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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

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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