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Baroda Branch of WIRC of ICAI
Indian Foreign Trade Policy 19th August, 2012 – Session 2
Mayur Popat – B. Com, A.C.A., L.C.S.
Today’s Agenda
� Historical Backgroud
� India’s Foreign Trade
� Foreign Trade Policy – Components and� Foreign Trade Policy – Components and
Schemes
� Foreign Trade Policy – New Initiatives
� Role of CAs in trade facilitation as in FTP
2
A Little Bit of History
• Scenario pre 1991
– GDP 4% Negative Foreign Reserves
– No FDI
– The inspector The inspector
– Bureaucratic controls
– Complex legislations &
manufacturer protective policies
– High import duties
– Backward States contd.
A Little Bit of History contd.
• Scenario post 1991– Section 80IA,80IB of IT Act 1961
– GDP 8%
– End of licensed raj/Smuggling Economy
– A marked shift from protecting ‘producers’– A marked shift from protecting ‘producers’to benefiting ‘consumers’.
– Markets opened up for import,simplification in rules
– Drastic cut in import duties
– Emergence of world wide production,broader access to factors of production in arange of foreign destinations contd
A Little Bit of History contd.
– Emergence of worldwide financial marketsand better access to external financing
– Realization of a common global market,based on the freedom of exchange ofgoods and capital
– Increase in information flow between– Increase in information flow betweengeographically remote locations
– Growth of cross cultural contacts. (HM)
– Our merchandise exports till 1991 (in44 years after independence) wereUS$ 17.86 b and in the last 20 yearsthese have grown (in 2011-12) to US$220 b !!
INDIA’S FOREIGN TRADE POLICY 2009-14
What is Foreign Trade Policy?
•The Union Commerce Ministry,Government of India announces theintegrated Foreign Trade Policy (FTP) inevery five year.
•This is also called EXIM policy.
•The Foreign Trade Policy which wasannounced on August 28, 2009 is anintegrated policy for the period 2009-14
•This policy is updated every year with somemodifications and new schemes.
Benefits by Department of
Commerce – Assistance to states for Developing Export
Infrastructure and Allied Activities (ASIDE)
– Market Access Initiative (MAI) (25% to 100%)
• Export Promotion Councils (EPC)
• Industry Trade Association (ITA)
• Agencies of State Governments
– Market Development Assistance (MDA)– Market Development Assistance (MDA)
• Meetings, Export Promotion Seminars, Travel Grant
– Reimbursement of Expenses for StatutoryCompliances
– Towns of Export Excellence (TEE)• Production of Rs. 750 Crores
• Handicraft, Agriculture and Fisheries (150 Crores)
• Priority on MDA, MAI
Benefits by Director General of
Foreign Trade (DGFT) – Export and Trading Houses
Status Category FOB Values (Rs. In Crores)
Export House (EH) 20
Star Export House (SEH) 100
Trading House (TH) 500
– Self Declaration Basis
– Input- Output Norms
– Exemption on Bank Guarantees (BG)
– Status Holder Incentive Duty Credit Script
Trading House (TH) 500
Star Trading House (STH) 2500
Premier Trading House (PTH) 7500
Benefits by Director General of
Foreign Trade (DGFT)
– Vishesh Krishi Gram Udhyog Yojana (VKGUY)(Duty Credit Script 3% - 5% Bonus – 2%) AlsoImport of Capital Goods
– Focus Market Scheme (FMS)(3% of FOB Value1% Additional)Focus Market Scheme (FMS)(3% of FOB Value1% Additional)
– Focus Product Scheme (FPS) (2%-5% of FOBAdditional 2%)
– Market Linked Focus Product Scripts (MLFPS)(2% FOB Value)
DUTY EXEMPTION & REMMISSION
SCHEMES
– Duty Exemption Schemes
– Advance Authorisation
• Duty Free Import of Imports
• Mandatory Spares export duty free 10% of CIF
• Minimum Value Addition 15%
Duty Free Import Authorisation– Duty Free Import Authorisation
• Free import of Inputs, Fuel, Oil, Energy Sources,Catalyst
Duty Entitlement Passbook (DEPB)(Discontinued from 01.10.2011)
Duty Drawback
Export Promotion Capital Goods Scheme (EPCG)
INDIA’S FOREIGN TRADE POLICY 2009-14
• Objectives of Foreign Trade Policy 2009-14
• 1. To arrest and reversedeclining trend of exports isthe main aim of the policy.
• 2. To Double India's exports ofgoods and services by 2014.
• 3. To double India's share inglobal merchandise trade by2020 as a long term aim ofthis policy.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Objectives of Foreign Trade Policy 2009-14
• 4. Simplification of the applicationprocedure for availing various benefits
• 5. To encourage exports through a "mix ofmeasures including fiscal incentives,institutional changes, proceduralinstitutional changes, proceduralrationalization and efforts for enhancingmarket access across the world anddiversification of export markets.
• Comprehensive economic partnershipagreement with south Korea.
• Trade in goods & services agreement withASEAN .
INDIA’S FOREIGN TRADE POLICY 2009-14
• Aim in General • The policy aims at developing export
potential, improving export
performance, boosting foreign trade and
earning valuable foreign exchange.
• FTP assumes great significance this year• FTP assumes great significance this year
for those sectors which job losses like
textiles, leather, handicrafts etc. during
recession.
• A fall in exports has led to the closure of
several small- and medium-scale export-
oriented units, resulting in large-scale
unemployment.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Targets:
• Export Target : $ 450 Billion for 2013-14
• Export Growth Target: 25 % every year
• Three pillars:
i. Improvement in infrastructure
related to exports.
ii. Reduction in transaction costs.
iii. Provision of full refund of all indirect
taxes.
INDIA’S FOREIGN TRADE POLICY 2009-14
• TECHNOLOGY UPGRADATION
EPCG Scheme
1. Obligation under EPCG scheme
• Re-fixation of Annual Average Export
Obligation:
Taking into account the decline in
exports, the facility of Re-fixation of
Annual Average Export Obligation for
SPECIAL FOCUS INITIATIVES
1. Obligation under EPCG scheme
relaxed.
2. To aid technological up gradation
of export sector, EPCG Scheme at
Zero Duty has been introduced.
3. Export obligation on import of
spares, moulds etc. under EPCG
Scheme has been reduced by
50%.
Annual Average Export Obligation for
a particular financial year in which
there is decline in exports from the
country, has been extended.
� GREEN PRODUCTS & TECHNOLOGIES
� Support for Green products and
products from North East extended.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for FPS, FMS.
• 26 new markets added in this
scheme.
• Incentives under FMS raised fromIncentives under FMS raised from
2.5 % to 3 %
• Incentive available under Focus
Product Scheme (FPS) raised from
1.25% to 2%.
• Extra products included in the
scope of benefits under FPS
INDIA’S FOREIGN TRADE POLICY 2009-14
Announcements
• Market Linked Focus Product Scheme (MLFPS)
expanded by inclusion of products like
pharmaceuticals, textile fabrics, rubber products,
glass products ,auto components, motor cars,
bicycle and its parts.etc. However , benefits to
these products will be provided, if exports arethese products will be provided, if exports are
made to 13 identified markets (Algeria,
Egypt, Kenya, Nigeria, South Africa, Tanzania,
Brazil, Mexico, Ukraine, Vietnam, Cambodia,
Australia and New Zealand).
• A common simplified application form has been
introduced to apply for the benefits under FPS,
FMS, MLFPS
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for MDA & MAI:
• Higher allocation for Market Development Assistance
(MDA) and Market Access Initiative (MAI) has been
announced.
• Towns of Export Excellence (TEE)
• The following cities have been recognized as towns of
export excellence (TEE)
• Handicrafts : Jaipur, Srinagar and Anantnag
• Leather Products : Kanpur,Dewas and Ambur
• Horticultural Products: Malihabad
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements For Marine sector :
• Fisheries exempted frommaintenance of average EO underEPCG Scheme (along with 7sectors) however FishingTrawlers, boats, ships and othersimilar items shall not be allowedTrawlers, boats, ships and othersimilar items shall not be allowedfor this exemption.
• Additional flexibility underTarget Plus Scheme (TPS) /Duty Free Certificate ofEntitlement (DFCE) Scheme forthe marine sector.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for Gems &
Jewellery Sector:
• Duty Drawback is allowed on Gold
Jewellery exports to neutralize duty
incidence.
• Plan to establish "Diamond Bourse (s)
with an aim to make India and
International Trading Hub announced.
• Introduction of a new facility to allow• Introduction of a new facility to allow
import on consignment basis of cut &
polished diamonds for the purpose of
grading/ certification.
• Import of Gold Above 8K
• Commercial Samples upto 3Lakhs
• Duty Free Re-import Entitlement 2% of
FOB Value of exports
• Personal Carriage of Gems and Jewellary
in exhibitons incresed to 5 Million
Dollars
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for Agro
Exports:• Introduction of a single
window system to facilitate
export of perishable
agricultural produce with an
aim to reduce transaction
and handling cost.and handling cost.
• This system will involve
creation of multi-functional
nodal agencies.
• Under VKGUY – Duty Credit
Script5% of FOB
• Status Holders - Duty Credit
Scripts 10% of FOB
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for Leather
Exports : • On the payment of 50 %
applicable export duty,
Leather sector shall be
allowed re-export of unsold
imported raw hides andimported raw hides and
skins and semi finished
leather from public bonded
ware houses.
• Additional Duty Script 2%
• Import of Effluent
Treatment Machinery
exempted from Basic
Customs Duty
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for Tea Exports:
• The existing Minimum valueaddition under advanceauthorization scheme for exportof tea is 100 %. It has beenreduced from the existing 100%to 50%.reduced from the existing 100%to 50%.
• DTA (Domestic Tariff Area) salelimit of instant tea by EOU unitsincreased from
• 30% to 50%.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for Pharma
Exports :• Export Obligation Period for
advance authorizations issued
increased from existing 6 months
to 36 months.
• Pharma sector included under
MLFPS for countries in Africa and
Latin America & some countries
in Oceania and Far East.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for Handloom
Exports • The claims under Focus
Product Scheme, the
requirement of " Handloom
mark" was required earlier.
This has been removed.This has been removed.
• 2% Bonus on FPS
• Duty free import of 5% of FOB
• Towns above 150 Crores shall
be notified
• Effluent Machinery Exempted
from Basic Customs Duty
INDIA’S FOREIGN TRADE POLICY 2009-14
• Scheme for Export Oriented Units:
• EOUs have been allowed to sell products manufactured
by them in DTA (Domestic Tariff Area) upto a limit of
90% instead of existing 75%, without changing the
criteria of ‘similar goods’, within the overall
entitlement of 50% for DTA sale. (This means thatentitlement of 50% for DTA sale. (This means that
instead of 75% these units can sell up to 90 % of their
products in the domestic markets)
• EOU allowed to procure finished goods for
consolidation along with their manufactured goods,
subject to certain safeguards.
• Extension of block period by one year for calculation of
Net Foreign Exchange earning of EOUs kept under
consideration.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for Value Added Manufacturing
(VAM)
• To encourage Value Added Manufactured export, a
minimum 15% value addition on imported inputs under
Advance Authorization Scheme.
• Announcements for Project Exports:
• Project Exports and a large number of manufactured
goods covered under FPS and
• MLFPS.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Reduction in Transaction Costs:
• Dispatch of imported goods directly from the Port to
the site has been allowed under Advance Authorisation
scheme for deemed supplies. (Presently the duty free
imported goods could be taken only to the
manufacturing unit of the authorisation holder or itsmanufacturing unit of the authorisation holder or its
supporting manufacturer.
• Maximum applicable fee for 18 Authorisations/ licence
applications has been reduced to Rs. 100,000 from the
existing Rs 1,50,000 (for manual applications) and Rs.
50,000 from the existing Rs.75,000 (for EDI
applications).
• No fee shall now be charged for grant of incentives
under the Schemes in Chapter 3 of FTP.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Disposal of Manufacturing Wastes:
• Disposal of manufacturing wastes / scrap will now be
allowed after payment of applicable excise duty also
before fulfillment of export obligation under Advance
• Authorisation and EPCG Scheme. Earlier it was allowed• Authorisation and EPCG Scheme. Earlier it was allowed
after fulfillment of export obligation.
• Announcements for Sports Weapon:
• Licenses for the import of sports weapon will be issued
now by Regional Authorities provided a NOC (No
Objection Certificate) is issued by Ministry of Sports &
Youth Affairs. (Earlier DGFT Headquarters had to be
approached for this)
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for Medical Devices
• To solve the problem of medical device industry, the
procedure for issue of Free Sale Certificate has been
simplified and the validity of the Certificate has been
increased from 1 year to 2 years.increased from 1 year to 2 years.
• Announcements for Automobile Industry
• Those Automobile industries which have their
establishment will be allowed free import of reference
fuels (petrol and diesel), upto a maximum of 5 KL per
annum, which are not manufactured in India.
Simplification in EPCG for automobile industry.
INDIA’S FOREIGN TRADE POLICY 2009-14
• Announcements for EDI Initiatives
• Export Promotion Councils & Commodity Boards have
been advised to issue RCMC through a web based
online system.
• Set up of Directorate of Trade Remedy Measures• Set up of Directorate of Trade Remedy Measures
Announced
• A Directorate of Trade Remedy Measures shall be set
up, which will enable support to Indian industry and
exporters, especially the Micro Small & medium
Enterprises MSMEs in availing their rights through trade
remedy instruments
INDIA’S FOREIGN TRADE POLICY 2009-14
• Duty Credit Scrips
• Earlier the payment of customs duty for Export
Obligation (EO) shortfall under Advance
Authorisation , DFIA or EPCG Authorisation was
allowed in cash only. Now this payment can be done in
the way of debit of Duty Credit scrips.
• Import of Restricted Items
• Restricted Items can be imported now (as
replenishment) against transferred DFIAs (Duty Free
Import Authorisations) as the present DFRC (Duty Free
Replenishment Card) scheme.
• Dollar Credits
• There is a provision for state-run banks to provide
dollar credits
--Status Certificate issuance– Export figures (ANF 3A)
-- Duty Neutralisation Schemes:
App. 23 for Adv Authorisation & DFIA
EPCG Scheme – ANF 5A to 5D; Append. 26 &
26A
Major contributions from CAs:
33
26A
Gems & Jewellery Scheme– ANF 4 I
-- Reward Schemes:
Export certification for all schemes
-- Turnover cft for Marble import entitlement etc
Indian Foreign Trade
Policy
Questions invited
or can be subsequently emailed to:or can be subsequently emailed to:
Mayur Popat – B.Com., A.C.A., L.C.S.
© S. H. Bathiya & Associates – 2012
www.shbathiya.com 34