1 CA. Raj Kumar

Foreign Trade Policy : 2015 -2020

F.T.P. “NIRMATA” “NIRDESHAK : Director General Foreign Trade (DGFT)

- It is an attached office to Ministry of Commerce (MOC)

- HQ : DELHI (Maulana Azad Road, Udyog Bhawan, New Delhi.

- DGFT: Shri Alok Vardhan Chaturvedi

- Add. DGFT/Jt. DGFT/ Dy. DGFT

- FTDO (Foreign Trade Development Officer)

- & 36 Regional Office of DGFT

MOC --- DGFT Work of : Director General Foreign Trade

Formulate, implement, supervise, and control: FTP

Provide: IEC Various Authorization, Various Scheme etc.

Supervise and Control: Export Promotion Council (EPC)

(For particular Group of Product)

Import Export Code

Board of Trade (BOT): Review: FTP

iSlk

Foreign Trade Central Excise Act (CEA) 1944

Development & Regulation (D&R) CETA, 1985

ACT, 1992 CA, 1962

CTA, 1975

Working Body: DGFT (Appointment by Above Act) CST Act, 1956, GST Acts.

D-VAT Act etc., RBI Act 1934

FTP (A product of FT Act, 1992) issued by DGFT.

(For every 5 year at present : 2015-2020) Working CBEC, Various Deptt.

Body (Excise, CST, VAT Deptt)

Update ; Every year : April Month RBI, FEMA etc.

(DFFT)

Suggestion Execute

CRUX:

Internal Structure

MOC MOF

ISSUES? - Rate - Exemption - Duty Free Authorisation - Incentives - Policy - Procedure - etc.

2 CA. Raj Kumar

Role of FTP / What is FTP MOF = ICEGATE.Gov.in www.DGFT.Gov.in

Foreign Trade Policy : is a set of Guidelines

For International Trade

Object 1 : Boost Export

i. Ease of doing Business:

- E-Gov. (online filing of Doc, online application for IEC/Various Authorization from

DGFT, Msg. Exchange, All the doc. at one place in E-form.

- Minimum : 3 Doc.: - B/E // Shipping Bill However in doubtful situation

- B/L need other documents.

- Invoice cum packing list

- Single Window Facility: Eg: DBK U/s 75(1)

Eg.: other procedure

- Quick Clearance: Even Export Goods – can not be taken on hold (Seizure) until serious

irregularities.

- Round ‘O’ Clock – working 24 x 365 @ [18 Sea Ports]

- etc.

ii. Encourage : Exporter to Export by giving various Incentives

(Generally called: PRE-EXPORT Benefit)

: - AAS (Advance Authorisation Scheme – Inputs)

i.e. Duty free – procure-Inputs - DFIA Duty Free Import Authorisation

(For Inputs – procure – Duty Free) - EPCG: Export promotion Capital Goods

- Other - Finding new markets

Finding new products to export

R&D : For Quality Improvement.

iii. After Export : Recognize – Big Exporters by giving Rank (Star Ranking/ holder)

Provide Various Facilities

eg.: Self Certification

eg.: Bonded W/H establish etc.

Scrips : Like food coupon Say 5% to 3% or 10% Of FOB Value

- ME-IS (merchandise (Goods) Export from India Scheme.

- SE-IS Service Export from India Scheme

Which can be utilize for the payment of ED/ID/ST/Application Fee Payable to Director General Foreign

Trade.

Having object of Economy management

3 CA. Raj Kumar

Objective 2: Decrease Import:

- Make in India – of those goods – which are currently imported into India.

- R&D – For Quality Improvement

- Cost cutting techniques

- Technology – India

Objective 3: Regulate – Import/Export (International Trade)

i. Import Item:

- Freely Importable

- New Product

- Old/Used product

- Restricted Item

- Prohibited Item

- Import – to Re-Export

- Import – On lease

- Import – after repair & maintenance

- Import – Sample basis etc. / Baggage etc.

ii. Export Item:

- Freely

- New

- Old

- Restricted

- Prohibited

- Baggage etc.

Objective 4: Other provisions / Objections:

For example: - Rules & Regulations: For 100% EOU/EHTP/STP etc.

(Electronic Hardware Technology Park, Software Tech Park)

Note: SEZ NOT Fall under FTP (FT Act, 1992) Because SEZ have separate Act Namely: SEZ Act, 2005,

SEZ Rules, 2006, however FTP Given by ICAI – Cover SEZ discussion also.

4 CA. Raj Kumar

FTP 2015-2020 :Main Focus:

Generations of Employment:

- Make in India or

Value added in India i.e. Factory

& Export

Then Export

Digital India:

- E-Governance Entry i.e. B/E or S/B

- Mandatory doc. B/L

Invoice cum packing list

- 24 hour: Custom clearance

- Single window facility: For All regulatory Authority:Custom, Excise, FEMA, RBI, VAT etc.

- Massage Exchange

- Online application For: IEC Code, Various Authorisation, Scrips.

Special Initiatives:

- Market diversification.

- Technology upgradation.

- Support to Status holder (Star holder)

- Sector Specific: Agriculture, Handloom, Handicraft, GEM & Jewellery, Leather, Electricity,

I.T., hardware, sports goods, toys etc.

- Location Specific: N E R

5 CA. Raj Kumar

PROVISION RELATED TO : IMPORT-EXPORT

BACKGROUND

1. Import-Export Code:

- Given by DGFT on the basis of E- Application with DSC and required to upload:

Digital photograph of Applicant, PAN Card, Cancelled Cheque.

- Mandatory for import-export (International Trade)

Except : where Relax by DGFT eg.: Baggage

- Form No. : ANF 2A (Aayat Niryat Form) : for application & fee. Rs. 500/-

- IEC : PAN Based 10 Digit

- FTP More than 40 Form www.DGFT.Gov.in

2. Need to follow: other Law: FT Act, 1992 FTP Procedures

Custom Act, Excise Act, GST Law.

FEMA, RBI, CST etc.

However: DGFT may Relax, from Any Policy / Procedure.

eg.: Sec.-20-Re-Importation

Example: TATA Nano

NO ID BUT Bond REQUIRE.

6 months Here: Bond requirement – Relax.

3. Soft Provision for: Nepal/Bhutan /Bangladesh /Myanmar etc.

(By signing Bilateral Agreement)

B/E, Shipping Bill / Bill of export

4. Mandatory Doc.: B/L, Airway Bill , Delivery Order

Invoice cum Packing list

For International Trade: Above knowledge required

& Goods Related knowledge required

IND S.LANKA

6 CA. Raj Kumar

Import Related Goods:

- Those goods for which : No need of any Authorisation / any condition to import

i.e. Freely Importable item.

eg.: All goods except : Specified / listed

- Pen

- Visualiser Freely Importable

- Chair etc.

i.e.: BANNED GOODS

Such goods can not be imported.

eg.: meat & edible meat of pigs

Feather of Wild Birds

Skin & other parts of Wild Birds

Fish : nails

Pig Fat

Mobile Phone: without IMEI (International mobile equipment identity)

Country Specific: Milk & Milk products

Chocolates & Chocó products From CHINA

For 1 year (June 2015 to June 2016)

i.e. Conditional access / “Conditionally prohibited”

Such Goods can be imported subject to given condition/(s)

eg.: Horses, Ass, Bulls, Cow, Goat, Dog

i.e. Animal

- Birds egg

- Marble Slab

- Fire works

- Blasting material

- Clinical waste

- CAR (Condition: BIS IV) Beauro of Indian Standard

- Liquor in Excess of 2 Liters (Need: Import license from DGFT)

Basically condition may:

Quantity Related

Value Related

Export Obligation condition Minimum Value Addition

Actual user condition (eg.: Project Import) – importer will use

Bank Guarantee

Validity Period

Etc.

Note: Authorization is not Right

Free Goods

Prohibited Goods

Restricted Item

7 CA. Raj Kumar

Normally allowed freely i.e. no need of Authorisation.

But need authorization For: Laptop, X-rox Machine, Genset and some other specified goods.

Baggage Rules, 2016

Quantity, Value, time limit, Exemption

Freely allowed

Mostly : Freely allowed

No authorisation is required for bonafide samples of even restricted item except vegetables seeds and new

drugs.

Samples upto Rs. 3,00,000 can be imported by all exporters without duty.

Samples of tea upto Rs. 2000 (CIF) per consignment will be allowed without authorization.

Public W/H

Private W/H

Only dutiable goods deposit

Other than : Prohibited item

Arms & Ammunition

Hazardous goods etc.

Removal from Bonded W/h - W/H

- H/C

- Export

- Any other : Specific i.e. Sample)

Second Hand Goods

Passenger Baggage

Import-under Lease

Import of Samples

Bonded Warehouse

8 CA. Raj Kumar

Export of Goods

Normal Export

etc.

Any goods other than i.e. completely Banned Item – Export Conditionally

specified eg: Wild (life Animals eg: Horse, Ass, Camel, Cow, meat,

eg: Military store flavoured milk ,

Any other Goods Banned sand & soil etc.

By – Public notice

eg: Supply of Arms to IRAQ

eg: Export of Rough Diamond

to Venezuela

eg: Exotic Birds etc.

Third-party exports means exports made by an exporter or manufacturer on behalf of another exporter(s). In such

cases, export documents such as shipping bills shall indicate name of both manufacturing exporter/manufacturer and

third party exporter(s). BRC, GR declaration, export order and invoice should be in the name of third party exporter.

Such third party exports shall be allowed under FTP.

Question: CD Corporation, a merchant exporter, procured order of goods from a customer in

USA. It approached AB Corporation, a manufacturer, for execution of the said order. The

shipping bills relating to the consignment bear the name of CD Corporation. Bank Realization

Certificate, export order and invoice are also in the name of CD Corporation. Comment whether

AB Corporation would be deemed as the exporter under FTP.

Answer: The given scenario is a case of third-party exports.

Third-party exports means exports made by an exporter or manufacturer on behalf of another exporter(s).

The conditions for being allowed as third-party exports under FTP are:

(i) Export documents such as shipping bills shall indicate name of both manufacturing

exporter/manufacturer and third party exporter(s).

(ii) BRC, export order and invoice should be in the name of third party exporter.

In the above case, though BRC, export order and invoice are in the name of CD Corporation (third party

exporter), the shipping bill does not have the name of AB Corporation (manufacturer). Therefore, AB

Corporation will not be treated as the exporter in this case.

Free Export Prohibited Goods Restricted Item

III PARTY EXPORT

9 CA. Raj Kumar

No Seizure of “Export Related Goods”

i.e. do not interfere : manufacturing Activity, Delivery, schedule etc.

[However: may seize: (if Prima facie evidence of Serious irregularities) for max period of 7 days]

Non-Realisation of Export Proceeds:

- Return Export Benefit eg: DBK with penalty & interest

BENEFITS UNDER FTP TO EXPORTERS

Object 1 :Boost the Export

Duty Exemption Scheme

AAS

DFIA

Duty Remission Scheme i. Reward Scheme

DBK ME-IS (Goods)

Benefit U/R 18/19 SE-IS (Services)

of C.E. Rules, 2002

EPCG ii. Recognition

(Export promotion Capital Goods) Status holder: Benefit

Note:

AAS : Advance authorisation scheme

DFIA : Duty free import authorisation

EPCG: Export promotion capital goods

ME-IS: Merchandise Export from India Scheme

SE-IS: Service Export from India Scheme

MISC

Raw mat…………………….FP

Capital goods

Export

:: 1

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or:

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eg.:

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ting E

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Ex

port

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CK

D/S

KD

pac

k (

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und

er E

PC

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l be

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ple

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Note

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hip

men

t under

: A

AS

/DF

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hal

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e in

cluded

in

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rom

: In

dia

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ula

tion o

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under

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.

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ote

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ast

movin

g e

nte

rpri

ses:

D

uty

: ID

/Exci

se d

uty

: E

xem

pt

A

ver

age

E.O

. i.

e. G

ener

al E

.O.

3.

Con

dit

ion

for

Exem

pti

on

:

+

-

Act

ual

use

r co

ndit

ion t

ill

Ex

port

Obli

gat

ion (

EO

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lfil

led

75%

of

spec

ific

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. w

ithin

3 y

ear

-

E.O

. (G

ener

al /

Spec

ific

) to

be

sati

sfie

d

NO

TE

: U

nd

er

the

GS

T r

eg

ime,

Cu

sto

ms d

uti

es w

ill

be

ex

em

pte

d o

n i

mp

ort

s m

ad

e u

nd

er

exp

ort

pro

mo

tio

n s

ch

em

es

nam

ely

EP

CG

, A

dv

an

ce

Au

thp

ris

ati

on

,

an

d D

FIA

. IG

ST

an

d C

om

pe

ns

ati

on

Ce

ss

will

ha

ve

to

be

paid

on

su

ch

im

po

rts

DG

FT

Man

ufa

ctu

rer

Or

Trad

er

(Tie

d w

ith

su

pp

ort

ing

m

an

ufa

ctu

rer)

O

r

Serv

ice

Pro

vid

er

Ge

ne

ral

Spec

ific

13 CA. Raj Kumar

ME-IS: Merchandise Export from India Scheme:

i Export- Notified Goods + to notified countries / market - shall be eligible Reward/Scrip.

@ Specified Rate- Specially goods having High Export Intensity, Employment potential etc.

ii. Export-Through – “E-Commerce” also eligible for such scrip = maximum value Rs. 25,000 per

Consignment shall be taken for computing scrip value.

E-commerce means buying and selling of goods and services, including digital products, conducted over

digital and electronic network. For the purposes of Merchandise Exports from India Scheme (MEIS), e-

commerce shall mean the export of goods hosted on a website accessible through the internet to a

purchaser. While the dispatch of goods shall be made through courier or postal mode, as specified under

MEIS, the payment for goods purchased on e-commerce platform shall be done through international

credit/debit cards and as per RBI Circular (RBI/2015- 16/185) as amended from time to time.

iii. Basis of calculating Reward/Scrip value:

FoB Value of Export Goods

(Given in Shipping Bill)

OR L O W E R

Realised FoB

iv. Use of scrip : for the payment of Indian Taxes.

v. Ineligible for the Scrip:

- 100% EOU/EHTP/STP etc. (Who are availing Direct Benefit)

- Supply from DTA to SEZ

- Deemed Export

- Milk, Milk product, sugar, meat, meat product, oil etc.

- Export of service.

14 CA. Raj Kumar

SE-IS: Service Export from India Scheme

1. Service provider (having IEC): Providing service in specified manner (B to B or B to C)

eligible for scrip @ 5% / 3% of Net foreign Exchange (NFE) earned.

2. NFE means:

Gross earnings of F.C. XXX

Less: Total Expenses/payments in F.C. XXX

NFE XXX

3. Rate: 5% Rate : General Rate

3% Rate : Specific Rate : Applicable on

- Hotels

- Restaurants

- Business services (eg: Advertisement service, market Research

Agency service, management consultancy

Service, technical testing & Analysts

Service etc.)

4. Eligibility For Scrip : Based on NFE in P.F.Y.

- Individual (incl. proprietor concern) $ 10,000

- Others $ 15,000

5. Ineligible for SE-IS:

- Foreign Exchange Receipts other than those earned for rendering of notified services.

eg. Loan, Donation, Equity participation etc.

- 100% EoU / EHTP etc.

- Service provider in: Telecom sector

Airlines

Shipping lines

- Export of Goods

- Manufacturer

6. Use of Scrip: For payment of Indian Taxes.

NOTE: The EXIM scrips under the export incentive schemes (for example MEIS and SEIS)

can be utilised only for payment of Customs duties or additional duties of Customs, on

items not covered by GST, at the time of import. The scrips cannot be utilized for payment

of Integrated Tax and Compensation Cess. Similarly, scrips cannot be used for payment of

CGST, SGST or IGST for domestic procurements.

15 CA. Raj Kumar

STATUS HOLDER

- Status holders are Business Leaders who have Excelled in International Trade & successfully

contributed to countries Foreign Trade.

- It is provided on the basis of Export performance in –

CFY

+

Preceding 3 FY

*However, for Gems & Jewellery Sector, the performance during the current and previous

two financial years shall be considered for recognition as status holder.

FoB Value Assume: RoE Rs. 60

Type USD (Million) Export performance

ONE Star holder 3 : 18 cr

TWO Star holder 25 : 150 cr

THREE Star holder 100 : 600 cr

FOUR Star holder 500 : 3000 cr

FIVE Star holder 2000 : 12000 cr

Note: Export performance necessary for at least 2 year out of 3 year.

Note: Export performance – non transferable.

- Authorisation: on self declaration basis.

- Fixation of SION (where SION not available for any product) on priority basis-

Max. Within 60 days,

- Exemption from Bank Guarantee under FTP,

- Eligible for A.C.P. (3 Star or Above)

- Permission to establish private Bonded W/H (Soft Guidelines): (2 Star or above)

Sample Export (Free of cost)

Max. Value = Rs. 10 Lakh or 2% of Average

Annual Export Higher

Of last 3 year

- But extra Benefit given Rs. 10 Lakh

Point to be noted: While computing Export performance following points – Should be considered:

i. For Granting “ONE Star Status” : Double weightage shall be taken for following-

- MSME (Micro small medium Exporter)

- Enterprises Located in NER

- Units Located in AEZ (Agriculture Export Zone)

- Enterprises having ISO status (International organization for standards).

ii For deemed export, FOR value of exports in Indian Rupees shall be converted in US$ at the exchange rate notified by CBEC, as applicable on 1st April of each Financial Year.

Note: Export performance shall be counted on the basis of FoB of Export earnings.

Normally for otherwise = Rs. 5 Lakh

16 CA. Raj Kumar

DEEMED EXPORT

Main Contractor

“1,000 Unit”

Movement within India

But shall be treated as

Deemed Export.

Deemed Export i.e. Supply to Exporter.

Sub-Contracting Hence the deemed Exporter

Eligible for Export Benefits.

eg. Rebate/Refund/AAS/DFIA/

EPCG etc.

Sub Contractor

SEZ: Special Economic Zone - Act : SEZ Act, 2005

- Rules: SEZ Rules, 2006

- Governing Body: UAC: Unit Approval Committee

SEZ………………..

- Why

- Who

- Where

- What (Benefits)

NO Indian Taxes

Developer of SEZ

Foreign Territory

Import (ID) × Export

Domestic Purchase (E.D.) × NO ST, NO Excise Duty

Service ST ×

Domestic clearance : ID

Registration:

Central Excise X

Custom X

Guidance Note: Authorised operations in connection with SEZs shall be exempted from payment of IGST.

Hence, there is no change in operation of the SEZ scheme.

Mr. X

0-------------0

100% EOU

SEZ

AAS Holder

DFIA Holder

EPCG Holder

Mr. Y

0-------------0

SEZ

0---------------0

Unit (S)

17 CA. Raj Kumar

100% Export Oriented Unit

Back Ground:

An100% EoU – need to Export entire production of Goods / Services:

Except permissible clearance in D.T.A.

(Maximum: 50% of Export turnover of PFY)

(In case of new 100% EoU: 50% of expected Export Sales of First Year)

Objective:

To promote Export

Enhance Foreign Exchange

Attract investment for foreign Export production

Employment – Generation

Procedure:

--- Person having investment Apply to Unit Decision of UAC within

In “Plant & M/c” of Rs. Approval 15 days

1 Crore or more committee (Accept / Reject)

--- Get permission (Letter of Start Business

Permission) from Board of Or

Approval (BOA) Production within

Within 2+2 years

Benefits:

- Goods (Incl. second Goods/Service

Hand goods)

- Purchase/Lease No ED, NO ST

No ID

- Goods (Incl. second hand Goods/Service

Goods) - Deemed Import

(Purchase/Lease)

Excise Duty Excise duty/S.T.

(Equivalent to ID)

Sec. Proviso to 3(1) proviso of CEA 1944

NOTE: Goods supplied by one unit of EOU/ EHTP/ STP/ BTP to another unit shall be treated as imported goods for

second unit for payment of duty, on DTA sale by second unit.

Forex : To be calculated : in a block of 5 year starting from commencement of Business.

( Positive / Weighed Positive)

If Genuine hardship : then the period of 5 year : Expend upto one year.

100% EOU/STP/AHTP/BTP/etc.

Can be established for all activities.

Inc:

Manufacturing Repairing Re-

making Re-conditioning Service

purpose etc.

“BUT NOT FOR TRADING

PURPOSE”

Export

DTA

18 CA. Raj Kumar

Guidance NOTE: EOUs/EHTPs/STPs will be allowed to import goods without payment of basic customs

duty (BCD) as well additional duties leviable under Section 3 (1) and 3(5) of the Customs Tariff Act.

GST would be leviable on the import of input goods or services or both used in the manufacture by

EOUs which can be taken as input tax credit (ITC). This ITC can be utilized for payment of GST taxes

payable on the goods cleared in the DTA or refund of unutilized ITC can be claimed under Section 54(3) of

CGST Act.

In the GST regime, clearance of goods in DTA will attract GST besides payment of amount equal to BCD

exemption availed on inputs used in such finished goods. DTA clearances of goods, which are not under

GST, Imports / Procurement by SEZs

Illustrations (ICAI STUDY MATERIAL) Q.1 Answer the following questions with reference to the provisions of Foreign Trade Policy:

(i) FIintex Manufacturers manufactures goods by using imported inputs and supplies the same

under Aid Programme of the United Nations. The payment for such supply is received in free

foreign exchange. Can FIintex Manufacturers seek Advance Authorization for the supplies made

by it?

(ii) XYZ Ltd. has imported inputs without payment of duty under Advance Authorization. The CIF

value of such inputs is Rs.10,00,000. The inputs are processed and the final product is exported.

The exports made by XYZ Ltd. are subject to general rate of value addition prescribed under

Advance Authorization Scheme. No other input is being used by XYZ Ltd. in the processing. What

should be the minimum FOB value of the exports made by the XYZ Ltd. as per the provisions of

Advance Authorization?

(iii) ‘A’ has used some duty paid inputs in its export products. However, for the rest of the inputs, he

wants to apply for the Advance Authorization. Can he do so? Explain.

Answer

(i) Supply to goods to UN or international organisations for their official use or supplied to projects financed

by them are ‘deemed exports’. Advance Authorization can be issued for supplies made to such ‘deemed

exports’. Therefore, Flintex Manufacturers can seek an Advance Authorization for the supplies made by it.

(ii) Advance Authorization necessitates exports with a minimum of 15% value addition (VA).

VA = [(A – B)/B x 100]

A = FOB value of export realized, B = CIF value of inputs covered by authorization.

Therefore, the minimum FOB value of the exports made by XYZ Ltd. should be Rs 11,50,000.

19 CA. Raj Kumar

(iii) Yes, ‘A’ can do so. In case of part duty free and part duty paid imports, both Advance Authorization and

drawback will be available. Drawback can be obtained for any duty paid material, whether imported or

indigenous, used in goods exported, as per drawback rate fixed by DoR, Ministry of Finance (Directorate

of Drawback). Advance Authorization can be used for importing duty free material. Drawback allowed must

be mentioned in the application for Advance Authorization. In such case, All Industry Brand Rates are not

applicable. The manufacturer has to get specific brand rate fixed from Commissioner for these

exported goods.

Q 2: Discuss the similarities and differences between Advance Authorization and DFIA (Duty Free

Import Authorization) schemes.

Answer: In both DFIA and Advance Authorization schemes, import of inputs, oil and catalyst which are required

for export products are permitted without payment of customs duty.

The differences between DFIA and Advance Authorisation schemes are as follows -

(i) ‘Advance Authorisation’ is not transferable. DFIA is transferable after export obligation is fulfilled.

(ii) Advance Authorisation scheme requires 15% value addition, while in case of DFIA, minimum 20% value

addition is required.

(iii) Advance Authorisation scheme is available to gem and jewellery sector but not DFIA.

(iv) DFIA cannot be issued where SION (Standard Input Output Norms) prescribes actual user condition [as the

material is transferable after fulfilment of export obligation].

(v) Advance Authorisation can be issued even if SION for that product is not fixed. DIFA can be issued only if

SION has been fixed for that product to be exported.

Q 3: XP Pvt. Ltd., a manufacturer, wants to import capital goods in CKD condition from a foreign

country and assemble the same in India. The import of the capital goods will be under notified

Project Imports. The capital goods will be used for pre-production processes. The final products

of XP Pvt. Ltd. would be supplied in SEZ. XP Pvt. Ltd. wishes to sell the capital goods imported by

it as soon as the production process starts.

XP Pvt. Ltd. seeks your advice whether it can avail the benefit of EPCG Scheme for importing the

intended capital goods.

20 CA. Raj Kumar

Note – Base your opinion on the facts given above assuming that all other conditions required for

being eligible to the EPCG Scheme are fulfilled in the above case.

Answer: Export Promotion Capital Goods Scheme (EPCG) permits exporters to import capital goods at zero

customs duty or procure them indigenously without paying duty in prescribed manner. In return, exporter is

under an obligation to fulfill the export obligation. Export obligation means obligation to export product(s)

covered by Authorisation/permission in terms of quantity or value or both, as may be prescribed/specified by Regional

or competent authority. Exports to SEZ unit/developer/co-developer will be considered for discharge of export

obligation of EPCG Authorization, irrespective of currency.

The authorisation holder can either procure the capital goods (whether used for pre-production, production or

post-production) from global market or domestic market. The capital goods can also be imported in CKD/ SKD to

be assembled in India.

An EPCG Authorization can also be issued for import of capital goods under Scheme for Project Imports

notified by CBEC. Export obligation for such EPCG Authorizations would be 6 times of duty saved.

However, import of capital goods is subject to ‘Actual User’ condition till export obligation is completed. After

export obligation is completed, capital goods can be sold or transferred.

Therefore, based on the above discussion, XP Pvt. Ltd. can import the capital goods under EPCG Scheme.

However, it has to make sure that it does not sell the capital goods till the export obligation is completed.

Q 4 : Examine whether benefit of Service Exports from India Scheme (SEIS) can be availed with

respect to notified services provided by service providers located in India in the current financial

year in the following independent cases:

(i) Net Foreign exchange earned by Mr. Aniket, a service provider, in the preceding financial year is

USD 3,000.

(ii) X and Y Brothers, a firm of service providers, has earned net foreign exchange to the tune of

USD 16,500 in the preceding financial year.

(iii) Mr. Ishaan, a service provider, has earned net foreign exchange of USD 12,000 in the preceding

financial year. Out of this, USD 3,000 has been paid to Mr. Ishaan through the credit card of the

foreign client.

Note: All the above service providers have an active IEC at the time of rendering services.

Answer: In order to be eligible for duty credit scrip entitlement under SEIS:-

21 CA. Raj Kumar

(a) Service provider must be located in India.

(b) It must provide only notified services in specified manner.

(c) It must have an active IEC at the time of rendering such services for which rewards are claimed.

(d) An individual service provider/Sole-proprietorship should have minimum net foreign exchange earnings of

USD 10,000 and a service provider other than individual/Sole-proprietorship should have minimum NFE

of USD 15,000, in preceding financial year.

Free foreign exchange earned through International Credit Cards and other instruments as permitted by RBI

for rendering of service are also be taken into account for computation of NFE.

In the light of the above provisions, the cases are examined as under:

(i) Mr. Aniket is not eligible for SEIS Scheme as his net foreign exchange earnings are less than USD 10,000

(minimum limit for individuals).

(ii) X and Y Brothers are eligible for the Scheme as their net foreign exchange earnings exceed the limit of USD

15,000 (minimum limit for firms).

(iii) Foreign exchange earned through credit cards is counted for the purpose of computing the limit of

minimum net foreign exchange required for being eligible to SEIS Scheme. Thus, Mr. Ishaan is eligible for

SEIS Scheme.

Q 5 : Two exporters namely, Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. have achieved the

status of Status Holders (One Star Export House) in the current financial year. Both the

exporters have been regularly exporting goods every year. What would have been the

minimum export performance of the two exporters to achieve such status?

Both the exporters want to establish export warehouses in accordance with the applicable

guidelines. What should be their export turnover to enable them to establish export

warehouses?

Answer: Status Holders are business leaders who have excelled in international trade and have successfully

contributed to country’s foreign trade. All exporters of goods, services and technology having an import-export code

(IEC) number shall be eligible for recognition as a status holder. Status recognition depends upon export

performance**.

In order to be categorized as One Star Export House, an exporter needs to achieve the export performance of 3

million US $ million [FOB/ FOR (as converted)] during current and previous three financial years. Thus, export

performance of Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. would have been at least 3 million US $ million [FOB/

FOR (as converted)] during current and previous three financial years.

22 CA. Raj Kumar

Further, Two Star Export Houses and above are permitted to establish export warehouses. Therefore, Red Sky Pvt.

Ltd. and Black Night Pvt. Ltd. can establish export warehouses in India only if they achieve the status of Two Star

Export House and above. In order to achieve said status, export performance of the exporters during current and

previous three financial years should be as indicated below:

FoB Value Assume: RoE Rs. 60

Type USD (Million) Export performance

TWO Star holder 25 : 150 cr

THREE Star holder 100 : 600 cr

FOUR Star holder 500 : 3000 cr

FIVE Star holder 2000 : 12000 cr