (LEO) date or
    2. Three months from the date of :
      i- Uploading of EDI shipping bills onto the DGFT server by Customs.
      ii- Printing/ release of shipping bills for Non EDI shipping bills.
  • In case of delay, late cut charges will be applicable which varies between 2% – 10% depending upon period of delay. The Application cannot be filed after 2 years from the due date.

Validity Period of Duty Credit Scrips

Duty Credit Scrip shall be valid for a period of 24 months from the date of issue.

Requirement

Mandatory Requirement

  • Importer Exporter Code (“IEC”)
  • Registration cum Membership Certificate (“RCMC”): The Membership Certificate is issued by Export Promotion Councils/Commodity board/Development authority or other competent authority as prescribed in FTP.
  • Digital Key: Required for filing online SEIS Application on DGFT Portal. 

Documentation

  • Shipping Bills with “Declaration of Intent” & Scheme reward option is ticked as “YES”.
  • E-brcs against the invoices.
  • Co-relation sheet of foreign exchange received against invoices raised during the financial year.

Discontinuation of MEIS

The Government of India has announced the discontinuation of MEIS & approved a new scheme, but the FTP 2015-20 is extended till 31st March 2021 due to Covid-19 Pandemic, under the extended policy exporter can continue to avail the MEIS benefits till 31st December 2020 and it may extend till 31st march 2021.

How do we assist our clients?

  • Checking eligibility of each exported products.
  • Preparation and filing of application along with requisite certificate & documents.
  • Representation & liaising with Department to provide clarification & obtain duty credit scrip.
  • Registration of the License with the custom department.
  • Assistance in selling of scrips in market.
  • Online transfer of scrips by recording the details on the DGFT website.

Export Promotion Capital Goods Scheme

Export Promotion Capital Goods (“EPCG”) Scheme is launched to facilitate import of capital goods for producing quality goods and services and enhance India’s manufacturing competitiveness. EPCG Authorization holder may also procure Capital Goods from a domestic manufacturer.

Type of EPCG Authorization

  1. Pre-import of capital goods- EPCG Scheme allows import of capital goods for pre-production, production and post-production at zero customs duty except those capital goods which are specifically excluded.
  2. Post-import of capital goods- EPCG in the form of duty credit scrips can be obtained from the department and such scrips either can be utilised for payment of custom duty on import of goods or can be sold in the open market.

EPCG Scheme allows import of capital goods for pre-production, production and post-production at zero customs duty (except those specified in negative list in Appendix 5 F*). Capital goods for the purpose of the EPCG scheme shall include: 

  • Capital Goods as defined in Chapter 9 including in CKD/SKD condition thereof;
  • Computer systems and software which are a part of the Capital Goods being imported;
  • Spares, moulds, dies, jigs, fixtures, tools & refractories; and
  • Catalysts for initial charge plus one subsequent charge. 

DGFT has notified list of capital goods which are not eligible for EPCG Scheme vide Public Notice No. 47/2015-20 dated 6th December 2017. The list of capital goods include: 

  • All Second hand capital goods
  • Computer and printers
  • Tractors
  • Motor Cars, Sports Utility Vehicle/ All purpose vehicles
  • Airport Ground Handling Equipment
  • Furniture, carpets, crockery, marble chandelier, tiles, flooring, doors for rooms but permitted only to hotel industry.

Conditions for EPCG

    1. Export Obligation shall be fulfilled by the authorisation holder through export of goods which are manufactured by him or his supporting manufacturer / services rendered by him.
    2. Import under EPCG Scheme shall be subject to an export obligation equivalent to 6 times of duties, taxes and cess saved on capital goods, to be fulfilled in 6 years reckoned from date of issue of Authorization.
    3. Export obligation should be fulfilled in the following manner:
Period from the date of issue of AuthorizationMinimum export to be fulfilled obligation
Exports of notified goods/products with ITC[HS] code, to notified markets as listed in Appendix 3B, is eligible for reward in the form to Duty Credit Scrip at notified rates on realized FOB value of exports.Scrips can be utilized for the payment of basic custom duty on import of inputs or goods.
MEIS rate of rewards varies from product to product and is in the range of 2% to 5% for most items. In some cases, MEIS rate is 7% also.

Freely Transferable

FTP relaxes the actual user condition that makes the scrips freely transferable. It means that the scrips can be sold in the open market.

  1. Incentive for early Export Obligation fulfilment
    If Authorization holder fulfils 75% or more export obligation and 100% average export obligation before the specified timeline, then, the remaining export obligation can be waived off.
  2. Non-fulfilment of Export Obligation
    In case Authorization Holder is not able to meet the export obligation during the first block, then, period may be extended by DGFT subject to payment of 2% of the duty saved.
  3. Extension of 6 years Export Obligation Period
    Subject to payment of certain percentage of duty saved which can vary between 5%-20%, DGFT can extend the export obligation period.

Validity

Authorization shall be valid for import for 18 months from the date of issue of Authorization which means capital goods should be imported within 18 months from such date. Revalidation of EPCG Authorization shall not be permitted.

Actual User Condition

Imported capital goods shall be subject to Actual User condition till export obligation is completed.

Procedure for obtaining Authorization under EPCG

Redemption of EPCG Authorization

  • On fulfilment of Export Obligation, Authorization holder should apply for redemption with the DGFT Authority.
  • Holder shall apply redemption by filing the prescribed documents long with the proof of Export Obligation fulfilment.
  • On being satisfied, RA concerned shall issue a certificate of discharge of export obligation to the EPCG authorization holder and forward a copy to Customs Authorities with whom BG/LUT has been executed.

Post Import Capital Goods- EPCG

  • On EPCG in the form of duty credit scrips can be obtained from the department and such scrips either can be utilised for payment of custom duty on import of goods or can be sold in the open market.
  • Exporter can file request in the requisite form for obtaining duty credit scrip in proportion to export obligation completed within the specified time.
  • In this case, following shall be the primary documentation:
    • Proof of actual duty payments on Capital Goods
    • Nexus and installation certificate(s) of Capital Goods
    • Proof of fulfilment of Export Obligation
    • Proof of maintenance of Average Export Obligation

Mandatory Requirements

  • Importer Exporter Code (“IEC”)
  • Registration cum Membership Certificate (“RCMC”)
  • Digital signaturel0
  • Pan Card
  • Excise Registration (if registered)
  • GST Registration Certificate
  • Proforma Invoice
  • Brochure of the capital goods
  • Self-Certified Copy + Original of Certificate of Chartered Accountant whereby certifying the information such as details of exports and other records thereon.
  • Chartered Engineer whereby certifying the details such as description of capital goods, stepwise Process/Flow Chart indicating the stages where the capital goods are to be used, wastage claimed by the holder, etc.

How can we help you?

  1. Evaluation of capital goods’ eligibility for EPCG Scheme.
  2. Preparation & filing of application along with requisite certificate & documents.
  3. Representation & liaising with Department to provide clarification & obtain EPCG Authorization.
  4. Redemption of EPCG Authorization on completion of Export Obligation.