Foreign Trade Policy: Government of India Ministry of Commerce and Industry Department of Commerce

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Foreign Trade Policy


27th August 2009 - 31st March 2014
w.e.f. 23.08.2010
Government of India
Ministry of Commerce and Industry
Department of Commerce
Website: http://dgft.gov.in
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TO BE PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY
PART-II, SECTION-3, SUB SECTION (ii)
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE AND INDUSTRY
DEPARTMENT OF COMMERCE
NOTIFICATION No. 1(RE-2010)/ 2009-2014
NEW DELHI, DATED THE 23rd August, 2010
In exercise of powers conferred by Section 5 of the Foreign Trade (Development &
Regulation) Act,1992 (No.22 of 1992) read with paragraph 1.2 of the Foreign Trade Policy,
2009-
2014, the Central Government hereby notifies the Foreign Trade Policy, 2009-2014
incorporating
the Annual Supplement as updated on 23rd August, 2010 and contained in Annexure to this
notification. The policy shall come into force w.e.f. 23rd August, 2010.
This issues in Public interest.
(P. K. Chaudhery)
Director General of Foreign Trade and
Additional Secretary to the Government of India
(Issued from F.No. 01/ 94 / 180 / Foreign Trade Policy / AM11 / PC-4)
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CONTENTS
CHAPTER SUBJECT
Page
GLOSSARY
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1A LEGAL FRAMEWORK
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1B SPECIAL FOCUS INITIATIVES
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1C BOARD OF TRADE
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2 GENERAL PROVISIONS REGARDING
IMPORTS AND EXPORTS
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3 PROMOTIONAL MEASURES
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4 DUTY EXEMPTION / REMISSION SCHEMES
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5 EXPORT PROMOTION CAPITAL GOODS SCHEME
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6 EXPORT ORIENTED UNITS (EOUs), ELECTRONICS
HARDWARE TECHNOLOGY PARKS (EHTPs),
SOFTWARE TECHNOLOGY PARKS (STPs) AND BIOTECHNOLOGY
PARKS (BTPs)
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7 SPECIAL ECONOMIC ZONES
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7A FREE TRADE & WAREHOUSING ZONES
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8 DEEMED EXPORTS
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9 DEFINITIONS
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1
GLOSSARY (ACRONYMS)
Acronym Explanation
ACC Assistant Commissioner of Customs
ACU Asian Clearing Union
AEZ Agri Export Zone
ANF Aayaat Niryaat Form
ARO Advance Release Order
ASIDE Assistance to States for Infrastructure Development of Exports
BG Bank Guarantee
BIFR Board of Industrial and Financial Reconstruction
BOA Board of Approval
BOT Board of Trade
BRC Bank Realisation Certificate
BTP Biotechnology Park
CBEC Central Board of Excise and Customs
CCP Customs Clearance Permit
CEA Central Excise Authority
CEC Chartered Engineer Certificate
CIF Cost, Insurance & Freight
CIS Commonwealth of Independent States
CoD Cash on Delivery
CoO Certificate of Origin
CVD Countervailing Duty
DA Document against Acceptance
DoBT Department of Bio Technology
DC Development Commissioner
DEPB Duty Entitlement Passbook Scheme
DFIA Duty Free Import Authorisation
DFRC Duty Free Replenishment Certificate
DGCI&S Director General, Commercial Intelligence & Statistics.
DGFT Director General of Foreign Trade
DIPP Department of Industrial Policy & Promotion
DoC Department of Commerce
DoE Department of Electronics
DoIT Department of Information Technology
DoR Department of Revenue
DoT Department of Tourism
DTA Domestic Tariff Area
EDI Electronic Data Interchange
EEFC Exchange Earners’ Foreign Currency
EFC Exim Facilitation Committee
EFT Electronic Fund Transfer
EH Export House
EHTP Electronic Hardware Technology Park
EIC Export Inspection Council
EO Export Obligation
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EOP Export Obligation Period
EOU Export Oriented Unit
EPC Export Promotion Council
EPCG Export Promotion Capital Goods
EPO Engineering Process Outsourcing
FDI Foreign Direct Investment
FIEO Federation of Indian Export Organisation
FIRC Foreign Exchange Inward Remittance Certificate
FMS Focus Market Scheme
FOB Free On Board
FPS Focus Product Scheme
FT (D&R) Act Foreign Trade ( Development & Regulation) Act, 1992 (22 of 1992)
FTDO Foreign Trade Development Officer
FTP Foreign Trade Policy
GATS General Agreement on Trade in Services
GRC Grievance Redressal Committee
HACCP Hazard Analysis and Critical Control Process
HBP v1 Handbook of Procedures (Vol.1)
HBP v2 Handbook of Procedures (Vol.2)
ICD Inland Container Depot
ICM Indian Commercial Mission
IEC Importer Exporter Code
ISO International Standards Organisation
ITC (HS) Indian Trade Classification (Harmonised System) Classification for Export &
Import Items, 2004-2009
ITPO India Trade Promotion Organisation
LoC Line of Credit
LoI Letter of Intent
LoP Letter of Permit
LUT Legal Undertaking
MAI Market Access Initiative
MDA Market Development Assistance
MEA Ministry of External Affairs
MoD Ministry of Defence
MoF Ministry of Finance
NC Norms Committee
NFE Net Foreign Exchange
NOC No Objection Certificate
PRC Policy Relaxation Committee
PTH Premier Trading House
PSU Public Sector Undertaking
R&D Research and Development
RA Regional Authority
RBI Reserve Bank of India
REP Replenishment
RCMC Registration-cum-Membership Certificate
RSCQC Regional Sub-Committee on Quality Complaints
S/B Shipping Bill
SEH Star Export House
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SEI CMM Software Engineers Institute’s Capability Maturity Model
SEZ Special Economic Zone
SFIS Served from India Scheme
SIA Secretariat for Industrial Assistance
SION Standard Input Output Norms
SSI Small Scale Industry
STE State Trading Enterprise
STH Star Trading House
STP Software Technology Park
TEE Towns of Export Excellence
TH Trading House
TRA
TRQ
Telegraphic Release Advice
Tariff Rate Quota
VA Value Addition
VKGUY Vishesh Krishi and Gram Udyog Yojana
WHOGMP World Health Organisation Good Manufacturing Practices
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CHAPTER 1 A
LEGAL FRAMEWORK
Foreword
1.1 The Foreword spells out the broad framework
Duration
1.2 The Foreign Trade Policy, 2009-2014 (FTP), incorporating
provisions relating to export and import of goods and
services, shall come into force with effect from 27th
August, 2009 and shall remain in force upto 31st March,
2014 unless otherwise specified. All exports and imports
upto 26th August 2009 shall be accordingly governed by the
FTP 2004-2009.
The Foreign Trade Policy, 2009-2014, incorporating the
Annual Supplement as updated on 23rd August, 2010 shall
come into force with effect from 23rd August, 2010, unless
otherwise specified.
Amendment 1.3 Central Government reserves right in public interest to make
any amendments by notification to this Policy in exercise of
powers conferred by Section 5 of FT(D&R) Act.
Transitional
Arrangements
1.4 Authorisation issued before commencement of FTP shall
continue to be valid for the purpose and duration for which
such Authorisation was issued, unless otherwise stipulated.
1.5 In case an export or import that is permitted freely under
FTP is subsequently subjected to any restriction or
regulation, such export or import will ordinarily be
permitted notwithstanding such restriction or regulation,
unless otherwise stipulated, provided that shipment of
export or import is made within original validity with
respect to available balance and time period of an
irrevocable commercial letter of credit, established before
the date of imposition of such restriction.
However for operationalizing such irrevocable commercial
letter of credit, the applicant shall have to register the Letter
of Credit and contract with the concerned RA within 15
days of the issue of any such restriction or regulation.
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CHAPTER 1 B
SPECIAL FOCUS INITIATIVES
Special Focus
Initiatives
1B.1 With a view to continuously increasing our percentage share of
global trade and expanding employment opportunities, certain
special focus initiatives have been identified/continued for
Market Diversification, Technological Upgradation, Support to
status holders, Agriculture, Handlooms, Handicraft, Gems &
Jewellery, Leather, Marine, Electronics and IT Hardware
manufacturing Industries, Green products, Exports of products
from North-East, Sports Goods and Toys sectors. Government
of India shall make concerted efforts to promote exports in
these sectors by specific sectoral strategies that shall be
notified from time to time.
Further Sectoral Initiatives in other sectors will also be
announced from time to time.
(i) Market Diversification
During 2008-09 and 2009-10, weaker demand in
developed economies, triggered by falling asset prices and
increased economic uncertainty had pulled down the growth of
India’s exports to developed countries. To insulate Indian
exports from the decline in demand from developed countries,
in this Policy, focus is on diversification of Indian exports to
other markets, specially those located in Latin America,
Africa, parts of Asia and Oceania. To achieve diversification
of Indian exports, following initiatives have been taken under
this Policy.
(a) 27 new countries have been included within the ambit
of Focus Market Scheme.
(b) The incentives provided under Focus Market Scheme
have been increased from 2.5% to 3%.
(c) There has been a significant increase in the outlay
under ‘Market Linked Focus Product Scheme’ by
inclusion of more markets and products. This ensures
support for exports to all countries in Africa and Latin
America, and major Asian markets like China and
Japan.
(ii) Technological Upgradation
To usher in the next phase of export growth, India needs to
move up in the value chain of export goods. This objective is
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sought to be achieved by encouraging technological
upgradation of our export sector. A number of initiatives have
been taken in this Policy to focus on technological
upgradation; such initiatives include:
(a) EPCG Scheme at zero duty has been introduced for
certain engineering products, electronic products,
basic chemicals and pharmaceuticals, apparel and
textile, plastics, handicrafts, chemicals and allied
products and leather and leather products. This
scheme is being expanded to cover more export
product groups including marine products, sports
goods, toys, rubber & rubber products, additional
chemicals / allied products and additional
engineering products. The scheme is also being
extended upto 31.3.2012.
(b) The existing 3% EPCG Scheme has been
considerably simplified, to ease its usage by the
exporters.
(c) The facility of EPCG Scheme for Annual
Requirement is being introduced to reduce
documentation and transaction time.
(d) To encourage value added manufacture export, a
minimum 15% value addition on imported inputs
under Advance Authorisation Scheme has been
stipulated.
(e) A number of products including automobiles and
other engineering products have been included for
incentives under Focus Product, and Market Linked
Focus Product Schemes.
(f) Steps to encourage Project Exports shall be taken.
(iii) Support to status holders
The Government recognized ‘Status Holders’ contribute
approx. 60% of India’s goods exports. To incentivise and
encourage the status holders, as well as to encourage
Technological upgradation of export production, additional
duty credit scrip @ 1% of the FOB value of past export shall
be granted for specified product groups including leather,
specific sub-sectors in engineering, textiles, plastics,
handicrafts and jute. This duty credit scrip can be used for
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import of capital goods by these status holders. The imported
capital goods shall be subject to actual user condition. The
status holder incentive scrip scheme is being expanded to
cover more export product groups including marine products,
sports goods, toys, specified chemicals and allied products and
additional engineering products. The scheme is also being
extended upto 31.3.2012.
(iv) Agriculture and Village Industry
(a) Vishesh Krishi and Gram Udyog Yojana.
(b) Capital goods imported under EPCG will be permitted
to be installed anywhere in AEZ.
(c) Import of restricted items, such as panels, are allowed
under various export promotion schemes.
(d) Import of inputs such as pesticides are permitted under
Advance Authorisation for agro exports.
(e) New towns of export excellence with a threshold
limit of Rs 150 crore shall be notified.
(f) Additional flexibility for agri-infra scrip by way of
limited transferability to other status holders and the
units in Food Parks allowed.
(v) Handlooms
(a) 2% bonus benefits under focus product scheme.
(b) Specific funds are earmarked under MAI / MDA
Schemes for promoting handloom exports.
(c) Duty free import entitlement of specified trimmings
and embellishments is 5% of FOB value of exports
during previous financial year. Handloom made-ups
have also been included for the entitlement.
(d) Duty free import entitlement of hand knotted carpet
samples is 1% of FOB value of exports during
previous financial year.
(e) Duty free import of old pieces of hand knotted carpets
on consignment basis for re-export after repair is
permitted.
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(f) New towns of export excellence with a threshold limit
of Rs 150 crore shall be notified.
(g) Machinery and equipment for effluent treatment
plants is exempt from customs duty.
(vi) Handicrafts
(a) Duty free import entitlement of tools, trimmings and
embellishments is 5% of FOB value of exports during
previous financial year. Entitlement is broad banded,
and shall extend also to merchant exporters tied up
with supporting manufacturers.
(b) Handicraft EPC is authorized to import trimmings,
embellishments and consumables on behalf of those
exporters for whom directly importing may not be
viable.
(c) Specific funds are earmarked under MAI & MDA
Schemes for promoting Handicraft exports.
(d) CVD is exempted on duty free import of trimmings,
embellishments and consumables.
(e) New towns of export excellence with a reduced
threshold limit of Rs 150 crore shall be notified.
(f) Machinery and equipment for effluent treatment plants
are exempt from customs duty.
(g) All handicraft exports would be treated as special
Focus products and entitled to higher incentives.
(h) In addition to above, 2% bonus benefits under Focus
Product Scheme for Handicraft exports.
(vii) Gems & Jewellery
(a) Import of gold of 8k and above is allowed under
replenishment scheme subject to import being
accompanied by an Assay Certificate specifying
purity, weight and alloy content.
(b) Duty Free Import Entitlement (based on FOB value of
exports during previous financial year) of
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Consumables, Tools and additional items allowed for:
1. Jewellery made out of:
(a) Precious metals
(other than Gold & Platinum) – 2%
(b) Gold and Platinum – 1%
(c ) Rhodium finished Silver – 3%
2 . Cut and Polished Diamonds – 1%
(c) Duty free import entitlement of commercial samples
shall be Rs. 300,000.
(d) Duty free re-import entitlement for rejected jewellery
shall be 2% of FOB value of exports.
(e) Import of Diamonds on consignment basis for
Certification / Grading & re-export by the authorized
offices / agencies of Gemological Institute of America
(GIA) in India or other approved agencies will be
permitted.
(f) Personal carriage of Gems & Jewellery products in
case of holding / participating in overseas exhibitions
increased to US$ 5 million and to US$ 1 million in
case of export promotion tours.
(g) Extension in number of days for re-import of unsold
items in case of participation in an exhibition in USA,
increased to 90 days.
(h) In an endeavour to make India a diamond international
trading hub, it is planned to establish “Diamond
Bourse(s)”.
(viii) Leather and Footwear
(a) Additional 2% bonus benefits under Focus Product
Scheme.
(b) Finished Leather exports to be incentivized under
Focus Product Scheme.
(c) Duty free import entitlement of specified items is 3%
of FOB value of exports of leather garments during
preceding financial year.
(d) Duty free entitlement for import of trimmings,
embellishments and footwear components for
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footwear (leather as well as synthetic), gloves, travel
bags and handbags is 3% of FOB value of exports of
previous financial year. Such entitlement shall also
cover packing material, such as printed and nonprinted
shoeboxes, small cartons made of wood, tin or
plastic materials for packing footwear.
(e) Machinery and equipment for Effluent Treatment
Plants shall be exempted from basic customs duty.
(f) Re-export of unsuitable imported materials such as
raw hides & skins and wet blue leathers is permitted.
(g) CVD is exempted on lining and interlining material
notified at S.No 168 of Customs Notification No
21/2002 dated 01.03.2002.
(h) CVD is exempted on raw, tanned and dressed fur
skins falling under Chapter 43 of ITC (HS).
(i) Re-export of unsold hides, skins and semi finished
leather shall be allowed from Public Bonded
warehouse without payment of export duty.
(ix) Marine Sector
(a) Imports for technological upgradation under EPCG in
fisheries sector (except fishing trawlers, ships, boats
and other similar items) exempted from maintaining
average export obligation.
(b) Duty free import of specified specialised inputs /
chemicals and flavouring oils is allowed to the extent
of 1% of FOB value of preceding financial year’s
export.
(c) To allow import of monofilament longline system for
tuna fishing at a concessional rate of duty and Bait
Fish for tuna fishing at Nil duty.
(d) A self removal procedure for clearance of seafood
waste is applicable subject to prescribed wastage
norms.
(e) Marine products are incentivized at special higher rate
under VKGUY scheme.
(f) Marine sector included for benefits under zero duty
EPCG scheme.
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(x) Electronics and IT Hardware Manufacturing Industries
(a) Export of electronic goods to be incentivized under
Focus Product Scheme.
(b) Expeditious clearance of approvals required from
DGFT, shall be ensured.
(c) Exporters /Associations would be entitled to utilize
MAI & MDA Schemes for promoting Electronics and
IT Hardware Manufacturing industries exports.
(d) Electronics Sector included for benefits under SHIS
scheme.
(xi) Sports Goods and Toys
(a) Duty free import of specified specialised inputs
allowed to the extent of 3% of FOB value of
preceding financial year’s export.
(b) Sports goods and toys shall be treated as a
Priority sector under MDA / MAI Scheme. Specific
funds would be earmarked under MAI / MDA Scheme
for promoting exports from this sector.
(c) Applications relating to Sports Goods and Toys shall
be considered for fast track clearance by DGFT.
(d) Sports Goods and Toys are treated as special focus
products and entitled to higher incentives.
(e) In addition to above, 2% bonus benefits under Focus
Product Scheme for Sports Goods & Toys.
(f) Sports goods & Toys included for benefits under zero
duty EPCG and SHIS schemes.
(xii) Green products and technologies
India aims to become a hub for production and export
of green products and technologies. To achieve this
objective, special initiative will be taken to promote
development and manufacture of such products and
technologies for exports. To begin with, focus would
be on items relating to transportation, solar and wind
power generation and other products as may be
notified, which will be incentivized under Reward
Schemes of Chapter 3 of FTP.
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(xiii) Incentives for Exports from the North Eastern
Region
In order to give a fillip to exports of products from the
north-eastern States, notified products of this region
would be incentivized under Reward Schemes of
Chapter 3 of FTP.
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CHAPTER 1 C
Board of Trade
Board of Trade
(BOT)
1C.1 BOT has a clear and dynamic role in advising government on
relevant issues connected with Foreign Trade.
Terms of Reference
1C.2 BOT has following terms of reference:
I To advise Government on Policy measures for
preparation and implementation of both short and long
term plans for increasing exports in the light of
emerging national and international economic
scenarios;
II To review export performance of various sectors,
identify constraints and suggest industry specific
measures to optimize export earnings;
III To examine existing institutional framework for
imports and exports and suggest practical measures for
further streamlining to achieve desired objectives;
IV To review policy instruments and procedures for
imports and exports and suggest steps to rationalize
and channelize such schemes for optimum use;
V To examine issues which are considered relevant for
promotion of India’s foreign trade, and to strengthen
international competitiveness of Indian goods and
services; and
VI To commission studies for furtherance of above
objectives.
Composition 1C.3 Commerce & Industry Minister will be the Chairman of the
Board of Trade (BOT). Government shall also nominate upto
25 persons, of whom at least 10 will be experts in trade policy.
In addition, Chairmen of recognized EPCs and President or
Secretary-Generals of National Chambers of Commerce will be
ex-officio members. BOT will meet at least once every quarter.
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CHAPTER 2
GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS
Exports and Imports
free unless regulated
2.1 Exports and Imports shall be free, except where regulated by
FTP or any other law in force. The item wise export and
import policy shall be, as specified in ITC (HS) notified by
DGFT, as amended from time to time.
Import of rough diamond from Cote d’Ivoire shall be
prohibited in compliance to Paragraph 6 of UN Security
Council Resolution (UNSCR) 1643(2005).
The import/export of rough diamond (HS Code 710210,
710221 or 710231) from / to Venezuela shall be prohibited in
view of voluntary separation of Venezuela from the
Kimberley Process Certification Scheme (KPCS). No
Kimberley Process Certificate shall be accepted / endorsed /
issued for import and export of rough diamonds from / to
Venezuela.
2.1.1 Import / export of arms and related material from / to Iraq
shall be prohibited.
2.1.2
Direct or indirect export and import of following items,
whether or not originating in Democratic People’s Republic of
Korea (DPRK), to / from, DPRK is prohibited:
All items, materials equipment, goods and technology
including as set out in lists in documents S/2006/814,
S/2006/815 (including S/2009/205), S/2009/364 and
S/2006/853 (United Nations Security Council Documents)
INFCIRC/254/Rev.9/Part1a and INFCIRC/254/Rev.7/Part 2a
(IAEA documents) which could contribute to DPRK’s
nuclear-related, ballistic missile-related or other weapons of
mass destruction-related programmes.
2.1.3
Direct or indirect export and import of all items, materials,
equipment, goods and technology which could contribute to
Iran’s enrichment-related, reprocessing or heavy water related
activities, or to development of nuclear weapon delivery
systems, as mentioned below, whether or not originating in
Iran, to / from Iran is prohibited:
i) items, listed in INFCIRC/254/Rev8/Part I in document
S/2006/814, in Sections B.2 to B.7 as well as A.I and B.I
except supply, sale or transfer of equipment covered by B.I
when such equipment is for light water reactors and lowenriched
uranium covered by A.1.2 when it is incorporated in
assembled nuclear fuel elements for such reactors;
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ii) items listed in S/2006/815 except supply sale or transfer of
items covered by 19.A.3 of Category II.
Above-mentioned UN Security Council documents are
accessible from DGFT web site.
Compliance with Laws 2.2 Every exporter or importer shall comply with the provisions of
FT (D&R) Act, the Rules and Orders made thereunder, FTP
and terms and conditions of any Authorisation granted to him.
All imported goods shall also be subject to domestic Laws,
Rules, Orders, Regulations, technical specifications,
environmental and safety norms as applicable to domestically
produced goods. No import or export of rough diamonds shall
be permitted unless accompanied by Kimberley Process (KP)
Certificate as specified by Gem & Jewellery EPC (GJEPC).
Interpretation of Policy 2.3 If any question or doubt arises in respect of interpretation of
any provision contained in FTP, or classification of any item
in ITC (HS) or HBP v1 or HBP v2, or Schedule of DEPB
Rates (including content, scope or issue of an authorization
there under) said question or doubt shall be referred to DGFT
whose decision thereon shall be final and binding.
Procedure 2.4 DGFT may, specify procedure to be followed for an exporter
or importer or by any licensing or any other competent
authority for purpose of implementing provisions of FT
(D&R) Act, the Rules and the Orders made there under and
FTP. Such procedures shall be published by means of a Public
Notice, and may, in like manner, be amended from time to
time.
Exemption from Policy /
Procedure
2.5 DGFT may pass such orders or grant such relaxation or relief,
as he may deem fit and proper, on grounds of genuine
hardship and adverse impact on trade.
DGFT may, in public interest, exempt any person or class or
category of persons from any provision of FTP or any
procedure and may, while granting such exemption, impose
such conditions as he may deem fit. Such request may be
considered only after consulting committees as under:
Sl.No. Description Committee
( i ) Fixation / modification of
product norms under all
schemes
Norms Committee
(ii) Nexus with Capital Goods
(CG) and benefits under
EPCG Schemes
EPCG Committee
(iii) All other issues Policy Relaxation
Committee (PRC)
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Principles of Restriction 2.6 DGFT may, through a notification, adopt and enforce any
measure necessary for: -
i Protection of public morals.
ii Protection of human, animal or plant life or health.
iii Protection of patents, trademarks and copyrights and
the prevention of deceptive practices.
iv Prevention of use of prison labour.
v Protection of national treasures of artistic, historic or
archaeological value.
vi Conservation of exhaustible natural resources.
vii Protection of trade of fissionable material or material
from which they are derived; and
viii Prevention of traffic in arms, ammunition and
implements of war.
Restricted Goods 2.7 Any goods, export or import of which is restricted under
ITC(HS) may be exported or imported only in accordance
with an Authorisation or in terms of a public notice issued in
this regard.
Terms and Conditions
of a licence / Certificate
/ Permission /
Authorisation
2.8 Every Authorisation shall be valid for prescribed period of
validity and shall contain such terms and conditions as may be
specified by RA which may include:
(a) Quantity, description and value of goods;
(b) Actual User condition;
(c) Export obligation;
(d) Value addition to be achieved; and
(e) Minimum export / import price.
Authorisation / Licence
/ Certificate /
Permission not a Right
2.9 No person may claim an Authorization as a right and DGFT or
RA shall have power to refuse to grant or renew the same in
accordance with provisions of FT (D&R) Act, Rules made
there under and FTP.
Penalty 2.10 If an Authorisation holder violates any condition of such
Authorisation or fails to fulfill export obligation, he shall be
liable for action in accordance with FT (D&R) Act, the Rules
and Orders made there under, FTP and any other law for time
being in force.
State Trading 2.11 Any goods, import or export of which is governed through
exclusive or special privileges granted to STE(s), may be
imported or exported by STE(s) as per conditions specified in
ITC (HS). DGFT may, however, grant an Authorisation to
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any other person to import or export any of these goods.
Such STE(s) shall make any such purchases or sales involving
imports or exports solely in accordance with commercial
considerations, including price, quality, availability,
marketability, transportation and other conditions of purchase
or sale in a non discriminatory manner and shall afford
enterprises of other countries adequate opportunity, in
accordance with customary business practices, to compete for
participation in such purchases or sales.
Importer-Exporter
Code (IEC) Number
2.12 No export or import shall be made by any person without an
IEC number unless specifically exempted. An IEC number
shall be granted on application by competent authority in
accordance with procedure specified in HBP v1.
Trade with
Neighbouring
Countries
2.13 DGFT may issue instructions or frame schemes as may be
required to promote trade and strengthen economic ties with
neighbouring countries.
Transit Facility 2.14 Transit of goods through India from / or to countries adjacent
to India shall be regulated in accordance with bilateral treaties
between India and those countries and will be subject to such
restrictions as may be specified by DGFT in accordance with
International Conventions.
Trade with Russia
under Debt-Repayment
Agreement
2.15 In case of trade with Russia under Debt Repayment Agreement,
DGFT may issue instructions or frame schemes as may be
required, and anything contained in FTP, in so far as it is
inconsistent with such instructions or schemes, shall not apply.
Actual User Condition 2.16 Capital goods, raw materials, intermediates, components,
consumables, spares, parts, accessories, instruments and other
goods, which are importable without any restriction, may be
imported by any person.
However, if such imports require an Authorisation, actual user
alone may import such goods unless actual user condition is
specifically dispensed with by RA.
Second Hand Goods 2.17 All second hand goods, except second hand capital goods,
shall be restricted for imports and may be imported only in
accordance with provisions of FTP, ITC (HS), HBP v1, Public
Notice or an Authorisation issued in this regard.
Import of second hand capital goods, including refurbished /
re-conditioned spares shall be allowed freely. However,
second hand personal computers / laptops, photocopier
machines, air conditioners, diesel generating sets will only be
allowed against a licence.
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Import of re-manufactured goods shall be allowed only
against a licence.
Scrap/Waste in SEZ 2.17A Any waste or scrap or remnant including any form of metallic
waste & scrap generated during manufacturing or processing
activities of an SEZ Unit/ Developer/Co-developer shall be
allowed to be disposed in DTA freely subject to payment of
applicable Customs Duty.
Import of samples 2.18 Import of samples shall be governed by HBP v1.
Import of Gifts 2.19 Import of gifts shall be permitted where such goods are
otherwise freely importable under FTP. In other cases, a
Customs Clearance Permit (CCP) shall be required from
DGFT.
Passenger Baggage 2.20 Bonafide household goods and personal effects may be imported
as part of passenger baggage as per limits, terms and conditions
thereof in Baggage Rules notified by Ministry of Finance.
Samples of such items that are otherwise freely importable
under FTP may also be imported as part of passenger baggage
without an Authorisation.
Exporters coming from abroad are also allowed to import
drawings, patterns, labels, price tags, buttons, belts, trimming
and embellishments required for export, as part of their
passenger baggage without an Authorisation.
Import on Export basis 2.21 Freely exportable new or second hand capital goods,
equipments, components, parts and accessories, containers
meant for packing of goods for exports, jigs, fixtures, dies and
moulds may be imported for export without an Authorisation
on execution of LUT / BG with Customs Authorities.
Re-import of goods
repaired abroad
2.22 Capital goods, equipments, components, parts and accessories,
whether imported or indigenous, except those restricted under
ITC (HS) may be sent abroad for repairs, testing, quality
improvement or upgradation or standardization of technology
and re-imported without an Authorisation.
Import of goods used in
projects abroad
2.23 After completion of projects abroad, project contractors may
import, without an Authorisation used goods including capital
goods provided they have been used for at least one year.
Sale on High Seas 2.24 Sale of goods on high seas for import into India may be made
subject to FTP or any other law in force.
Import under Lease
Financing
2.25 Permission of RA is not required for import of capital goods
under lease financing.
Clearance of Goods
from Customs
2.26 Goods already imported / shipped / arrived, in advance, but
not cleared from Customs may also be cleared against an
Authorisation issued subsequently.
22
Execution of BG / LUT
2.27
Wherever any duty free import is allowed or where otherwise
specifically stated, importer shall execute prescribed LUT /
BG / Bond with Customs Authority before clearance of goods.
In case of indigenous sourcing, Authorisation holder shall
furnish LUT / BG / Bond to RA concerned before sourcing
material from indigenous supplier / nominated agency as
prescribed in HBP v1.
Private / Public Bonded
Warehouses for Imports
2.28 Private / Public bonded warehouses may be set up in DTA as
per terms and conditions of notification issued by DoR.
Any person may import goods except prohibited items, arms
and ammunition, hazardous waste and chemicals and
warehouse them in such bonded warehouses.
Such goods may be cleared for home consumption in
accordance with provisions of FTP and against Authorisation,
wherever required. Customs duty as applicable shall be paid at
the time of clearance of such goods.
If such goods are not cleared for home consumption within a
period of one year or such extended period as the custom
authorities may permit, importer of such goods shall re-export
the goods.
Free Exports 2.29 All goods may be exported without any restriction except to
the extent that such exports are regulated by ITC (HS) or any
other provision of FTP or any other law for the time being in
force.
DGFT may, however, specify through a public notice such
terms and conditions according to which any goods, not
included in ITC (HS), may be exported without an
Authorisation.
Export of Samples 2.30 Export of samples and Free of charge goods shall be governed
by provisions given in HBP v1.
Export of Passenger
Baggage
2.31 Bonafide personal baggage may be exported either along with
passenger or, if unaccompanied, within one year before or
after passenger's departure from India. However, items
mentioned as restricted in ITC (HS) shall require an
Authorisation. Government of India officials proceeding
abroad on official postings shall, however, be permitted to
carry alongwith their personal baggage, food items (free,
restricted or prohibited) strictly for their personal
consumption.
Export of Gifts 2.32 Goods, including edible items, of value not exceeding
Rs.5,00,000 /- in a licensing year, may be exported as a gift.
23
However, items mentioned as restricted for exports in ITC
(HS) shall not be exported as a gift, without an Authorisation.
Export of Spares 2.33 Warranty spares (whether indigenous or imported) of plant,
equipment, machinery, automobiles or any other goods,
(except those restricted under ITC (HS)) may be exported
along with main equipment or subsequently but within
contracted warranty period of such goods subject to approval
of RBI.
Third Party Exports 2.34 Third party exports, as defined in Chapter 9 shall be allowed
under FTP.
Export of Imported
Goods
2.35 Goods imported, in accordance with FTP, may be exported in
same or substantially the same form without an Authorisation
provided that item to be imported or exported is not restricted
for import or export in ITC (HS).
Exports of such goods imported against payment in freely
convertible currency would be permitted against payment in
freely convertible currency.
2.36 Goods, including those mentioned as restricted for import
(except prohibited items) may be imported under Customs
Bond for export in freely convertible currency without an
Authorisation provided that item is freely exportable without
any conditionality / requirement of Licence / permission as
may be required under ITC (HS) Schedule II.
2.36 A Hides, Skins and semi finished leather may be imported in the
Public Bonded warehouse for the purpose of DTA sale and the
unsold items thereof can be re-exported from such bonded
warehouses at 50% of the applicable export duty. However,
this facility shall not be allowed for import under Private
Bonded warehouse.
Export of Replacement
Goods
2.37 Goods or parts thereof on being exported and found defective
/ damaged or otherwise unfit for use may be replaced free of
charge by the exporter and such goods shall be allowed
clearance by Customs authorities, provided that replacement
goods are not mentioned as restricted items for exports in ITC
(HS).
Export of Repaired
Goods
2.38 Goods or parts, except restricted under ITC (HS) thereof, on
being exported and found defective, damaged or otherwise
unfit for use may be imported for repair and subsequent reexport.
Such goods shall be allowed clearance without an
Authorisation and in accordance with customs notification.
24
Private Bonded
Warehouses for Exports
2.39 Private bonded warehouses exclusively for exports may be set up in
DTA as per terms and conditions of notifications issued by DoR.
Such warehouses shall be entitled to procure goods from
domestic manufacturers without payment of duty. Supplies
made by a domestic supplier to such notified warehouses shall
be treated as physical exports provided payments are made in
free foreign exchange.
Denomination of
Export Contracts
2.40 All export contracts and invoices shall be denominated either
in freely convertible currency or Indian rupees but export
proceeds shall be realised in freely convertible currency.
However, export proceeds against specific exports may also
be realized in rupees, provided it is through a freely
convertible Vostro account of a non resident bank situated in
any country other than a member country of ACU or Nepal or
Bhutan. Additionally, rupee payment through Vostro account
must be against payment in free foreign currency by buyer in
his non-resident bank account. Free foreign exchange remitted
by buyer to his non-resident bank (after deducting the bank
service charges) on account of this transaction would be taken
as export realization under export promotion schemes of FTP.
Contracts [for which payments are received through Asian
Clearing Union (ACU)] shall be denominated in ACU Dollar.
Central Government may relax provisions of this paragraph in
appropriate cases. Export contracts and Invoices can be
denominated in Indian rupees against EXIM Bank /
Government of India line of credit.
Realisation of Export
Proceeds
2.41 If an exporter fails to realise export proceeds within time
specified by RBI, he shall, without prejudice to any liability or
penalty under any law in force, be liable to action in
accordance with provisions of FT (D&R) Act, Rules and
Orders made there under and FTP.
Free movement of
export goods
2.42 Consignments of items meant for exports shall not be
withheld/ delayed for any reason by any agency of Central /
State Government. In case of any doubt, authorities concerned
may ask for an undertaking from exporter.
No seizure of Stock 2.42.1 No seizure of stock shall be made by any agency so as to
disrupt manufacturing activity and delivery schedule of
exports. In exceptional cases, concerned agency may seize the
stock on basis of prima facie evidence. However, such seizure
should be lifted within 7 days.
Export Promotion
Councils (EPC)
2.43 Basic objective of Export Promotion Councils (EPCs) is to
promote and develop Indian exports. Each Council is
responsible for promotion of a particular group of products,
projects and services as given in HBP-v1.
25
Registration -cum-
Membership Certificate
(RCMC)
2.44 Any person, applying for:
(i) an Authorisation to import / export, [except items
listed as restricted items in ITC(HS)] or
(ii) any other benefit or concession under FTP
shall be required to furnish RCMC granted by competent
authority in accordance with procedure specified in HBP-v1
unless specifically exempted under FTP.
Certificate of Registration as Exporter of Spices (CRES)
issued by Spices Board shall be treated as Registration-Cum-
Membership Certificate (RCMC) for the purposes under this
Policy.
Trade Facilitation
through EDI Initiatives
2.45 It is endeavor of Government to work towards greater
simplification, standardization and harmonization of trade
documents using international best practices. As a step in this
direction, DGFT shall move towards an automated
environment for electronic filing, retrieval and authentication
of documents based on agreed protocols and message
exchange with other community partners including Customs
and Banks.
DGCI&S Commercial
Trade Data
2.45.1 To enable users to make commercial decisions in a more
professional manner, DGCI&S trade data shall be made
available with a minimum time lag in a query based structured
format on a commercial criteria.
Fiscal Incentives to
promote EDI Initiatives
adoption
2.45.2 With a view to promote use of Information Technology,
DGFT will provide fiscal incentives to user community.
Deductions in Application Fee would be admissible for
applications signed digitally or / and where application fee is
paid electronically through EFT (Electronic Fund Transfer).
Details are enumerated in HBP v1.
Regularization of EO
default and settlement
of customs duty and
interest through
Settlement Commission
2.46 With a view to providing assistance to firms who have
defaulted under FTP for reasons beyond their control as also
facilitating merger, acquisition and rehabilitation of sick units,
it has been decided to empower Settlement Commission in
Central Board of Excise and Customs to decide such cases
also with effect from 01.04.2005.
Easing of
Documentation
Requirement
2.47 Pending finalisation of Single Common Document (SCD) for
international trade, Government Departments dealing with
exports and imports will honour Authorisation issued by other
Government departments based on verification of export
documents like shipping bill, bank realization certificate,
packing list, bill of lading etc. and will not insist upon fresh
submission of these documents.
26
Exemption / Remission
of Service Tax in DTA
2.48 For all goods and services which are exported from units in
DTA and units in EOU / EHTP / STP / BTP exemption /
remission of service tax levied and related to exports, shall be
allowed, as per prescribed procedure in Chapter 4 of HBP v1.
Exemption from Service
Tax in SEZ
2.48.1 Units in SEZ shall be exempted from service tax.
Exemption from Service
Tax on Services
received abroad
2.48.2 For all goods and services exported from India, services
received / rendered abroad, where ever possible, shall be
exempted from service tax.
GRIEVANCE REDRESSAL
DGFT as a facilitator
of exports / imports
2.49 DGFT has a commitment to function as a facilitator of exports
and imports. Focus is on good governance, which depends on
clean, transparent and accountable delivery systems.
Citizen’s Charter 2.49.1 DGFT has in place a Citizen’s Charter, giving time schedules
for providing services to clients, and details of grievance
committees at different levels.
Grievance Redressal
Committee (GRC)
2.49.2 In order to facilitate speedy redressal of grievances of trade
and industry, a new grievance redressal mechanism has been
put in place in the form of GRC by a Government Resolution.
The Government is committed to resolving all outstanding
problems and disputes pertaining to past policy periods
through GRC set up on 27.10.2004, for condoning delays,
regularizing breaches by exporters in bonafide cases,
resolving disputes over entitlements, granting extensions for
utilization of Authorisations.
Export of perishable
agricultural products
2.50 To reduce transaction and handling costs, a single window
system to facilitate export of perishable agricultural produce
has been introduced. The system will involve creation of
multi-functional nodal agencies to be accredited by
Agricultural and Processed Food Products Export
Development Authority (APEDA), New Delhi. The detailed
procedures have been notified at Appendix 40 to HBP v1.
27
CHAPTER 3
PROMOTIONAL MEASURES
PROMOTIONAL MEASURES IN DEPARTMENT
OF COMMERCE
Assistance to
States for
Developing
Export
Infrastructure and
Allied Activities
(ASIDE)
3.1 Scheme for Assistance to States for Developing Export
Infrastructure and Allied Activities (ASIDE) is formulated
to involve the States in the export effort by providing
assistance to the States Governments for creating
appropriate infrastructure for the development and growth
of exports. The Scheme is administered by Department of
Commerce (DoC).
The objective of scheme is to establish a mechanism for
involving the State Governments to participate in funding
of infrastructure critical for growth of exports by providing
export performance linked financial assistance to them.
The activities aimed at development of infrastructure for
exports can be funded from the scheme provided such
activities have overwhelming export content and their
linkage with exports is full established. The specific
purposes for which funds allocated under the Scheme can
be sanctioned and utilized are as follows:
• Creation of new Export Promotion Industrial
Parks/Zones (SEZs/Agri Business Zones) and
augmenting facilities in the existing ones.
• Setting up of electronics and other related
infrastructure in export conclave.
• Equity participation in infrastructure projects including
the setting up of SEZs.
• Meeting requirements of capital outlay of
EPIPs/EPZs/SEZs.
• Development of complementary infrastructure such as,
roads connecting the production centres with the ports,
setting up of Inland Container Depots and Container
Freight Stations.
28
• Stabilizing power supply through additional
transformers and islanding of export production centre
etc.
• Development of minor ports and jetties to serve export
purpose.
• Assistance for setting up Common Effluent Treatment
facilities and
• Any other activity as may be notified by DoC.
Details of ASIDE Scheme are available at
http://www.commerce.nic.in or
http://www.commerce.gov.in.
Market Access
Initiative (MAI)
3.2 Under MAI scheme, Financial assistance is provided for
export promotion activities on focus country, focus
product basis. Financial assistance is available for Export
Promotion Councils (EPCs), Industry and Trade
Associations (ITAs), Agencies of State Government,
Indian Commercial Missions (ICMs) abroad and other
national level institutions/eligible entities as may be
notified.
A whole range of activities can be funded under MAI
scheme. These include, amongst others,
i. Market studies/surveys,
ii. Setting up of showroom / warehouse,
iii. Participation in international trade fairs,
iv. Displays in International departmental stores,
v. Publicity campaigns,
vi. Brand promotion,
vii. Reimbursement of registration charges for
pharmaceuticals and expenses for carrying out
clinical trials etc., in fulfillment of statutory
requirements in the buyer country,
viii. Testing charges for engineering products abroad.
ix. Assistance for contesting Anti Dumping
litigations etc.
Each of these export promotion activities can receive
financial assistance from Government ranging from 25%
to 100% of total cost depending upon activity and
implementing agency.
29
Full text of guidelines is available at
http://commerce.nic.in.
Marketing
Development
Assistance (MDA)
3.3 Under MDA Scheme, financial assistance is provided for a
range of export promotion activities implemented by EPCs
and Trade Promotion Organizations on the basis of
approved annual action plans. The scheme is administered
by DOC. Assistance includes, amongst others,
participation in:
i. Trade Fairs and Buyer Seller meets abroad or in India,
and
ii. Export promotions seminars.
iii. Financial assistance with travel grant is available to
exporters traveling to focus areas, viz., Latin America,
Africa, CIS region, ASEAN countries, Australia and
New Zealand. In other areas, financial assistance
without travel grant is available.
MDA assistance is available for exports having an annual
export turnover as prescribed in MDA guidelines. Full text
of guidelines is available at http://commerce.nic.in.
Meeting expenses for
statutory compliances
in buyer country for
Trade Related Matters
3.4 DOC provides for reimbursement of charges/expenses for
fulfilling statutory requirements in the buyer country,
including registration charges for product registration for
pharmaceuticals, bio-technology and agro-chemicals
products on recommendation of EPCs. Financial assistance
is also provided for contesting litigation(s) in the foreign
country concerning restrictions/anti dumping duties etc on
particular product(s) of Indian origin, as provided under
the Market Access Initiative (MAI) Scheme of DOC.
Towns of Export
Excellence (TEE)
3.5 A number of towns have emerged as dynamic industrial
clusters contributing handsomely to India’s exports. It is
necessary to grant recognition to these industrial clusters
with a view to maximizing their potential and enabling
them to move higher in the value chain and tap new
markets.
Selected towns producing goods of Rs. 750 Crore or more
will be notified as TEE based on potential for growth in
30
exports. However for TEE in Handloom, Handicraft,
Agriculture and Fisheries sector, threshold limit would be
Rs 150 Crores.
(i) Recognized associations of units will be provided
financial assistance under MAI scheme, on priority
basis, for export promotion projects for marketing,
capacity building and technological services.
(ii) Common Service Providers in these areas shall be
entitled for EPCG scheme.
(iii) The projects received from TEEs shall be accorded
priority by SLEPC for financial assistance under
ASIDE.
Notified Towns (TEEs) are listed in Appendix 7 of
HBPv1.
Brand Promotion and
Quality
3.6 IBEF (originally called India Brand Equity Fund and later
renamed as India Brand Equity Foundation) was set up by
the Ministry of Commerce on 11th July, 1996, with the
primary objective to promote and create international
awareness of the “Made in India” label in markets
overseas. IBEF aims to promote India as a business
opportunity by creating positive economic perceptions of
India globally as well as effectively present the India
business perspective and leverage business partnerships in
a globalised market-place.
DOC provides funds for capacity building for up-gradation
of quality to national level Institutions and EPCs to
organize training programmes for the skill improvement of
the exporters for quality up-gradation, reduction in
rejection, product improvement etc. as provided under the
Market Access Initiative (MAI) Scheme of DOC.
Test Houses 3.7 Central Government will assist in modernization and
upgradation of test houses and laboratories to bring them
at par with international standards.
31
PROMOTIONAL MEASURES IN DGFT
Quality Complaints /
Disputes
3.8 Regional Sub-Committee on Quality Complaints
(RSCQC) set up at Regional Offices of this Directorate
shall investigate quality complaints received from foreign
buyers. Guidelines for settlement of quality complaints, in
particular, and such other complaints, in general, are given
in Appendix-16 of HBPv1.
Trade Disputes
affecting Trade
Relations
3.9 If it comes to DGFT’s notice or he has reason to believe
that an export or import has been made in a manner that:
(i) is gravely prejudicial to trade relations of India
with any other country; and / or
(ii) is gravely prejudicial to interest of other persons
engaged in exports or imports; and / or
(iii)has brought disrepute to the country;
DGFT may take action against such exporter or importer
in accordance with FT(D&R) Act, Rules and Orders made
there-under and FTP.
3.10
EXPORT AND TRADING HOUSES
Eligibility for Export
and Trading Houses
Status
3.10.1 Merchant as well as Manufacturer Exporters, Service
Providers, Export Oriented Units (EOUs) and Units
located in Special Economic Zones (SEZs), Agri Export
Zones (AEZs), Electronic Hardware Technology Parks
(EHTPs), Software Technology Parks (STPs) and Bio-
Technology Parks (BTPs) shall be eligible for status.
32
Status Category 3.10.2 Applicant shall be categorized depending on his total FOB
(FOR - for deemed exports) export performance during
current plus previous three years (taken together) upon
exceeding limit below. For Export House (EH) Status,
export performance is necessary in at least two out of four
years (i.e., current plus previous three years).
Status Category Export Performance
FOB / FOR Value
(Rupees in Crores)
Export House (EH) 20
Star Export House (SEH) 100
Trading House (TH) 500
Star Trading House (STH) 2500
Premier Trading House (PTH) 7500
Double Weightage and
Other Conditions for
Grant of Status
3.10.3 (i) Exporters in Small Scale Industry (SSI) / Tiny Sector /
Cottage Sector, Units registered with KVICs / KVIBs,
Units located in North Eastern States, Sikkim and
Jammu & Kashmir, Units exporting handloom /
handicrafts / hand knotted or silk carpets, exporters
exporting to countries in Latin America / CIS / sub-
Saharan Africa as listed in Appendix-9, Units having
ISO 9000 (series) / ISO 14000 (series) / WHOGMP /
HACCP / SEI CMM level-II and above status granted
by agencies listed in Appendix-6 of HBP v1, exports
of services and exports of agro products shall be
entitled for double weightage on exports made for
grant of status. Double Weightage shall be admissible
to Merchant as well as Manufacturer Exporters.
However, a shipment can get double weightage only
once in any one of above categories.
(ii) Transfer of export performance from one to another is
not permitted. Therefore disclaimer system shall not be
allowed for counting of export turnover.
(iii)Exports made on re-export basis shall not be counted
for recognition.
(iv) Exports made by subsidiary of a limited company shall
be counted towards export performance of limited
company for recognition only if limited company has a
majority share holding in subsidiary company.
33
Privileges of Export
and Trading House
Status Holders
3.10.4 A Status Holder shall be eligible for privileges as under:
(i) Authorization and Customs Clearances for both
imports and exports on self-declaration basis;
(ii) Fixation of Input-Output norms on priority within
60 days;
(iii) Exemption from compulsory negotiation of
documents through banks. Remittance / Receipts,
however, would be received through banking
channels;
(iv) 100% retention of foreign exchange in EEFC
account;
(v) Exemption from furnishing of BG in Schemes
under FTP;
(vi) SEHs and above shall be permitted to establish
Export Warehouses, as per DoR guidelines.
(vii) For status holders, a decision on conferring of ACP
Status shall be communicated by Customs within
30 days from receipt of application with Customs.
(viii) As an option, for Premier Trading House (PTH),
the average level of exports under EPCG Scheme
shall be the arithmetic mean of export performance
in last 5 years, instead of 3 years.
(ix) Status Holders of specified sectors shall be eligible
for Status Holder Incentive Scrip under Para 3.16
of FTP.
(x) Status Holders of Agri. Sector (Chapter 1 to 24)
shall be eligible for Agri. Infrastructure Incentive
Scrip under VKGUY – Para 3.13.4 of FTP.
34
3.11 SERVICES EXPORTS
Services Exports 3.11.1 Services include all 161 tradable services covered under
General Agreement on Trade in Services (GATS) where
payment for such services is received in free foreign
exchange. A list of services is given in Appendix 10 of
HBPv1.
All provisions of this Policy shall apply mutatis mutandis
to export of services as they apply to goods.
Registration cum
Membership
Certificate (RCMC)
for Service Providers
3.11.2 Software exporters shall register themselves with
Electronics and Software EPC. Exporters of 15 specific
services listed in Sl. No. 34 of Appendix 2 of HBPv1 are
required to register themselves with Services EPC. Other
service exporters shall register themselves with Federation
of Indian Export Organisations (FIEO).
Common Facility
Centres
3.11.3 Government shall promote establishment of Common
Facility Centres for use by home-based service providers,
particularly in areas like Engineering & Architectural
Design, Multi-media operations, Software developers etc.,
in State and District level towns, to draw in a vast
multitude of home-based professionals into services export
arena.
REWARD / INCENTIVE SCHEMES IN DGFT
3.12 SERVED FROM INDIA SCHEME (SFIS)
Objective 3.12.1 Objective is to accelerate growth in export of services so
as to create a powerful and unique ‘Served From India’
brand, instantly recognized and respected world over.
Eligibility
3.12.2 All Indian Service Providers, of services listed in
Appendix 10 of HBPv1, who have free foreign exchange
earning of at least Rs. 10 Lakhs in preceding financial year
/ current financial year shall qualify for Duty Credit Scrip.
For Individual Indian Service Providers, minimum free
foreign exchange earnings would be Rs 5 Lakhs.
35
Ineligible Services and
Service Providers
3.12.3 Services and Service Providers as listed in Para 3.6.1 of
HBPv1 shall not be entitled for benefits under the SFIS
scheme.
Entitlement
3.12.4 All Service Providers shall be entitled to Duty Credit Scrip
equivalent to 10% of free foreign exchange earned during
current financial year.
Eligible Remittances
3.12.5 Free foreign exchange earned through International Credit
Cards and other instruments as permitted by RBI for
rendering of service shall also be taken into account for
computation of Duty Credit Scrip.
Imports Allowed
3.12.6 Duty Credit scrip may be used for import of any capital
goods including spares, office equipment and professional
equipment, office furniture and consumables; that are
otherwise freely importable and / or restricted under ITC
(HS). Imports shall relate to any service sector business of
applicant.
Utilization of Duty Credit scrip earned shall be permitted
for payment of duty in case of import of only those
vehicles, which are in the nature of professional equipment
to the service provider.
In case of hotels; clubs having residential facility of
minimum 30 rooms, golf resorts and stand-alone
restaurants having catering facilities, Duty Credit scrip
may also be used for import of consumables including
food items and alcoholic beverages.
Non Transferability
3.12.7 Entitlement / goods (imported / procured) shall be non
transferable (except within group company and managed
hotels) and be subject to Actual User condition.
Procurement from
Domestic Sources
3.12.8 Utilization of Duty Credit Scrip shall be permitted for
payment of excise duty in terms of DoR notification issued
in this behalf for procurement from domestic sources, of
items permitted for imports under SFIS Duty Credit Scrip.
36
3.13 VISHESH KRISHI AND GRAM UDYOG YOJANA
(VKGUY) (SPECIAL AGRICULTURE AND
VILLAGE INDUSTRY SCHEME)
Objective 3.13.1 Objective of VKGUY is to promote exports of :
(i) Agricultural Produce and their value added
products;
(ii) Minor Forest Produce and their value added
variants;
(iii) Gram Udyog Products;
(iv) Forest Based Products; and
(v) Other Products, as notified from time to time.
Such products shall be listed in Appendix 37A of HBPv1.
Entitlement
3.13.2 Duty Credit Scrip benefits are granted with an aim to
compensate high transport costs, and to offset other
disadvantages.
Exporters, of products notified in Appendix 37A of
HBPv1, shall be entitled for Duty Credit Scrip equivalent
to 5% of FOB value of exports (in free foreign exchange)
for exports made from 27.8.2009 onwards, unless a
specific date of export / period is specified by public
notice / notification.
However, for exports made w.e.f 27.8.2009, some
Flowers, Fruits, Vegetables and other products, as listed in
Table 2 of Appendix 37A shall be entitled to an additional
duty credit scrip equivalent to 2% of FOB value of
exports; over and above the 5% or 3% VKGUY reduced
rate entitlement available as per Para 3.13.3 below.
Applicability of
Reduced Rate
3.13.3 Duty Credit Scrip benefits under VKGUY scheme shall be
granted only at a reduced rate of 3% of FOB value of
exports in such cases where exporter has also availed
benefits of:
(i) Drawback at rates higher than 1%; and/or
(ii) Specific DEPB rate (i.e. other than Miscellaneous
Category – Sr. Nos. 22D & 22C of Product Group
90); and/or
37
(iii) Advance Authorization or Duty Free Import
Authorization Import of inputs (other than
catalysts, consumables and packing materials)
for the exported product for which Duty Credit Scrip under
VKGUY is being claimed.
Agri. Infrastructure
Incentive Scrip
3.13.4 For exports made during a particular year, all Status
Holders (having status recognition for the current year)
exporting products covered under ITC HS Chapters 1 to
24, shall be incentivized with duty credit scrip equal to
10% of FOB value of agricultural exports (including
VKGUY benefits entitled under Policy Para 3.13.2)
provided that the total benefits for all status holders put
together does not exceed Rs 100 Cr (i.e. Rs 50 Cr for each
half year) and the conditions specified in Para 3.4 of
HBPv1 are satisfied.
Zonal Office, CLA, New Delhi shall be the licensing
office for grant of the benefit to all status holders.
The following capital goods / equipments shall be
permitted for import:
(i) Cold storage units (including Controlled
Atmosphere (CA) and Modified Atmosphere
(MA) Stores); Pre-cooling Units and Mother
Storage Units for Onions, etc.;
(ii) Pack Houses (including facilities for handling,
grading, sorting and packaging etc.);
(iii) Reefer Van / Containers; and
(iv) Other Capital Goods / Equipments as may be
notified in Appendix 37F.
Imported capital goods/equipment shall be utilized for
storage, packing etc. (as in (ii) above) and transportation of
agricultural products (including agro-processed perishable
products).
This additional benefit shall be subject to actual user
condition and hence non-transferable.
38
However, for import of Cold Chain Equipment, this
Incentive Scrip shall be freely transferable amongst Status
Holders as well as to Units (the term ‘Units’ shall not
include Developers) in the Food Parks.
3.14 FOCUS MARKET SCHEME (FMS)
Objective
3.14.1 Objective is to offset high freight cost and other
externalities to select international markets with a view to
enhance India’s export competitiveness in these countries.
Entitlement
3.14.2 Exporters of all products to notified countries (as in
Appendix 37C of HBPv1) shall be entitled for Duty Credit
Scrip equivalent to 3% of FOB value of exports (in free
foreign exchange) for exports made from 27.8.2009
onwards, unless a specific date of export / period is
specified by public notice / notification.
Ineligible Exports
Categories / Sectors
for FMS
3.14.3 The following categories of export products / sectors shall
be ineligible for Duty Credit Scrip, under FMS scheme:
a) Supplies made to SEZ units;
b) Service Exports;
c) Diamonds and other precious, semi precious stones;
d) Gold, silver, platinum and other precious metals in any
form, including plain and studded Jewellery;
e) Ores and Concentrates, of all types and in all forms;
f) Cereals, of all types;
g) Sugar, of all types and in all forms;
h) Crude / Petroleum Oil & Crude / Petroleum based
Products covered under ITC HS codes 2709 to 2715,
of all types and in all forms; and
i) Export of Milk and Milk Products covered under ITC
HS Codes 0401 to 0406, 19011001, 19011010, 2105 &
3501.
39
3.15 FOCUS PRODUCT SCHEME (FPS)
Objective 3.15.1 Objective is to incentivise export of such products which
have high export intensity / employment potential, so as to
offset infrastructure inefficiencies and other associated
costs involved in marketing of these products.
Entitlement 3.15.2 Exports of notified products (as in Appendix 37D of
HBPv1) to all countries (including SEZ units) shall be
entitled for Duty Credit scrip equivalent to 2% of FOB
value of exports (in free foreign exchange) for exports
made from 27.8.2009 onwards, unless a specific date of
export / period is specified by public notice / notification.
However, Special Focus Product(s) /sector(s), covered
under Table 2 and Table 5 of Appendix 37D, shall be
granted Duty Credit Scrip equivalent to 5% of FOB value
of exports (in free foreign exchange) for exports made
from 27.8.2009 onwards, unless a specific date of export /
period is specified by public notice / notification.
Further, Focus Product(s) / sector(s) that are notified under
Table 7 of Appendix 37D shall be granted additional Duty
Credit Scrip equivalent to 2% of FOB value of exports (in
free foreign exchange) over and above the existing rate for
that product / sector from the admissible date of export /
period specified in the public notice issued to notify the
product / sector.
3.15.3 Market Linked Focus Products Scrip (MLFPS):
Export of Products/Sectors of high export intensity /
employment potential (which are not covered under
present FPS List) would be incentivized at 2% of FOB
value of exports (in free foreign exchange) under FPS
when exported to the Linked Markets (countries), which
are not covered in the present FMS list, as notified in
Appendix 37D of HBPv1, for exports made from
27.8.2009 onwards, unless a specific date of export /
period is specified by public notice / notification.
40
3.16 Status Holders Incentive Scrip (SHIS)
3.16.1 With an objective to promote investment in upgradation of
technology of some specified sectors as listed in Para
3.16.4 below, Status Holders shall be entitled to incentive
scrip @1% of FOB value of exports made during 2009-10,
2010-11 and during 2011-12, of these specified sectors, in
the form of duty credit.
The Status Holders of the additional sectors listed in the
Para 3.10.8 of HBPv1 2009-14 (RE-2010) shall be eligible
for this Status Holders Incentive Scrip on exports made
during 2010-11 and 2011-12.
This shall be over and above any duty credit scrip
claimed/availed under this chapter.
3.16.2 Status Holders availing Technology Upgradation Fund
Scheme (TUFS) benefits (under Ministry of Textiles)
during a particular year shall not be eligible for Status
Holders Incentive Scrip for exports of that year.
3.16.3 The Status Holders Incentive Scrip shall be with Actual
User Condition and shall be used for imports of capital
goods (as defined in FTP) relating to the sectors specified
in Para 3.16.4 below.
3.16.4
The Status Holders of the following Sectors shall be
eligible for this Status Holders Incentive Scrip:
1. Leather Sector (excluding finished leather);
2. Textiles and Jute Sector;
3. Handicrafts;
4. Engineering Sector (excluding Iron & Steel, Nonferrous
Metals in primary or intermediate forms,
Automobiles & two wheelers, nuclear reactors &
parts and Ships, Boats and Floating Structures);
5. Plastics; and
6. Basic Chemicals (excluding Pharma Products).
The Status Holders of the additional sectors listed in the
Para 3.10.8 of HBPv1 2009-14 (RE-2010) shall be
eligible for this Status Holders Incentive Scrip on exports
made during 2010-11 and 2011-12.
41
Special Provisions 3.17 Common Provisions of Duty Credit Scrips, except where
specifically provided for.
3.17.1 Government reserves the right in public interest, to specify
export products or services or exports to such countries,
which shall not be eligible for computation of entitlement.
Further Government reserves the right to impose / change
the rate / ceiling on Duty Credit Scrip under this chapter.
Similarly, Government may also notify goods (in
Appendix 37B of HBPv1), which shall not be allowed for
import under Duty Credit Scrips.
Ineligible Exports
Categories / Sectors
3.17.2 For VKGUY, FMS, FPS (including MLFPS) and Status
Holders Incentive Scrip, the following exports categories /
sectors shall be ineligible for Duty Credit Scrip
entitlement:
(i) EOUs / EHTPs / BTPs who are availing direct tax
benefits / exemption;
(ii) Export of imported goods covered under Para 2.35 of
FTP;
(iii)Exports through transshipment, meaning thereby that
exports originating in third country but transshipped
through India;
(iv) Deemed Exports;
(v) Exports made by SEZ units or SEZ products exported
through DTA units; and
(vi) Items, which are restricted or prohibited for export
under Schedule-2 of Export Policy in ITC (HS).
Counting of
Commission in FOB
value of Exports (in
free foreign exchange)
3.17.3 For computation of Duty Credit Scrip Benefits, FOB
Value of Exports (in free foreign exchange) shall include
up to 12.5% Foreign Agency Commission.
Free Transferability
3.17.4 Duty Credit Scrip and items imported against it would be
freely transferable.
42
However, Duty Credit Scrip under SFIS (Para 3.12) and
under Status Holders Incentive Scrip (Para 3.16) shall not
be freely transferable.
Imports Allowed
3.17.5 Duty Credit Scrip may be used for import of inputs or
goods including capital goods, provided same is freely
importable and / or restricted under ITC (HS). However,
import of items listed in Appendix 37B of HBPv1 shall not
be permitted to be debited.
Duty Credit Scrips under Chapter 3 of FTP can also be
utilized for payment of duty against imports under EPCG
scheme provided the item is importable against the scrip.
CENVAT / Drawback
3.17.6 Additional customs duty/excise duty paid in cash or
through debit under Duty Credit scrip shall be adjusted as
CENVAT Credit or Duty Drawback as per DoR rules,
except under SFIS.
TRA Facility
3.17.7 Utilization of Duty Credit Scrip for imports from a port
other than port of registration shall be allowed under
Telegraphic Release Advice (TRA) facility as per DoR
notification.
Exclusivity of
Entitlement
3.17.8 For a shipment, Duty Credit Scrip benefit under any one of
the schemes covered in this Chapter can alone be claimed,
at exporter’s option.
Import under Lease
financing
3.17.9 Utilization of Duty Credit Scrip shall be permitted for
payment of duty in case of import of capital goods under
lease financing in terms of provision in Para 2.25 of FTP.
Transfer of Export
Performance
3.17.10 Transfer of export performance from one to another shall
not be permitted. Thus, a shipment bill containing name of
applicant shall be counted in export performance /
turnover of applicant only if export proceeds from
overseas are realized in applicant’s bank account and this
shall be evidenced from BRC / FIRC.
However, for VKGUY, FMS and FPS (including MLFPS),
benefits can be claimed either by the supporting
manufacturer (along with disclaimer from the company /
firm who has realized the foreign exchange directly from
43
overseas) or by the company / firm who has realized the
foreign exchange directly from overseas.
Facility of Payment of
Customs Duties in
case of E.O. defaults
3.17.11 Duty Credit Scrips can also be used / debited towards
payment of Customs Duties in case of EO defaults under
Authorizations issued under Chapters 4 and 5 of the
Policy. However, penalty / interest shall be required to be
paid in cash.
44
45
CHAPTER 4
DUTY EXEMPTION & REMISSION SCHEMES
Duty Exemption
and Remission
Schemes
4.1 Duty exemption schemes enable duty free import of inputs
required for export production. Duty Exemption Schemes
consist of (a) Advance Authorisation scheme and (b) Duty Free
Import Authorisation (DFIA) scheme. A Duty Remission
Scheme enables post export replenishment / remission of duty
on inputs used in export product. Duty remission schemes
consist of (a) Duty Entitlement Passbook (DEPB) Scheme and
(b) Duty Drawback (DBK) Scheme.
Re-import of
exported goods
under Duty
Exemption /
Remission Scheme
4.1.1 Goods exported under Advance Authorisation / DFIA / DEPB
may be re-imported in same or substantially same form subject
to DoR specified conditions.
Value Addition 4.1.2 Value addition (VA) for the purpose of this Chapter (Except for
Gems and Jewellery Sector) shall be:-
VA
A-B
= --------- x 100, where
B
A = FOB value of export realised / FOR value of supply
received.
B = CIF value of inputs covered by authorisation, plus
any other imported materials used on which benefit
of DBK is claimed.
ADVANCE AUTHORISATION SCHEME
Advance
Authorisation
4.1.3
An Advance Authorisation is issued to allow duty free import of
inputs, which are physically incorporated in export product
(making normal allowance for wastage). In addition, fuel, oil,
energy, catalysts which are consumed / utilised to obtain export
product, may also be allowed. DGFT, by means of Public
Notice, may exclude any product(s) from purview of Advance
Authorisation.
Duty free import of mandatory spares upto 10% of CIF value of
Authorisation which are required to be exported / supplied with
46
resultant product are allowed under Advance Authorisation.
Advance Authorisations are issued for inputs and export items
given under SION. These can also be issued on the basis of
Adhoc norms or self declared norms as per para 4.7 of HBP v1.
Advance Authorisation can be issued either to a manufacturer
exporter or merchant exporter tied to supporting manufacturer(s)
for:
i) Physical exports (including exports to SEZ); and/ or
ii) Intermediate supplies; and /or
iii) Supply of goods to the categories mentioned in paragraph
8.2 (b), (c), (d), (e), (f), (g), (i) and (j) of FTP ;
iv) Supply of ‘stores’ on board of foreign going vessel /
aircraft subject to condition that there is specific SION
in respect of item(s) supplied.
In addition, in respect of supply of goods to specified projects
mentioned in paragraph 8.2 (d), (e), (f), (g) and (j) of FTP, an
Advance Authorisation can also be availed by sub-contractor to
such project provided name of sub contractor(s) appears in
main contract.
Such Authorisation can also be issued for supplies made to
United Nations Organisations or under Aid Programme of the
United Nations or other multilateral agencies and which are paid
for in free foreign exchange.
However, Advance Authorization for import of raw sugar, can
be issued either to a manufacturer exporter or merchant exporter
tied to supporting manufacturer(s). Exports can also be made by
procurement of white sugar from any other factory(ies). This
provision shall be applicable for exports from 17.2.2009.
4.1.4 Advance Authorisations are exempted from payment of basic
customs duty, additional customs duty, education cess, antidumping
duty and safeguard duty, if any. However, imports for
supplies covered under paragraph 8.2 (h) & (i) will not be
exempted from payment of applicable anti-dumping and
safeguard duty, if any.
47
4.1.5 Advance Authorisation and / or materials imported thereunder
will be with actual user condition. It will not be transferable
even after completion of export obligation. However,
Authorisation holder will have option to dispose off product
manufactured out of duty free inputs once export obligation is
completed. In case where CENVAT credit facility on inputs
have been availed for the exported goods, even after completion
of export obligation, the goods imported against Advance
Authorisation shall be utilized only in the manufacture of
dutiable goods whether within the same factory or outside (by a
supporting manufacturer),for which the authorisation holder
shall produce a certificate from either the jurisdictional Central
Excise Supdt. or Chartered Accountant, at the option of the
exporter, at the time of filing application for EODC to RA
concerned. However, the actual user condition shall not be
applicable in case of raw sugar to be imported from 17.2.2009,
till 30.09.2009 under Advance Authorization Scheme.
Further the manufacturing wastes / scrap, as allowed, can be
disposed off with the payment of applicable duty even before
fulfilment of export obligation.
4.1.6 Advance Authorisation necessitates exports with a minimum
value addition of 15%, except for items specified in Appendix
11B of HBP v1 and for items in Gems & Jewellery sector, for
which value addition would be as per paragraph 4A.2.1 of HBP
v.1. Exports to SEZ Units / supplies to Developers / Codevelopers,
irrespective of currency of realization, would also be
covered.
For physical exports for which payments are not received in
freely convertible currency, same shall be subject to value
addition as specified in Appendix-11 of HBP v1.
In case of Authorisation for import of Tea, minimum value
addition under Advance Authorisation shall be 50%.
Similarly, in case of spices {covered by Chapter 9 of ITC(HS)},
duty free import of spices shall be permitted only for value
addition purposes like crushing / grinding / sterilization or for
manufacture of oils and oleoresins and not for simple cleaning,
grading, re-packing etc.
4.1.7 Advance Authorisation shall be issued in accordance with
Policy and procedure in force on Authorisation issue date.
Validity period of Advance Authorisation for import shall be as
prescribed in HBP v1.
48
Free of Cost
Supply by Foreign
Buyer
4.1.8 Facility of Advance Authorisation shall also be available where
some or all inputs are supplied free of cost to exporter by
foreign buyer.
In such cases, for calculation of value addition, notional value of
free of cost inputs along with value of other duty-free inputs
shall be taken into consideration. However, if all inputs are
supplied free of cost, exporter shall also have option to follow
provision prescribed by DoR.
Export Obligation 4.1.9 Period for fulfillment of export obligation under Advance
Authorisation shall be as prescribed in HBP v1.
Provision for
BIFR units
4.1.9 A Any firm / company registered with BIFR or any firm /
company acquiring a unit, which is under BIFR shall be allowed
Export Obligation Period (EOP) extension as per rehabilitation
package prepared subject to approval of BIFR or 5 years if not
specified, without payment of composition fee.
Above provisions apply also to SSI units as per rehabilitation
scheme of concerned State government.
Advance
Authorisation
for Annual
Requirement
4.1.10
Advance authorisation can also be issued for annual
requirement. Imports are exempted from payment of basic
customs duty, additional customs duty, education cess, antidumping
duty and safeguard duty, if any.
Status Certificate holder and all other categories of exporters
having past export performance (in preceding two years) shall
be entitled for Advance Authorisation for Annual Requirement.
Entitlement in terms of CIF value of imports shall be upto 300%
of the FOB value of physical export and / or FOR value of
deemed export in preceding licensing year or Rs 1 crore,
whichever is higher.
Advance Release
Order (ARO) and
Invalidation Letter
4.1.11 Holder of Advance Authorisation, Advance Authorisation for
Annual Requirement and Duty Free Import Authorisation
intending to source inputs from indigenous sources / State
Trading Enterprises in lieu of direct import, has option to source
them either against Advance Release Order (ARO) or
Invalidation letter denominated in free foreign exchange / Indian
rupees. However, supplies may be obtained against
Authorisation from EOU / EHTP / BTP / STP / SEZ units,
without conversion into ARO or Invalidation letter.
49
Transferee of DFIA shall also be eligible for ARO / Invalidation
letter facility.
Validity period of ARO shall be as prescribed in HBP v1.
Back-to-Back
Inland Letter of
Credit
4.1.12 Holder of Advance Authorisation, Advance Authorisation for
Annual Requirement and DFIA may, instead of applying for an
ARO or Invalidation letter, avail of the facility of Back-to-Back
Inland Letter of Credit in accordance with procedure specified
in HBP v1.
Prohibited Items 4.1.13 Prohibited items of imports mentioned in ITC(HS) shall not be
imported under Advance Authorisation / DFIA. Further items
reserved for imports by STEs cannot be imported against
Advance Authorisation / DFIA. However those items can be
procured from STEs against ARO or Invalidation letter.
STEs are also allowed to sell goods on High Sea Sale basis to
holders of Advance Authorisation / DFIA holder.
In addition, STEs are permitted to issue “No Objection
Certificate (NOC)” for import by advance Authorisation / DFIA
holder. Authorisation Holder would be required to file Quarterly
Returns of imports effected against such NOC to concerned
STE and STE would submit half-yearly import figures of such
imports to concerned administrative Department for monitoring
with a copy endorsed to DGFT.
Similarly prohibited items of exports mentioned in ITC(HS)
shall not be exported under Advance Authorisation / DFIA
scheme. Export of restricted items shall be subject to all
conditionalities or requirements of Export Authorisation or
permission, as may be required, under Schedule II of ITC (HS).
Admissibility of
Drawback
4.1.14 In case of an Advance Authorisation, drawback shall be
available 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).
Drawback allowed shall be mentioned in Authorisation.
50
DUTY FREE IMPORT AUTHORISATION (DFIA) SCHEME
Scheme 4.2.1
DFIA is issued to allow duty free import of inputs, fuel, oil,
energy sources, catalyst which are required for production of
export product. DGFT, by means of Public Notice, may exclude
any product(s) from purview of DFIA. This scheme is in force
from 1st May, 2006.
Entitlement 4.2.2 Provisions of paragraph 4.1.3 shall be applicable in case of
DFIA. However, these Authorisations shall be issued only for
products for which Standard Input and Output Norms (SION)
have been notified.
In case of post export DFIA, a merchant exporter shall be
required to mention only name (s) and address(s) of
manufacturer(s) of the export product(s). Applicant is required
to file application to concerned RA before effecting exports
under DFIA.
Pre-export Authorisation shall be issued with actual user
condition and shall be exempted from payment of basic customs
duty, additional customs duty / Excise duty, education cess, antidumping
duty and safeguard duty, if any.
In case of actual user DFIA and where CENVAT credit facility
on inputs have been availed for the exported goods, even after
completion of export obligation, the goods imported against
such DFIA shall be utilized in the manufacture of dutiable goods
whether within the same factory or outside (by a supporting
manufacturer)
Import items 4.2.3 Provisions of paragraphs 4.1.11, 4.1.12, 4.1.13 and 4.1.14 of
FTP shall be applicable for DFIA holder.
Value Addition 4.2.4 A minimum 20% value addition shall be required for issuance of
such authorisation except for items in gems and jewellery sector
for which value addition would be as per paragraph 4A.2.1 of
HBP v1. Items for which higher value addition is prescribed
under Advance Authorisation Scheme shall be applicable.
Export Obligation 4.2.5 Procedure and time period related to fulfillment of Export
Obligation have been laid down in Chapter 4 of HBP v1.
Transferability 4.2.6 Once export obligation has been fulfilled, request for
transferability of Authorisation or inputs imported against it
may be made before concerned RA. Once, transferability is
51
endorsed, Authorisation holder may transfer DFIA or duty free
inputs, except fuel and any other item(s) notified by DGFT.
However, for fuel, import entitlement may be transferred only to
companies which have been granted authorisation to market fuel
by Ministry of Petroleum and Natural Gas.
Once transferability is endorsed, imports / domestic
procurement against authorisation or transfer of imported inputs
/ domestically procured inputs shall be subject to payment of
applicable additional customs duty / excise duty. While
endorsing transferability, authorisation would bear a note as to
liability of such additional customs duty / excise duty.
However, in case where CENVAT facility has not been availed,
exemption from additional customs duty / excise duty would be
available even after endorsement of transferability on DFIA.
Wherever SIONs prescribe actual user condition and in case of
Acetic Anhydride, Ephedrine and Pseudo Ephedrine, DFIA shall
be issued with actual user condition for these inputs and no
transferability shall be allowed for these inputs even after
fulfillment of export obligation.
However, for authorizations issued prior to 1.4.2007, exemption
from Additional Customs Duty/ Excise Duty shall continue to
be available even after endorsement of transferability as
provided in FTP (RE-2006).
CENVAT Facility
4.2.7 CENVAT credit facility shall be available for inputs either
imported or procured indigenously.
DUTY ENTITLEMENT PASSBOOK (DEPB) SCHEME
Duty Entitlement
Passbook Scheme
(DEPB)
4.3 Objective of DEPB is to neutralise incidence of customs duty on
import content of export product. Component of customs duty
on fuel (appearing as consumable in the SION) shall also be
factored in the DEPB rate. Component of Special Additional
Duty shall also be allowed under DEPB(as brand rate) in case of
non-availment of CENVAT credit. Neutralisation shall be
provided by way of grant of duty credit against export product.
4.3.1 An exporter may apply for credit, at specified percentage of
FOB value of exports, made in freely convertible currency. In
case of supply by a DTA unit to a SEZ unit / SEZ
Developer/Co-Developer, an exporter may apply for credit for
exports made in freely convertible currency or payment made
52
from foreign currency account of SEZ Unit/SEZ Developer/Co-
Developer. In addition, the exporter shall also be entitled 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.
Credit shall be available against such export products and at
such rates as may be specified by DGFT by way of public
notice. Credit may be utilized for payment of Customs Duty on
freely importable items and/or restricted items. DEPB Scrips
can also be utilized for payment of duty against imports under
EPCG Scheme. Further, DEPB Scrips can also be used / debited
towards payment of customs Duty in case of E.O. defaults for
authorizations issued under chapters 4 And 5 of this policy.
However, penalty / interest shall be required to be paid in cash.
Prohibited items of exports mentioned in ITC(HS) Book (as
amended from time to time) shall not be entitled for DEPB
credit except for the exports effected under transitional facility,
wherever allowed, in terms of paragraph 1.5 of FTP.
4.3.2 DEPB holder shall have option to pay additional customs duty
in cash as well.
Validity 4.3.3 Validity period of DEPB for import shall be as prescribed in
HBP v1.
Transferability 4.3.4 DEPB and / or items imported against it are freely transferable.
Transfer of DEPB shall however be for import at specified port,
which shall be the port from where exports have been made.
Imports from a port other than the port of export shall be
allowed under TRA facility as per terms and conditions of DOR
notification.
Applicability of
Drawback
4.3.5 Additional customs duty / Excise Duty and Special Additional
Duty paid in cash or through debit under DEPB may also be
adjusted as CENVAT Credit or Duty Drawback as per DoR
rules.
53
GEMS AND JEWELLERY
Scheme for Gems
and Jewellery
4A Exporters of Gems and Jewellery can import / procure duty free
inputs for manufacturing.
Replenishment
Authorisation
4A.1 Exporters may obtain Replenishment (REP) Authorisations from
RA in accordance with procedure specified in HBP v1.
4A.1.1 Replenishment authorisation may also be issued for consumables
as per paragraph 4A.28 of HBP v1.
Import of
Diamonds for
Certification /
Grading & reexport
4A.2 The authorized offices/agencies in India of Gemological Institute
of America (GIA) or any other agency approved in this regard
shall be permitted to import diamonds to their laboratories for
the purpose of certification/grading reports by them with a
condition that the same should be re-exported with the
certification/grading reports issued by them without any import
duty as per the procedure laid down in HBP v.1
Schemes for Gold/
Silver/ Platinum
Jewellery
4A.3 Exporters of gold / silver / platinum jewellery and articles
thereof may import their essential inputs such as gold, silver,
platinum, mountings, findings, rough gems, precious and semiprecious
stones, synthetic stones and unprocessed pearls etc. in
accordance with the procedure specified in this behalf.
Nominated
Agencies
4A.4 Nominated agencies are MMTC Ltd, Handicraft and Handloom
Export Corporation (HHEC), State Trading Corporation (STC),
the Project and Equipment Corporation of India Ltd (PEC),
STCL Ltd, MSTC Ltd, Diamond India Limited (DIL), Gems &
Jewellery Export Promotion Council (G&J EPC)), Star Trading
House (only for Gems & Jewellery sector) and Premier Trading
House under Paragraph 3.10.2 of FTP and any other agency
authorised by RBI. Exporters (except EOUs and units in SEZ)
may obtain gold / silver / platinum from nominated agency(s).
Procedure for import of precious metal by these agencies (other
than those authorized by RBI and the Gems & Jewellery units
operating under EOU and SEZ schemes) and the monitoring
mechanism thereof shall be as per the provisions laid down in
HBP v1 in this regard.
A bank authorised by RBI is allowed export of gold scrap for
refining and import standard gold bars as per RBI guidelines.
54
Items of Export
4A.5
Following items, if exported, would be eligible for facilities:
(a) Gold jewellery, including partly processed jewellery and
articles including medallions and coins (excluding legal
tender coins), whether plain or studded, containing gold
of 8 carats and above;
(b) Silver jewellery including partly processed jewellery,
silverware, silver strips and articles including medallions
and coins (excluding legal tender coins and any
engineering goods) containing more than 50% silver by
weight;
(c) Platinum jewellery including partly processed jewellery
and articles including medallions and coins (excluding
legal tender coins and any engineering goods)
containing more than 50% platinum by weight.
Value Addition 4A.6 Value Addition (VA) for gems and jewellery sector shall be as
per paragraph 4A.2.1 of HBP v1. It would be calculated as
under:
A–B
VA = ----------- x 100, where
B
A = FOB value of the export realised / FOR value of supply
received.
B = Value of inputs ( including domestically procured ) such as
gold / silver / platinum content in export product plus
admissible wastage along with value of other items such as
gemstone etc. Wherever gold has been obtained on loan
basis, value shall also include interest paid in free foreign
exchange to foreign supplier.
Wastage Norms 4A.7 Wastage or manufacturing loss for gold / silver / platinum
jewellery shall be admissible as per paragraph 4A.2 of HBP v1.
Export against
Supply
by Foreign Buyer
4A.8 Where export orders are placed on nominated agencies / status
holder / exporters of three years standing having an annual
average turnover of Rs. Five Crores during preceding three
licensing years, foreign buyer may supply in advance and free of
charge, gold / silver / platinum, alloys, findings and mountings
of gold / silver / platinum for manufacture and export.
Such supplies can also be in advance and may involve semifinished
jewellery including findings / mountings / components
55
for repairs / re-make and export subject to minimum value
addition of 10%. However, if so imported semi finished gold /
silver /platinum jewellery is exported as studded jewellery, value
addition of 15% shall be achieved. In such cases of export,
wastage of 2% may be permitted.
Exports may be made by nominated agencies directly or through
their associates or by status holder / exporter. Import and Export
of findings shall be on net to net basis.
Export Against
Supply by
Nominated
Agencies
4A.9
Exporter may obtain gold / silver / platinum as an input for
export products from nominated agencies in advance or as
replenishment after exports in accordance with specified
procedure.
Export Against
Advance
Authorisation
4A.10 An Advance Authorisation may be granted for duty free import
of :
(a) Gold of fineness not less than 0.995 and mountings,
sockets, frames and findings of 8 carats and above;
(b) Silver of fineness not less than 0.995 and mountings,
sockets, frames and findings containing more than 50%
silver by weight;
(c) Platinum of fineness not less than 0.900 and mountings,
sockets, frames and findings containing more than 50%
platinum by weight.
4A.11 Such authorisations shall carry an export obligation to be
fulfilled as per procedure specified in paragraph 4A of HBP v1.
Value addition shall be as per paragraph 4A.2.1 of HBP v.1.
Advance Authorisation holder may obtain gold / silver /
platinum from nominated agencies in lieu of direct import.
Gem
Replenishment
Authorisation
4A.12 Gem Replenishment (Gem & Jewellery REP) Authorisation may
be issued as given in paragraph 4A.8, 4A.9 and 4A.10 above.
In case of plain or studded gold / silver / platinum jewellery and
articles, value of such Authorisations shall be determined with
reference to realisation in excess of prescribed minimum VA.
Such Gem REP Authorisations shall be freely transferable.
Gem REP Rate
and Item
4A.13 Replenishment Rate and item of import will be as prescribed in
Appendix 12B of HBP v1.
Export Promotion
Tours/ Export of
4A.14 Nominated agencies and their associates, with approval of
Department of Commerce, and others, with approval of Gem &
56
Branded Jewellery Jewellery EPC (GJEPC), may export gold / silver / platinum
jewellery and articles thereof for exhibitions abroad.
Personal carriage of gold / silver / platinum jewellery, precious,
semi-precious stones, beads and articles and export of branded
jewellery is also permitted, subject to conditions as in HBP v1.
Personal Carriage
of Export / Import
Parcels
4A.15 Personal carriage of gems and jewellery export parcels by
foreign bound passengers and import parcels by an Indian
importer/foreign national may be permitted as in HBP v1.
Export by Post 4A.16 In case of exports through Foreign Post Office (including via
Speed Post), value of jewellery parcels shall not exceed US$
75000 and 20 kg. by weight.
Firms and companies dealing in purchase/ sale of rough or cut
and polished diamonds/precious metal jewellery plain, minakari
and / or studded with / without diamond and/or other stones,
with a track record of at least two years in import or export of
diamonds / coloured gemstones/ diamond and coloured
gemstones studded jewellery / plain gold jewellery, and having
an average annual turnover of Rs. 3 crores or above during
preceding three licensing years, may also carry out their business
through designated Diamond Dollar Accounts (DDA).
Dollars in such accounts available from bank finance and / or
export proceeds shall be used only for:
(i) Import / purchase of rough diamonds from overseas /
local sources;
(ii) Purchase of cut and polished diamonds, coloured
gemstones and plain gold jewellery from local sources;
(iii) Import / purchase of gold from overseas / nominated
agencies and repayment of dollar loans from the bank;
and
(iv) Transfer to Rupee Account of exporter. Details of this
DDA Scheme are given in HBP v1.
Diamond &
Jewellery Dollar
Accounts
4A.17
A non DDA holder is also permitted to supply cut and polished
diamonds to DDA holder, receive payment in dollars and
convert same into Rupees within 7 days. Cut and polished
diamonds and coloured gemstones so supplied by non-DDA
holder will also be counted towards discharge of his export
obligation and / or entitle him to replenishment Authorisation.
57
Export of cut &
Polished precious
and semi-precious
stones for treatment
and re-import
4A.18
Gems and Jewellery exporters shall be allowed to export cut and
polished precious and semi-precious stones for the treatment and
re-import as per customs rules and regulations. In case of reexport,
the exporter shall be entitled for duty drawback as per
rules.
Re-import of
rejected jewellery
4A.19 Gems & Jewellery exporters shall be allowed to re-import
rejected precious metal jewellery as per para 4A.32 of HBP v1.
Export on
consignment basis
4A.20 Gems & Jewellery exporters shall be allowed to export diamond,
gemstones & jewellery on consignment basis as per HBP v1 and
Customs rules and regulations.
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59
CHAPTER 5
EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME
Zero duty
EPCG
Scheme
5.1 Zero duty EPCG scheme allows import of capital goods for preproduction,
production and post production (including CKD/SKD
thereof as well as computer software systems) at zero Customs duty,
subject to an export obligation equivalent to 6 times of duty saved on
capital goods imported under EPCG scheme, to be fulfilled in 6 years
reckoned from Authorization issue-date.
The scheme will be available for exporters of engineering & electronic
products, basic chemicals & pharmaceuticals, apparels & textiles,
plastics, handicrafts, chemicals & allied products, leather & leather
products, paper & paperboard and articles thereof, ceramic products,
refractories, glass & glassware, rubber & articles thereof, plywood and
allied products, marine products, sports goods and toys subject to
exclusions as provided in HBP Vol. I.
Validity period for import of capital goods and provision for extension
in export obligation period will be as separately provided in the HBP
Vol. I. All other provisions pertaining to concessional 3% duty EPCG
scheme under this Chapter, to the extent they are not inconsistent with
the above provisions of zero duty EPCG scheme, shall be applicable to
the zero duty EPCG scheme also. The zero duty EPCG scheme will be
in operation till 31.3.2012.
Concessional
3% Duty
EPCG
Scheme
5.2 Concessional 3% duty EPCG scheme allows import of capital goods for
pre-production, production and post production (including CKD/SKD
thereof as well as computer software systems) at 3% Customs duty,
subject to an export obligation equivalent to 8 times of duty saved on
capital goods imported under EPCG scheme, to be fulfilled in 8 years
reckoned from Authorization issue-date.
In case of agro units, and units in cottage or tiny sector, import of
capital goods at 3% Customs duty shall be allowed subject to
fulfillment of export obligation equivalent to 6 times of duty saved on
capital goods imported, in 12 years from Authorization issue-date.
For SSI units, import of capital goods at 3% Customs duty shall be
allowed, subject to fulfillment of export obligation equivalent to 6 times
of duty saved on capital goods, in 8 years from Authorization issuedate,
provided the landed cif value of such imported capital goods under
the scheme does not exceed Rs. 50 lakhs and total investment in plant
and machinery after such imports does not exceed SSI limit.
However, in respect of EPCG Authorization with a duty saved amount
of Rs. 100 crores or more, export obligation shall be fulfilled in 12
years.
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In case CVD is paid in cash on imports under EPCG, incidence of CVD
would not be taken for computation of net duty saved, provided the
same is not CENVATed.
Capital goods shall include spares (including refurbished/reconditioned
spares), tools, jigs, fixtures, dies and moulds.
Second hand capital goods, without any restriction on age, may also be
imported under EPCG scheme.
However, import of motor cars, sports utility vehicles/all purpose
vehicles shall be allowed only to hotels, travel agents, tour operators or
tour transport operators and companies owning/operating golf resorts,
subject to the condition that:
(i) total foreign exchange earning from hotel, travel & tourism
and golf tourism sectors in current and preceding three
licensing years is Rs. 1.5 crores or more.
(ii) ‘duty saved’ amount on all EPCG Authorizations issued in a
licensing year for import of motor cars, sports utility
vehicles/ all purpose vehicles shall not exceed 50% of
average foreign exchange earnings from hotel, travel &
tourism and golf tourism sectors in preceding three
licensing years.
(iii) vehicles imported shall be so registered that the vehicle is
used for tourist purpose only. A copy of the Registration
certificate should be submitted to concerned RA as a
confirmation of import of vehicle. However, parts of motor
cars, sports utility vehicles/all purpose vehicles such as
chassis etc. cannot be imported under the EPCG Scheme.
Import of Restricted items of imports mentioned under ITC(HS) shall
only be allowed under EPCG Scheme after approval from EFC at
Headquarters.
5.2A Spares (including refurbished/reconditioned spares), moulds, dies, jigs,
fixtures, tools, refractory for initial lining and catalyst for initial charge;
for existing plant and machinery (imported earlier, under EPCG or
otherwise), shall be allowed to be imported under the EPCG scheme
subject to an export obligation equivalent to 50% of the normal export
obligation prescribed in para 5.1 and 5.2 above (for import of capital
goods), to be fulfilled in 8 years (6 years for zero duty EPCG scheme),
reckoned from Authorization issue date. This would however be subject
to the condition that the c.i.f. value of import of the above spares etc.
will be limited to 10% of the value of plant and machinery imported
under the EPCG scheme. In case of plant and machinery not imported
61
under the EPCG scheme, c.i.f. value of import of the spares etc. will be
limited to 10% of the book value of the plant and machinery.
EPCG for
Projects
5.2B An EPCG Authorization can also be issued for import of capital goods
under Scheme for Project Imports notified by the Central Board of
Excise and Customs under S. No. 441 of Customs Exemption
Notification No. 21/2002 dated 01.03.2002.
Export obligation for such EPCG Authorizations would be eight times
(6 times for zero duty EPCG scheme) of duty saved. Duty saved would
be difference between the effective duty under aforesaid Customs
Notification and concessional duty under the EPCG Scheme.
EPCG for
Retail Sector
5.2C To create modern infrastructure in retail sector, concessional duty
benefits under EPCG scheme shall be extended for import of capital
goods required by retailers having minimum area of 1000 sq. meters.
Such retailer shall fulfill export obligation i.e. 8 times of duty saved, in
8 years.
EPCG
Authorization
for Annual
Requirement
5.2D EPCG Authorization can also be issued for annual requirement to Status
Certificate Holders and all other categories of exporters having past
export performance (in preceding two years), both under zero duty and
3% duty Schemes. The annual entitlement in terms of duty saved
amount shall be upto 50% of FOB value of Physical Export and / or
FOR value of Deemed Export, in preceding licensing year.
Eligibility 5.3 EPCG scheme covers manufacturer exporters with or without
supporting manufacturer(s)/ vendor(s), merchant exporters tied to
supporting manufacturer(s) and service providers.
Export Promotion Capital Goods (EPCG) Scheme also covers a service
provider who is designated / certified as a Common Service Provider
(CSP) by the DGFT, Department of Commerce or State Industrial
Infrastructural Corporation in a Town of Export Excellence subject to
provisions of Foreign Trade Policy/Handbook of Procedures with the
following conditions:-
(i) EPCG licence to be given to the CSP should have a clear
endorsement giving the details of the users and the quantum of
Export Obligation (EO) which each user would fulfill;
(ii) Such exports will not count towards fulfillment of other specific
export obligations ; and
(iii) Each one of the users of the CSP apart from the CSP should
furnish 100% Bank Guarantee (BG) equivalent to their portion
of duty foregone apportioned in terms of quantum of EO to be
discharged by them and the B.G. will be enforced in the event
of the obligation not being fulfilled.
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Conditions
for import of
Capital Goods
5.4 Import of capital goods shall be subject to Actual User condition till
export obligation is completed.
Export
obligation
5.5
Following conditions shall apply to the fulfillment of the export
obligation:-
(i) Export Obligation shall be fulfilled by export of goods
manufactured/services rendered by the applicant.
Export obligation under the scheme shall be, over and above,
the average level of exports achieved by him in the preceding
three licensing years for the same and similar products within
the overall export obligation period including extended period,
if any; except for categories mentioned in paragraph 5.7.6 of
HBP Vol. I. Such average would be the arithmetic mean of
export performance in the last three years for the same and
similar products provided that Premier Trading House (PTH)
shall have option of fixing average level of exports based on
arithmetic mean of export performance in the last five years
instead of three years.
Upto 50% Export Obligation may also be fulfilled by exports of
other good(s) manufactured or service(s) provided by the same
firm / company, or group company / managed hotel, which has
the EPCG authorization. However, EPCG authorizations issued
prior to 1.4.2008 will be governed by earlier policy provisions.
However, in such cases, additional export obligation imposed
shall be over and above average exports achieved by the unit /
company / group company / managed hotel in preceding three
years for both the original and the substitute product(s) /
service(s), despite exemptions in Para 5.7.6 of HBP Vol. I.
(ii) Shipments under Advance Authorization, DFRC, DFIA, DEPB
or Drawback scheme, or incentive schemes under Chapter 3 of
FTP; would also count for fulfillment of EPCG export
obligation.
(iii) Export obligation can also be fulfilled by the supply of ITA-I
items to DTA, provided realization is in free foreign exchange.
(iv) Exports shall be physical exports. However, deemed exports as
specified in paragraph 8.2 (a), (b), (d), (f), (g) & (j) of FTP shall
also be counted towards fulfillment of export obligation,
alongwith usual benefits available under paragraph 8.3 of FTP.
63
Royalty payments received in freely convertible currency and foreign
exchange received for R&D services shall also be counted for
discharge under EPCG. Payment received in rupee terms for port
handling services, in terms of Chapter 9 of FTP shall also be counted
for export obligation discharge.
Provision for
BIFR units
5.5.1 Any firm/ company registered with BIFR or any firm/ company
acquiring a unit, which is under BIFR, may be allowed EO extension, as
per rehabilitation package prepared by operating agency and approved
by BIFR/Rehabilitation Department of State Government, upto 12 years
if not specified.
Above provisions apply also to SSI units as per rehabilitation scheme of
concerned State government.
EPCG for
agro units
5.5.2 LUT/Bond or 15% BG ( as applicable) may be given for EPCG
Authorization granted to units in Agri Export Zones provided EPCG
Authorization is taken for export of primary agricultural product(s)
notified in Appendix 8 or their value added variants.
Indigenous
Sourcing of
Capital Goods
and benefits
to Domestic
Supplier
5.6 A person holding an EPCG Authorization may source capital goods
from a domestic manufacturer. Such domestic manufacturer shall be
eligible for deemed export benefit under paragraph 8.3 of FTP. Such
domestic sourcing shall also be permitted from EOUs and these
supplies shall be counted for purpose of fulfillment of positive NFE by
said EOU as provided in Para 6.9 (a) of FTP.
Fixation of
Export
Obligation
5.7 In case of direct imports, export obligation shall be reckoned with
reference to actual duty saved amount. In case of domestic sourcing,
export obligation shall be reckoned with reference to notional Customs
duties saved on FOR value.
Technological
Upgradation
of existing
EPCG
machinery
5.8 EPCG Authorization holders can opt for Technological Upgradation of
existing capital good imported under EPCG Authorization.
Conditions governing Technological Up-gradation of existing capital
goods are as under:
(i) Minimum time period for applying for Technological Upgradation
of existing capital goods imported under EPCG is 5
years from Authorization issue-date.
(ii) Minimum exports made under old capital goods must be 40%
of total export obligation imposed on first EPCG
Authorization.
(iii) Export obligation would be re-fixed such that total export
obligation mandated for both capital goods would be sum
total of 6 times of duty saved on both the capital goods, to be
fulfilled in 8 years from new authorization issue-date.
64
(iv) Facility for technological up-gradation shall be available only
once and the minimum imports to be made shall be at least
10% of the existing investment in plant and machinery by
applicant.
(v) Capital Goods to be imported must be new and
technologically superior to earlier CG.
Incentives for
Fast Track
Companies
5.9 To incentivize fast track companies with a view to accelerate exports,
in cases where Authorization holder has fulfilled 75% or more of
specific export obligation and 100% of Average Export Obligation till
date, if any, in half or less than half the original export obligation
period specified, remaining export obligation shall be condoned and
the Authorization redeemed by RA concerned. However no benefits
under Para 5.12 of HBP Vol. I shall be available in such cases.
65
CHAPTER 6
EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE
TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS
(STPs) AND BIO-TECHNOLOGY PARKS (BTPs).
Eligibility 6.1 Units undertaking to export their entire production of goods
and services (except permissible sales in DTA), may be set up
under the Export Oriented Unit (EOU) Scheme, Electronics
Hardware Technology Park (EHTP) Scheme, Software
Technology Park (STP) Scheme or Bio-Technology Park
(BTP) Scheme for manufacture of goods, including repair, remaking,
reconditioning, re-engineering and rendering of
services. Trading units are not covered under these schemes.
Export and Import of
Goods
6.2 (a) An EOU / EHTP / STP / BTP unit may export all kinds
of goods and services except items that are prohibited in
ITC (HS). Export of Special Chemicals, Organisms,
Materials, Equipment and Technologies (SCOMET)
shall be subject to fulfillment of the conditions indicated
in ITC(HS).
Procurement and supply of export promotion material
like brochure / literature, pamphlets, hoardings,
catalogues, posters etc. upto a maximum value limit of
1.5% of FOB value of previous years exports shall also
be allowed.
(b) An EOU / EHTP / STP / BTP unit may import and /or
procure, from DTA or bonded warehouses in DTA /
international exhibition held in India, without payment
of duty, all types of goods, including capital goods,
required for its activities, provided they are not
prohibited items of import in the ITC (HS). Any
permission required for import under any other law
shall be applicable. Units shall also be permitted to
import goods including capital goods required for
approved activity, free of cost or on loan / lease from
clients. Import of capital goods will be on a self
certification basis. Goods imported by a unit shall be
with actual user condition and shall be utilized for
export production.
(c) State Trading regime shall not apply to EOU
manufacturing units. However, in respect of Chrome
Ore / Chrome concentrate, State Trading Regime as
stipulated in export policy of these items, will be
applicable to EOUs.
66
(d) EOU / EHTP / STP / BTP units may import / procure
from DTA, without payment of duty, certain specified
goods for creating a central facility. Software EOU /
DTA units may use such facility for export of software.
(e) An EOU engaged in agriculture, animal husbandry,
aquaculture, floriculture, horticulture, pisciculture,
viticulture, poultry or sericulture may be permitted to
remove specified goods in connection with its activities
for use outside bonded area.
(f) Gems and jewellery EOUs may source gold / silver /
platinum through nominated agencies on loan / outright
purchase basis. Units obtaining gold / silver / platinum
from nominated agencies, either on loan basis or
outright purchase basis shall export gold / silver /
platinum within 90 days from date of release.
(g) EOU / EHTP / STP / BTP units, other than service
units, may export to Russian Federation in Indian
Rupees against repayment of State Credit / Escrow
Rupee Account of buyer subject to RBI clearance, if
any.
(h) Procurement and export of spares / components, upto
5% of FOB value of exports, may be allowed to same
consignee / buyer of the export article, subject to the
condition that it shall not count for NFE and direct tax
benefits.
(i) BoA may allow, on a case to case basis, requests of
EOU / EHTP / STP / BTP units in sectors other than
Gems & Jewellery, for consolidation of goods related
to manufactured articles and export thereof along with
manufactured article. Such goods may be allowed to
be imported / procured from DTA by EOU without
payment of duty, to the extent of 5% FOB value of
such manufactured articles exported by the unit in
preceding financial year. Details of procured /
imported goods and articles manufactured by the EOU
will be listed separately in the export documents. In
such cases, value of procured / imported goods will not
be taken into account for calculation of NFE, DTA sale
entitlement & profits accruing out of such procured /
imported goods will not be eligible for income tax
benefits. Such procured / imported goods shall not be
allowed to be sold in DTA. BoA may also specify any
other conditions.
67
Second Hand Capital
Goods
6.3 Second hand capital goods, without any age limit, may also
be imported duty free.
Leasing of Capital
Goods
6.4 a) An EOU / EHTP / STP / BTP unit may, on the basis of
a firm contract between parties, source capital goods
from a domestic / foreign leasing company without
payment of customs / excise duty. In such a case, EOU
/ EHTP / STP / BTP unit and domestic / foreign leasing
company shall jointly file documents to enable import /
procurement of capital goods without payment of duty.
b) An EOU / EHTP / BTP / STP unit may sell capital
goods and lease back the same from a Non Banking
Financial Company (NBFC), subject to the following
conditions:
i) The unit should obtain permission from the
jurisdictional Deputy / Assistant Commissioner of
Customs or Central Excise, for entering into
transaction of ‘Sale and Lease Back of Assets’,
and submit full details of the goods to be sold and
leased back and the details of NBFC;
ii) The goods sold and leased back shall not be
removed from the unit’s premises;
iii) The unit should be NFE positive at the time when
it enters into sale and lease back transaction with
NBFC;
iv) A joint undertaking by the unit and NBFC should
be given to pay duty on goods in case of violation
or contravention of any provision of the
notification under which these goods were
imported or procured, read with Customs Act,
1962 or Central Excise Act, 1944, and that the
lien on the goods shall remain with the Customs /
Central Excise Department, which will have first
charge over the said goods for recovery of sum
due from the unit to Government under provision
of Section 142(b) of the Customs Act, 1962 read
with the Customs (Attachment of Property of
Defaulters for Recovery of Govt. Dues) Rules,
1995.
Net Foreign Exchange
Earnings
6.5 EOU / EHTP / STP / BTP unit shall be a positive net foreign
exchange earner except for sector specific provision of
Appendix 14-I-C of HBP v 1, where a higher value addition
shall be required. NFE Earnings shall be calculated
68
cumulatively in blocks of five years, starting from
commencement of production. Whenever a unit is unable to
export due to prohibition / restriction imposed on export of
any product mentioned in LoP, the five year block period for
calculation of NFE earnings may be suitably extended by
BoA. BoA may also consider extension of block period by
another one year, for calculation of NFE, on case to case
basis, for those units which complete 5 years block period in
between 30.09.2008 and 30.09.2009, keeping in view the
decline in exports in that particular unit, due to economic
slow down only.
Letter of Permission /
Letter of Intent and
Legal Undertaking
6.6 (a) On approval, a Letter of Permission (LoP) / Letter of
Intent (LoI) shall be issued by DC / designated officer to
EOU / EHTP / STP / BTP unit. LoP / LoI shall have an
initial validity of 3 years, by which time unit should
have commenced production. Its validity may be
extended further up to 3 years by competent authority.
However, proposals for extension beyond six years shall
be considered in exceptional circumstances, on a caseto-
case basis by BoA. Once unit commences production,
LoP / LoI issued shall be valid for a period of 5 years for
its activities. This period may be extended further by DC
for a period of 5 years at a time.
(b) LoP / LoI issued to EOU / EHTP / STP / BTP units by
concerned authority, subject to compliance of provision
in para 6.2 above, would be construed as an
Authorisation for all purposes.
(c) Unit shall execute an LUT with DC concerned. Failure
to ensure positive NFE or to abide by any of the terms
and conditions of LoP / LoI / IL / LUT shall render the
unit liable to penal action under provisions of the FT
(D&R) Act and Rules and Orders made thereunder,
without prejudice to action under any other law / rules
and cancellation or revocation of LoP / LoI / IL.
Investment Criteria (d) Only projects having a minimum investment of Rs. 1
Crore in plant & machinery shall be considered for
establishment as EOUs. However, this shall not apply to
existing units and units in EHTP / STP / BTP,
Handicrafts / Agriculture / Floriculture / Aquaculture /
Animal Husbandry / Information Technology, Services,
Brass Hardware and Handmade jewellery sectors. BoA
may also allow establishment of EOUs with a lower
investment criteria.
69
Application &
Approvals
6.7 (a) Applications for setting up of units under EOU scheme,
other than proposals for setting up of units in services
sector (except R&D, software and IT enabled services,
or any other service activity as may be delegated by
BoA), shall be approved or rejected by the Units
Approval Committee within 15 days as per criteria
indicated in HBP v1.
(b) In other cases, approval may be granted by BoA set up
for this purpose as indicated in HBP v 1.
(c) Proposals for setting up EOU requiring industrial licence
may be granted approval by DC after clearance of
proposal by BoA and DIPP within 45 days.
(d) Applications for conversion into an EOU / EHTP / STP /
BTP unit from existing DTA units, having an investment
of Rs. 50 crores and above in plant and machinery or
exporting Rs. 50 crores and above annually, shall be
placed before BoA for a decision.
DTA Sale of Finished
Products / Rejects /
Waste / Scrap /
Remnants and Byproducts
6.8
(a)
Entire production of EOU / EHTP / STP / BTP units
shall be exported subject to following:
Units, other than gems and jewellery units, may sell
goods upto 50% of FOB value of exports, subject to
fulfilment of positive NFE, on payment of concessional
duties. Within entitlement of DTA sale, unit may sell in
DTA, its products similar to goods which are exported or
expected to be exported from units. However, units
which are manufacturing and exporting more than one
product can sell any of these products into DTA, upto
90% of FOB value of export of the specific products,
subject to the condition that total DTA sale does not
exceed the overall entitlement of 50% of FOB value of
exports for the unit, as stipulated above. No DTA sale at
concessional duty shall be permissible in respect of
motor cars, alcoholic liquors, books, tea (except instant
tea), pepper & pepper products, marble and such other
items as may be notified from time to time. Such DTA
sale shall also not be permissible to units engaged in
activities of packaging / labeling / segregation /
refrigeration / compacting / micronisation / pulverization
/ granulation / conversion of monohydrate form of
chemical to anhydrous form or vice-versa. Sales made to
a unit in SEZ shall also be taken into account for purpose
of arriving at FOB value of export by EOU provided
payment for such sales are made from Foreign Exchange
Account of SEZ unit. Sale to DTA would also be subject
70
to mandatory requirement of registration of
pharmaceutical products (including bulk drugs). An
amount equal to Anti Dumping duty under section 9A of
the Customs Tariff Act, 1975 leviable at the time of
import, shall be payable on the goods used for the
purpose of manufacture or processing of the goods
cleared into DTA from the unit.
(b) For services, including software units, sale in DTA in
any mode, including on line data communication, shall
also be permissible up to 50% of FOB value of exports
and /or 50% of foreign exchange earned, where payment
of such services is received in foreign exchange.
(c) Gems and jewellery units may sell upto 10% of FOB
value of exports of the preceding year in DTA, subject to
fulfillment of positive NFE. In respect of sale of plain
jewellery, recipient shall pay concessional rate of duty as
applicable to sale from nominated agencies. In respect of
studded jewellery, duty shall be payable as applicable.
(d) Unless specifically prohibited in LoP, rejects within an
overall limit of 50% may be sold in DTA on payment of
duties as applicable to sale under sub-para 6.8(a) on prior
intimation to Customs authorities. Such sales shall be
counted against DTA sale entitlement. Sale of rejects
upto 5% of FOB value of exports shall not be subject to
achievement of NFE.
(e) Scrap / waste / remnants arising out of production
process or in connection therewith may be sold in DTA,
as per SION notified under Duty Exemption Scheme, on
payment of concessional duties as applicable, within
overall ceiling of 50% of FOB value of exports. Such
sales of scrap / waste / remnants shall not be subject to
achievement of positive NFE. In respect of items not
covered by norms, DC may fix ad-hoc norms for a period
of six months and within this period, norms should be
fixed by Norms Committee. Ad-hoc norms will continue
till such time norms are fixed by Norms Committee.
Sale of waste / scrap / remnants by units not entitled to
DTA sale, or sales beyond DTA sale entitlement, shall be
on payment of full duties. Scrap / waste / remnants may
also be exported.
(f) There shall be no duties / taxes on scrap / waste /
remnants, in case same are destroyed with permission of
Customs authorities.
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(g) By-products included in LoP may also be sold in DTA
subject to achievement of positive NFE, on payment of
applicable duties, within the overall entitlement of subpara
6.8(a). Sale of by-products by units not entitled to
DTA sales, or beyond entitlements of sub-para 6.8 (a),
shall also be permissible on payment of full duties.
(h) EOU / EHTP / STP / BTP units may sell finished
products, except pepper and pepper products and marble,
which are freely importable under FTP in DTA, under
intimation to DC, against payment of full duties,
provided they have achieved positive NFE. An amount
equal to Anti Dumping duty under section 9A of the
Customs Tariff Act, 1975 leviable at the time of import,
shall be payable on the goods used for the purpose of
manufacture or processing of the goods cleared into DTA
from the unit.
(i) In case of units manufacturing electronics hardware and
software, NFE and DTA sale entitlement shall be
reckoned separately for hardware and software.
(j) In case of DTA sale of goods manufactured by EOU /
EHTP / STP / BTP, where basic duty and CVD is nil,
such goods may be considered as non-excisable for
payment of duty.
(k) In case of new EOUs, advance DTA sale will be allowed
not exceeding 50% of its estimated exports for first year,
except pharmaceutical units where this will be based on
its estimated exports for first two years.
(l) Units in Textile and Granite sectors shall have an option
to sell goods into DTA in terms of sub- paras 6.8 (a), (d),
(e), (g) and (k) above, on payment of an amount equal to
aggregate of duties of excise leviable under section 3 of
the Central Excise Act, 1944 or under any other law for
the time being in force, on like goods produced or
manufactured in India other than in an EOU, subject to
the condition that they have not used duty paid imported
inputs in excess of 3% of the FOB value of exports of the
preceding year and they have achieved positive NFE.
Once this option is exercised, the unit will not be allowed
to import any duty free inputs for any purpose.
Other Supplies in DTA 6.9 Following supplies effected from EOU / EHTP / STP / BTP
units to DTA will be counted for fulfillment of positive NFE:
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(a) Supplies effected in DTA to holders of Advance
Authorisation / Advance Authorisation for annual
requirement / DFIA under duty exemption / remission
scheme / EPCG scheme. However, printing sector EOUs
(or any other sector that may be notified in HBP v 1), can
not supply goods, where basic customs duty and CVD is
nil or exempted otherwise, to holders of Advance
Authorisation / Advance Authorization for annual
requirement.
(b) Supplies effected in DTA against foreign exchange
remittance received from overseas.
(c) Supplies to other EOU / EHTP / STP / BTP / SEZ units,
provided that such goods are permissible for procurement
in terms of para 6.2 of FTP.
(d) Supplies made to bonded warehouses set up under FTP
and / or under section 65 of Customs Act and free trade
and warehousing zones, where payment is received in
foreign exchange.
(e) Supplies of goods and services to such organizations
which are entitled for duty free import of such items in
terms of general exemption notification issued by MoF,
as may be provided in HBP v 1.
(f) Supplies of Information Technology Agreement (ITA -1)
items and notified zero duty telecom / electronics items.
(g) Supplies of items like tags, labels, printed bags, stickers,
belts, buttons or hangers to DTA unit for export.
(h) Supply of LPG produced in an EOU refinery to Public
Sector domestic oil companies for being supplied to
household domestic consumers at subsidized prices under
the Public Distribution System (PDS) Kerosene and
Domestic LPG Subsidy Scheme, 2002, as notified by the
Ministry of Petroleum and Natural Gas vide notification
No. E-20029/18/2001-PP dated 28.01.2003 (hereinafter
referred to as PDS Scheme) subject to the following
conditions:-
(a) Only supply of such quantity of LPG would be
eligible for which Ministry of Petroleum and Natural
Gas declines permission for export and requires the
LPG to be cleared in DTA; and
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(b) The Ministry of Finance by a notification has
permitted duty free imports of LPG for supply under
the aforesaid PDS Scheme.
Export through others 6.10 An EOU / EHTP / STP / BTP unit may export goods
manufactured / software developed by it through another
exporter or any other EOU / EHTP / STP / SEZ unit subject to
conditions mentioned in para 6.18 of HBP v1.
Entitlement for supplies
from the DTA
6.11 (a) Supplies from DTA to EOU / EHTP / STP / BTP units
will be regarded as “deemed exports” and DTA supplier
shall be eligible for relevant entitlements under chapter 8
of FTP, besides discharge of export obligation, if any, on
the supplier. Notwithstanding the above, EOU / EHTP /
STP / BTP units shall, on production of a suitable
disclaimer from DTA supplier, be eligible for obtaining
entitlements specified in chapter 8 of FTP. For claiming
deemed export duty drawback, they shall get brand rates
fixed by DC wherever All Industry Rates of Drawback
are not available.
(b) Suppliers of precious and semi-precious stones, synthetic
stones and processed pearls from DTA to EOU shall be
eligible for grant of Replenishment Authorisations at
rates and for items mentioned in HBP v1.
(c) In addition, EOU / EHTP / STP / BTP units shall be
entitled to following:-
i) Reimbursement of Central Sales Tax (CST) on
goods manufactured in India.
Simple interest @ 6% per annum will be payable
on delay in refund of CST, if the case is not
settled within 30 days of receipt of complete
application (as in paragraph 9.10.1 of HBP v1).
ii) Exemption from payment of Central Excise Duty
on goods procured from DTA on goods
manufactured in India.
iii) Reimbursement of duty paid on fuel procured from
domestic oil companies / Depots of domestic oil
Public Sector Undertakings as per drawback rate
notified by DGFT from time to time.
Reimbursement of additional duty of excise levied
on fuel under the Finance Acts would also be
admissible.
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iv) CENVAT Credit on service tax paid.
Other Entitlements 6.12 Other entitlements of EOU / EHTP / STP / BTP units are
as under:
(a) Exemption from Income Tax as per Section 10A
and 10B of Income Tax Act.
(b) Exemption from industrial licensing for manufacture
of items reserved for SSI sector.
(c) Export proceeds will be realized within 12 months.
(d) Units will be allowed to retain 100% of its export
earning in the EEFC account.
(e) Unit will not be required to furnish bank guarantee at
the time of import or going for job work in DTA,
where unit has
(i) a turnover of Rs. 5 crores or above;
(ii)
(iii)
unit is in existence for at least three years;
and
The unit :
(a)
(b)
has achieved positive NFE / export
obligation wherever applicable;
has not been issued a show cause notice
or a confirmed demand, during the
preceding 3 years, on grounds other
than procedural violations, under the
penal provision of the Customs Act, the
Central Excise Act, the Foreign Trade
(Development & Regulation) Act, the
Foreign Exchange Management Act, the
Finance Act, 1994 covering Service Tax
or any allied Acts or the rules made
thereunder, on account of fraud /
collusion / willful mis-statement /
suppression of facts or contravention of
any of the provisions thereof;
(f) 100% FDI investment permitted through automatic
route similar to SEZ units.
75
(g) Units shall pay duty on the goods produced or
manufactured and cleared into DTA on monthly
basis in the manner prescribed in the Central Excise
Rules.
Inter Unit Transfer 6.13 (a) Transfer of manufactured goods from one EOU /
EHTP / STP / BTP unit to another EOU / EHTP /
STP / BTP unit is allowed with prior intimation to
concerned DC and Customs authorities, following
procedure of in-bond movement of goods. Transfer
of manufactured goods shall also be allowed from
EOU / EHTP / STP / BTP unit to a SEZ developer
or unit following procedure prescribed in SEZ
Rules, 2006.
(b) Capital goods may be transferred or given on loan
to other EOU / EHTP / STP / BTP / SEZ units,
with prior intimation to concerned DC and
Customs authorities.
(c) 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.
Sub-Contracting 6.14 (a) (i) EOU / EHTP / STP / BTP units, including gems
and jewellery units, may on the basis of annual
permission from Customs authorities, subcontract
production processes to DTA through job work
which may also involve change of form or nature
of goods, through job work by units in DTA.
(ii) These units may subcontract upto 50% of overall
production of previous year in value terms in DTA
with permission of Customs authorities.
(b) (i) EOU may, with annual permission from Customs
authorities, undertake job work for export, on behalf
of DTA exporter, provided that goods are exported
directly from EOU and export document shall
jointly be in name of DTA / EOU. For such exports,
DTA units will be entitled for refund of duty paid on
inputs by way of brand rate of duty drawback.
(ii) Duty free import of goods for execution of export
order placed on EOU by foreign supplier on
jobwork basis, would be allowed subject to
condition that no DTA clearance shall be allowed.
76
(iii) Subcontracting of both production and production
processes may also be undertaken without any limit
through other EOU / EHTP / STP / BTP / SEZ
units, on the basis of records maintained in unit.
(iv) EOU / EHTP / STP / BTP units may subcontract
part of production process abroad and send
intermediate products abroad as mentioned in LoP.
No permission would be required when goods are
sought to be exported from subcontractor premises
abroad. When goods are sought to be brought back,
prior intimation to concerned DC and Customs
authorities shall be given.
(c) Scrap / waste / remnants generated through job work may
either be cleared from job worker’s premises on payment
of applicable duty on transaction value or destroyed in
presence of Customs / Central Excise authorities or
returned to unit. Destruction shall not apply to gold,
silver, platinum, diamond, precious and semi precious
stones.
(d) Sub-contracting / exchange by gems and jewellery EOUs
through other EOUs or SEZ units or units in DTA, shall
be as per procedure indicated in HBP v1.
Sale of Unutilized
Material
6.15 (a) In case an EOU / EHTP / STP / BTP unit is unable to
utilize goods and services, imported or procured from
DTA, it may be
(i) transferred to another EOU / EHTP / STP / BTP /
SEZ unit; or
(ii) disposed off in DTA with approval of Customs
authorities on payment of applicable duties and
submission of import authorization; or
(iii) exported. Such transfer from EOU / EHTP / STP /
BTP unit to another such unit would be treated as
import for receiving unit.
(b) Capital goods and spares that have become obsolete /
surplus, may either be exported, transferred to another
EOU / EHTP / STP / BTP / SEZ unit or disposed off in
DTA on payment of applicable duties. Benefit of
depreciation, as applicable, will be available in case of
disposal in DTA only when the unit has achieved positive
NFE taking into consideration the depreciation allowed.
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No duty shall be payable in case capital goods, raw
material, consumables, spares, goods manufactured,
processed or packaged, and scrap / waste / remnants /
rejects are destroyed within unit after intimation to
Customs authorities or destroyed outside unit with
permission of Customs authorities. Destruction as stated
above shall not apply to gold, silver, platinum, diamond,
precious and semi precious stones.
(c) In case of textile sector, disposal of left over material /
fabrics upto 2% of cif value or quantity of import,
whichever is lower, on payment of duty on transaction
value, may be allowed, subject to certification of Central
Excise / Customs officers that these are leftover items.
(d) Disposal of used packing material will be allowed on
payment of duty on transaction value.
Reconditioning / Repair
and Re-engineering
6.16 EOU / EHTP / STP / BTP units may be set up with approval
of BoA to carry out reconditioning, repair, remaking, testing,
calibration, quality improvement, up-gradation of technology
and re-engineering activities for export in foreign currency.
Provisions of paragraphs 6.8, 6.9, 6.10, 6.13, 6.14 of FTP
and para 6.28 of HBP v1 shall not, however, apply to such
activities.
Replacement / Repair
of imported /
Indigenous Goods
6.17 (a) General provisions of FTP relating to export / import of
replacement / repair of goods would also apply equally
to EOU / EHTP / STP / BTP units. Cases not covered by
these provisions shall be considered on merits by DC.
(b) Goods sold in DTA and not accepted for any reasons,
may be brought back for repair / replacement, under
intimation to concerned jurisdictional Customs / Central
Excise authorities.
(c) Goods or parts thereof, on being imported / indigenously
procured and found defective or otherwise unfit for use
or which have been damaged or become defective
subsequently, may be returned and replacement obtained
or destroyed. In the event of replacement, goods may be
brought back from foreign suppliers or their authorized
agents in India or indigenous suppliers. The unit can
take free of cost replacement (duty paid) from the
authorized agents in India of foreign suppliers, provided
the defective part is re-exported or destroyed. However
destruction shall not apply to precious and semi precious
stones and precious metals.
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Exit from EOU
Scheme
6.18 (a) With approval of DC, an EOU may opt out of scheme.
Such exit shall be subject to payment of Excise and
Customs duties and industrial policy in force.
(b) If unit has not achieved obligations, it shall also be liable
to penalty at the time of exit.
(c) In the event of a gems and jewellery unit ceasing its
operation, gold and other precious metals, alloys, gems
and other materials available for manufacture of
jewellery, shall be handed over to an agency nominated
by DoC, at price to be determined by that agency.
(d) An EOU / EHTP / STP / BTP unit may also be permitted
by DC to exit from the scheme at any time on payment of
duty on capital goods under the prevailing EPCG Scheme
for DTA Units. This will be subject to fulfillment of
positive NFE criteria under EOU scheme, eligibility
criteria under EPCG scheme and standard conditions
indicated in HBP v 1.
(e) Unit proposing to exit out of EOU scheme shall intimate
DC and Customs and Central Excise authorities in
writing. Unit shall assess duty liability arising out of
debonding and submit details of such assessment to
Customs and Central Excise authorities. Customs and
Central Excise authorities shall confirm duty liabilities on
priority basis, subject to the condition that the unit has
achieved positive NFE, taking into consideration the
depreciation allowed. After payment of duty and
clearance of all dues, unit shall obtain “No Dues
Certificate” from Customs and Central Excise authorities.
On the basis of “No Dues Certificate” so issued by the
Customs and Central Excise authorities, unit shall apply
to DC for final debonding.
In case there is no proceeding pending under FT(D&R)
Act, DC shall issue final debonding order within a period
of 7 working days. Between “No Dues Certificate” issued
by Customs and Central Excise authorities and final
debonding order by DC, unit shall not be entitled to claim
any exemption for procurement of capital goods or
inputs. However, unit can claim Advance Authorisation /
DEPB / Duty Drawback. Since the duty calculations and
dues are disputed and take a long time, a BG / Bond /
Installment processes backed by BG shall be provided for
expediting the exit process.
79
(f) In cases where a unit is initially established as DTA unit
with machines procured from abroad after payment of
applicable import duty, or from domestic market after
payment of excise duty, and unit is subsequently
converted to EOU, in such cases removal of such capital
goods to DTA after debonding would be without
payment of duty. Similarly, in cases where a DTA unit
imported capital goods under EPCG Scheme and after
completely fulfilling export obligation gets converted
into EOU, unit would not be charged customs duty on
capital goods at the time of removal of such capital goods
in DTA when debonding.
(g) An EOU / EHTP / STP / BTP unit may also be permitted
by DC to exit under Advance Authorization as a one time
option. This will be subject to fulfillment of positive NFE
criteria.
Conversion 6.19 (a) Existing DTA units may also apply for conversion into
an EOU / EHTP / STP / BTP unit, and Income Tax
benefits under Section 10A and 10B will be available for
plant, machinery and equipment already installed.
(b) Existing EHTP / STP units may also apply for
conversion / merger to EOU unit and vice-versa. In such
cases, units will remain in bond and avail exemptions in
duties and taxes as applicable.
Monitoring of NFE 6.20 Performance of EOU / EHTP / STP / BTP units shall be
monitored by Units Approval Committee as per guidelines in
HBP v1.
Export through
Exhibitions / Export
6.21 EOU / EHTP / STP / BTP are permitted to:
Promotion Tours /
showrooms abroad /
Duty Free Shops
(i) Export goods for holding / participating in exhibitions
abroad with permission of DC.
(ii) Personal carriage of gold / silver / platinum jewellery,
precious, semi-precious stones, beads and articles.
(iii) Export goods for display / sale in permitted shops set up
abroad.
(iv) Display / sell in permitted shops set up abroad, or in
showrooms of their distributors / agents.
(v) Set up showrooms / retail outlets at International
Airports.
Personal Carriage of
Import / Export Parcels
including through
6.22 Import / export through personal carriage of gems and
jewellery items may be undertaken as per Customs
procedure. However, export proceeds shall be realized
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Foreign bound
Passengers
through normal banking channel. Import / export through
personal carriage by units, other than gems and jewellery
units, shall be allowed provided goods are not in commercial
quantity. An authorized person of Gems & Jewellery EOU
may also import gold in primary form, upto 10 Kgs in a
financial year through personal carriage, as per guidelines
prescribed by RBI and DoR.
Export / Import by Post /
Courier
6.23 Goods including free samples, may be exported / imported
by airfreight or through foreign post office or through
courier, as per Customs procedure.
Administration of EOUs
/ Powers of DC
6.24 Details of administration of EOUs and powers of DC are
given in HBP v1.
Revival of Sick Units 6.25 Subject to a unit being declared sick by appropriate
authority, proposals for revival of the unit or its take over
may be considered by BoA .
Approval of EHTP /
STP
6.26 In case of units under EHTP / STP schemes, necessary
approval / permission under relevant paragraphs of this
Chapter shall be granted by officer designated by Ministry of
Communication and Information Technology, Department of
Information Technology, instead of DC, and by Inter-
Ministerial Standing Committee (IMSC) instead of BoA.
Approval of BTP 6.27 Bio-Technology Parks (BTP) would be notified by DGFT on
recommendations of Department of Biotechnology. In case
of units in BTP, necessary approval / permission under
relevant provisions of this chapter will be granted by
designated officer of Department of Biotechnology.
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CHAPTER 7
SPECIAL ECONOMIC ZONES
The policy relating to Special Economic Zones is governed by SEZ Act 2005, and the Rules
framed thereunder.
82
83
CHAPTER 7 A
FREE TRADE & WAREHOUSING ZONES
The policy relating to Free Trade and Warehousing Zones is governed by SEZ Act 2005,
and
the Rules framed thereunder.
84
85
CHAPTER 8
DEEMED EXPORTS
Deemed Exports 8.1 “Deemed Exports” refer to those transactions in which goods
supplied do not leave country, and payment for such supplies is
received either in Indian rupees or in free foreign exchange.
Categories of
Supply
8.2 Following categories of supply of goods by main / subcontractors
shall be regarded as “Deemed Exports” under FTP,
provided goods are manufactured in India:
(a) Supply of goods against Advance Authorisation / Advance
Authorisation for annual requirement / DFIA;
(b) Supply of goods to EOU / STP / EHTP / BTP;
(c) Supply of capital goods to EPCG Authorisation holders;
(d) Supply of goods to projects financed by multilateral or
bilateral Agencies / Funds as notified by Department of
Economic Affairs (DEA), MoF under International
Competitive Bidding (ICB) in accordance with procedures
of those Agencies / Funds, where legal agreements provide
for tender evaluation without including customs duty;
Supply and installation of goods and equipment (single
responsibility of turnkey contracts) to projects financed by
multilateral or bilateral Agencies / Funds as notified by
DEA, MoF under ICB, in accordance with procedures of
those Agencies / Funds, which bids may have been invited
and evaluated on the basis of Delivered Duty Paid (DDP)
prices for goods manufactured abroad;
(e) Supply of capital goods, including in unassembled /
disassembled condition as well as plants, machinery,
accessories, tools, dies and such goods which are used for
installation purposes till stage of commercial production,
and spares to extent of 10% of FOR value to fertilizer plants;
(f) Supply of goods to any project or purpose in respect of
which the MoF, by a notification, permits import of such
goods at zero customs duty;
(g) Supply of goods to power projects and refineries not covered
in (f) above;
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(h) Supply of marine freight containers by 100% EOU
(Domestic freight containers-manufacturers) provided said
containers are exported out of India within 6 months or such
further period as permitted by customs;
(i) Supply to projects funded by UN Agencies; and
(j) Supply of goods to nuclear power projects through
competitive bidding as opposed to ICB.
Benefits of deemed exports shall be available under paragraphs
(d), (e), (f) and (g) only if the supply is made under procedure of
ICB.
However, in regard to mega power projects, the requirement of
ICB would not be mandatory, if the requisite quantum of power
has been tied up through tariff based competitive bidding or if the
project has been awarded through tariff based competitive
bidding.
Benefits for
Deemed Exports
8.3 Deemed exports shall be eligible for any / all of following
benefits in respect of manufacture and supply of goods qualifying
as deemed exports subject to terms and conditions as in HBP v1:-
(a) Advance Authorisation / Advance Authorisation for annual
requirement / DFIA.
(b) Deemed Export Drawback.
(c) Exemption from terminal excise duty where supplies are
made against ICB. In other cases, refund of terminal excise
duty will be given. Exemption from TED shall also be
available for supplies made by an Advance Authorisation
holder to a manufacturer holding another Advance
Authorization if such manufacturer, in turn, supplies the
product(s) to an ultimate exporter.
Benefits to the
Supplier
8.4.1 (i) In respect of supplies made against Advance
Authorisation / DFIA in terms of paragraph 8.2(a)
of FTP, supplier shall be entitled to Advance
Authorisation / DFIA for intermediate supplies.
(ii) If supplies are made against Advance Release
Order (ARO) or Back to Back Letter of Credit
issued against Advance Authorisation / DFIA in
terms of paragraphs 4.1.11 and 4.1.12 of FTP,
suppliers shall be entitled to benefits listed in
paragraphs 8.3(b) and (c) of FTP, whichever is
applicable.
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8.4.2 In respect of supply of goods to EOU / EHTP / STP / BTP in
terms of paragraph 8.2(b) of FTP, supplier shall be entitled to
benefits listed in paragraphs 8.3(a), (b) and (c) of FTP,
whichever is applicable.
8.4.3 In respect of supplies made under paragraph 8.2(c) of FTP,
supplier shall be entitled to the benefits listed in paragraphs
8.3(a), (b) and (c) of the Policy, whichever is applicable.
8.4.4 (i) In respect of supplies made under paragraphs
8.2(d), (f) and (g) of FTP, supplier shall be entitled
to benefits listed in paragraphs 8.3(a), (b) and (c),
whichever is applicable.
(ii) In respect of supplies mentioned in paragraph
8.2(d), supplies to projects funded by such
Agencies alone, as may be notified by DEA, MoF,
shall be eligible for deemed export benefits. A list
of such Agencies / Funds is given in Appendix 13
of HBP v1 .
(iii) Benefits of deemed exports under para 8.2(f) of
FTP shall be applicable in respect of items, import
of which is allowed by DoR at zero customs duty,
subject to fulfillment of conditions specified under
Notification No. 21/2002-Customs dated 1.3.2002,
as amended from time to time.
(iv) Supply of Capital goods and spares upto 10% of
FOR value of capital goods to power projects in
terms of paragraph 8.2(g), shall be entitled for
deemed export benefits provided the ICB
procedures have been followed at Independent
Power Producer (IPP) / Engineering and
Procurement Contract (EPC) stage. However, in
regard to mega power projects, the requirement of
ICB would not be mandatory, if the requisite
quantum of power has been tied up through tariff
based competitive bidding or if the project has
been awarded through tariff based competitive
bidding. Benefit of deemed exports shall also be
available for renovation / modernization of power
plants. Supplier shall be eligible for benefits listed
in paragraph 8.3(a) and (b) of FTP, whichever is
applicable. However, supply of goods required for
setting up of any mega power project as specified
in S.No. 400 of DoR Notification No. 21/2002-
Customs dated 1.3.2002, as amended, shall be
88
eligible for deemed export benefits as mentioned in
paragraph 8.3(a), (b) and (c) of FTP, whichever is
applicable, if such mega power project complies
with the threshold generation capacity specified
therein, in Customs Notification.
Further, supply of goods required for the
expansion of existing mega power project as
specified in Sl. no 400A of DoR Notification
21/2002- Customs dated 1.3.2002, as amended
shall also be eligible for deemed export benefits as
mentioned in paragraph 8.3 ( a), (b) and (c) of
FTP, whichever is applicable.
(v) Supplies under paragraph 8.2(g) of FTP to new
refineries being set up during Ninth Plan period
and spilled over to Tenth Plan period, shall be
entitled for deemed export benefits in respect of
goods mentioned in list 17 specified in S.No. 228
of Notification No. 21/2002-Customs dated
1.3.2002, as amended from time to time. Supplier
shall be eligible for benefits listed in paragraphs
8.3(a) and (b) of FTP, whichever is applicable.
8.4.5 In respect of supplies made under paragraph 8.2(e) of FTP,
supplier shall be eligible for benefits listed in paragraph 8.3(a)
and (b) of FTP, whichever is applicable. Benefit of deemed
exports shall be available in respect of supplies of capital
goods and spares to Fertilizer Plants which are set up or
expanded / revamped / retrofitted / modernized during Ninth
Plan period. Benefit of deemed exports shall also be available
on supplies made to Fertilizers Plants, which have started in
the 8th / 9th Plan periods and spilled over to 10th Plan period.
8.4.6 Supplies of goods to projects funded by UN Agencies covered
under para 8.2(i) of FTP are eligible for benefits listed in
paragraph 8.3(a) and (b) of FTP, whichever is applicable.
8.4.7 In respect of supplies made to Nuclear Power Projects under
para 8.2(j) of FTP, the supplier would be eligible for benefits
given in para 8.3(a), (b) and (c) of FTP, whichever is applicable.
Supply of only those goods required for setting up any Nuclear
Power Project specified in list 43 at S.No. 401 of Notification
No. 21/2002-Customs dated 1.3.2002, as amended from time to
time, having a capacity of 440MW or more as certified by an
officer not below rank of Joint Secretary to Government of
India in Department of Atomic Energy, shall be entitled for
deemed export benefits in cases where procedure of competitive
bidding (and not ICB ) has been followed.
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Eligibility for
refund of
terminal excise
duty / drawback
8.5 Supply of goods will be eligible for refund of terminal excise
duty in terms of para 8.3(c) of FTP, provided recipient of
goods does not avail CENVAT credit / rebate on such goods.
Similarly, supplies will be eligible for deemed export
drawback in terms of para 8.3(b) of FTP on Central Excise
paid on inputs / components, provided CENVAT credit facility
/ rebate has not been availed by applicant. Such supplies will
however be eligible for deemed export drawback on customs
duty paid on inputs / components.
8.5.1 Simple interest @ 6% per annum will be payable on delay in
refund of duty drawback and terminal excise duty under
deemed export scheme if the case is not settled within 30 days
of receipt of complete application (as in paragraph 9.10.1 of
HBP v1).
Supplies to be
made by the
main / subcontractor
8.6.1 In all cases of deemed exports, supplies shall be made directly
to designated Projects / Agencies / Units / Advance
Authorisation / EPCG Authorisation holders. Sub-contractor
may, however, make supplies to main contractor instead of
supplying directly to designated projects / Agencies. Such
Supplies shall be eligible for deemed export benefits as per
procedure laid down in paragraph 8.4 of HBP v1.
8.6.2 Supplies made by an Indian sub-contractor of an Indian or
foreign main contractor directly to the designated projects /
Agencies, shall also be eligible for deemed export benefits
provided sub-contractor is indicated either originally or
subsequently in the contract, and payment certificate is issued
by project authority in the name of sub-contractor as in
Appendix 22C of HBP v1.
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91
CHAPTER 9
DEFINITIONS
9.1 For purpose of FTP, unless context otherwise requires, following
words and expressions shall have the following meanings
attached to them.
9.2 "Accessory" or "Attachment" means a part, sub-assembly or
assembly that contributes to efficiency or effectiveness of a
piece of equipment without changing its basic functions.
9.3 "Act" means Foreign Trade (Development and Regulation) Act,
1992 (No.22 of 1992) [FT(D&R) Act].
9.4 "Actual User" means an actual user who may be either industrial
or non-industrial.
9.5 "Actual User (Industrial)" means a person who utilises imported
goods for manufacturing in his own industrial unit or
manufacturing for his own use in another unit including a
jobbing unit.
9.6 "Actual User (Non-Industrial)" means a person who utilises the
imported goods for his own use in
(i) any commercial establishment carrying on any business,
trade or profession; or
(ii) any laboratory, Scientific or Research and Development
(R&D) institution, university or other educational
institution or hospital; or
(iii) any service industry.
9.7 "AEZ" means Agricultural Export Zones notified by DGFT in
Appendix 8 of HBP v1.
9.8 “Appeal” is an application filed under section 15 of the Act and
includes such applications preferred by DGFT officials in
government interest against decision by designated adjudicating
/ appellate authorities.
9.9 "Applicant" means person on whose behalf an application is
made and shall, wherever context so requires, includes person
signing the application.
9.9.1 “Authorisation” means a permission as included in Section 2 (g)
of FT(D&R) Act to import or export as per provisions of FTP.
9.10 "BoA" means the Board of Approval as notified by DoC.
9.11 "BTP" means Biotechnology Park as notified by DGFT on
recommendation of Department of Biotechnology.
92
9.12 "Capital Goods" means any plant, machinery, equipment or
accessories required for manufacture or production, either
directly or indirectly, of goods or for rendering services,
including those required for replacement, modernisation,
technological upgradation or expansion. It also includes
packaging machinery and equipment, refractories for initial
lining, refrigeration equipment, power generating sets, machine
tools, catalysts for initial charge, equipment and instruments for
testing, research and development, quality and pollution control.
Capital goods may be for use in manufacturing, mining,
agriculture, aquaculture, animal husbandry, floriculture,
horticulture, pisciculture, poultry, sericulture and viticulture as
well as for use in services sector.
9.13 "Competent Authority" means an authority competent to
exercise any power or to discharge any duty or function under
the Act or the Rules and Orders made thereunder or under FTP.
9.14 "Component" means one of the parts of a sub-assembly or
assembly of which a manufactured product is made up and into
which it may be resolved. A component includes an accessory or
attachment to another component.
9.15 "Consumables" means any item, which participates in or is
required for a manufacturing process, but does not necessarily
form part of end-product. Items, which are substantially or
totally consumed during a manufacturing process, will be
deemed to be consumables.
9.16 "Consumer Goods" means any consumption goods, which can
directly satisfy human needs without further processing and
includes consumer durables and accessories thereof.
9.17 "Counter Trade" means any arrangement under which
exports/imports from/to India are balanced either by direct
imports/exports from importing/exporting country or through a
third country under a Trade Agreement or otherwise.
Exports/Imports under Counter Trade may be carried out
through Escrow Account, Buy Back arrangements, Barter trade
or any similar arrangement. Balancing of exports and imports
could wholly or partly be in cash, goods and/or services.
9.18 "Developer" means a person or body of persons, company, firm
and such other private or government undertaking, who
develops, builds, designs, organises, promotes, finances,
operates, maintains or manages a part or whole of infrastructure
and other facilities in SEZ as approved by Central Government
and also includes a co-developer.
9.19 "Development Commissioner" means Development
Commissioner of SEZ.
93
9.20
"DFRC" means Duty Free Replenishment Certificate (as given
in FTP 2004-09).
9.21 "Domestic Tariff Area (DTA)" means area within India which is
outside SEZs and EOU/ EHTP/ STP/BTP.
9.22 "Drawback” in relation to any goods manufactured in India and
exported, means rebate of duty chargeable on any imported
material or excisable material used in manufacture of such goods
in India. Goods include imported spares, if supplied with capital
goods manufactured in India.
9.23 "EHTP" means Electronic Hardware Technology Park.
9.24 "EOU" means Export Oriented Unit for which an LOP has been
issued by Development Commissioner.
9.25 "Excisable goods" means any goods produced or manufactured
in India and subject to a duty of excise under Central Excise and
Salt Act 1944 (1 of 1944).
9.26 "Exporter" means a person who exports or intends to export and
holds an IEC number, unless otherwise specifically exempted.
9.27 "Export Obligation" means obligation to export product or
products covered by Authorisation or permission in terms of
quantity, value or both, as may be prescribed or specified by
Regional or competent authority.
9.27.1 “FTP” means the Foreign Trade Policy which specifies policy
for exports and imports under section 5 of the Act.
9.28 “Group Company” means two or more enterprises which,
directly or indirectly, are in a position to —
(i) exercise twenty-six per cent, or more of voting rights in other
enterprise; or
(ii) appoint more than fifty percent, of members of board of
directors in the other enterprise.
For group companies to claim benefits or have their exports
counted for benefits to be claimed by another member of group,
the group company should have been in existence at least 2 years
prior to date of application under any of export promotion
schemes notified in FTP.
9.29 “HBP v1” means the Handbook of Procedures (Vol.1) and “HBP
v2” means Handbook of Procedures (Vol.2) published under
provisions of paragraph 2.4 of FTP.
9.30 "Importer" means a person who imports or intends to import and
holds an IEC number, unless otherwise specifically exempted.
94
9.31 "Infrastructure facilities" means industrial, commercial and
social infrastructure or any other facility for development of SEZ
as notified.
9.32 "ITC(HS)" means ITC(HS) Classifications of Export and Import
Items Book.
9.33 "Jobbing" means processing or working upon of raw materials or
semi-finished goods supplied to job worker, so as to complete a
part of process resulting in manufacture or finishing of an article
or any operation which is essential for aforesaid process.
9.34 "Licensing Year" means period beginning on the 1st April of a
year and ending on 31st March of following year.
9.35 "Managed Hotel" means hotels managed by a three star or above
hotel/ hotel chain under an operating management contract for a
duration of at least three years between operating hotel/ hotel
chain and hotel being managed. Management contract must
necessarily cover the entire gamut of operations/ management of
managed hotel.
9.36 "Manufacture" means to make, produce, fabricate, assemble,
process or bring into existence, by hand or by machine, a new
product having a distinctive name, character or use and shall
include processes such as refrigeration, re-packing, polishing,
labelling, Re-conditioning repair, remaking, refurbishing,
testing, calibration, re-engineering. Manufacture, for the purpose
of FTP, shall also include agriculture, aquaculture, animal
husbandry, floriculture, horticulture, pisciculture, poultry,
sericulture, viticulture and mining.
9.37 "Manufacturer Exporter" means a person who exports goods
manufactured by him or intends to export such goods.
9.38 "MAI" means Market Access Initiative Scheme notified by
Department of Commerce.
9.39 “Merchant Exporter” means a person engaged in trading activity
and exporting or intending to export goods.
9.40 "NC" means the Norms Committee in the Directorate General of
Foreign Trade, for recommending grant of Authorisations under
Duty Exemption Scheme and for recommending Input Output
norms and value addition norms to be notified by DGFT.
9.41 "NFE" means Net Foreign Exchange.
9.42 "Notification" means a notification published in Official
Gazette.
9.43 "Order" means an Order made by Central Government under the
Act.
9.44 "Part" means an element of a sub-assembly or assembly not
normally useful by itself, and not amenable to further
95
disassembly for maintenance purposes. A part may be a
component, spare or an accessory.
9.45 "Person" includes an individual, firm, society, company,
corporation or any other legal person including the DGFT
officials.
9.46 "Policy" means FTP 2009-2014 as amended from time to time.
9.47 "Prescribed" means prescribed under the Act or the Rules or
Orders made thereunder or under FTP.
9.48 "Public Notice" means a notice published under provisions of
paragraph 2.4 of FTP.
9.49 "Raw material" means:
(i) basic materials which are needed for manufacture of goods,
but which are still in a raw, natural, unrefined or
unmanufactured state; and
(ii) for a manufacturer, any materials or goods which are
required for his manufacturing process, whether they have
actually been previously manufactured or are processed or
are still in a raw or natural state.
9.49.1 "Regional Authority" means authority competent to grant an
Authorisation under the Act / Order.
9.50 "Registration-Cum-Membership Certificate" (RCMC) means
certificate of registration and membership granted by an Export
Promotion Council/Commodity Board/Development Authority
or other competent authority as prescribed in FTP or HBP v1.
9.51 "Rules" means Rules made by Central Government under
Section 19 of the Act.
9.52 "Services" include all tradable services covered under General
Agreement on Trade in Services and earning free foreign
exchange.
9.53 "Service Provider" means a person providing
(i) Supply of a ‘service’ from India to any other country;
(ii) Supply of a ‘service’ from India to service consumer of any
other country in India; and
(iii) Supply of a ‘service’ from India through commercial or
physical presence in territory of any other country.
(iv) Supply of a ‘service’ in India relating to exports paid in free
foreign exchange or in Indian Rupees which are otherwise
considered as having being paid for in free foreign
exchange by RBI.
9.54 "SEZ" means Special Economic Zone notified by Ministry of
Commerce & Industry, Department of Commerce.
96
9.55 "Ships" mean all types of vessels used for sea borne trade or
coastal trade, and shall include second hand vessels.
9.56 "SION" means Standard Input Output Norms notified by DGFT
in HBP v2 / approved by Board of Approval.
9.57 "Spares" means a part or a sub-assembly or assembly for
substitution, that is ready to replace an identical or similar part
or sub-assembly or assembly. Spares include a component or an
accessory.
9.58 "Specified" means specified by or under the provisions of this
Policy through Notification / Public Notice.
9.59 "Status holder" means an exporter recognized as Export
House/Trading House etc. by DGFT/Development
Commissioner.
9.59.1 “Stores” means goods for use in a vessel or aircraft and includes
fuel and spares and other articles of equipment, whether or not
for immediate fitting.
9.60 "STP" means Software Technology Park
9.61 "Supporting Manufacturer" means any person who manufactures
any product or part/accessories/components of that product.
Name of supporting manufacturer as well as the exporter must
be endorsed on export documents.
9.62 "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.
9.63 "Transaction Value" is as defined in Customs Valuation Rules of
Department of Revenue.
9.64 "Wild Animal" means any wild animal as defined in Section
2(36) of Wildlife (Protection) Act, 1972.

Second
Foreign Trade Policy
1st September 2004-31st March 2009
w.e.f. 1.4.2008
Website: http://dgft.gov.in
Ministry of Commerce and Industry
Department of Commerce
Government of India
2
3
TO BE PUBLISHED IN THE GAZETTEE OF INDIA EXTRAORDINARY
PART-II, SECTION-3, SUB SECTION (ii)
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE AND INDUSTRY
DEPARTMENT OF COMMERCE
NOTIFICATION No. 1(RE-2008)/ 2004-2009
NEW DELHI, DATED THE 11th April, 2008
In exercise of powers conferred by Section 5 of the Foreign Trade (Development &
Regulation) Act, 1992 (No.22 of 1992) read with paragraph 1.2 of the Foreign
Trade
Policy, 2004-2009, the Central Government hereby notifies the Foreign Trade
Policy,
2004-2009 incorporating the Annual Supplement as updated on 11th April 2008 and
contained in Annexure to this notification. The policy shall come into force w.e.f.
1st
April 2008.
This issues in Public interest.
(R. S. Gujral)
Director General of Foreign Trade and
Ex Officio Additional Secretary to the Government of India
(Issued from F.No. 01/94/180/FTP/AM09/PC-4)
4
5
CONTENTS
CHAPTER SUBJECT Page
FOREWORD 7
GLOSSARY 11
1A LEGAL FRAMEWORK 15
1B SPECIAL FOCUS INITIATIVES 17
1C BOARD OF TRADE 21
2 GENERAL PROVISIONS REGARDING 23
IMPORTS AND EXPORTS
3 PROMOTIONAL MEASURES 33
4 DUTY EXEMPTION / REMISSION SCHEMES 45
5 EXPORT PROMOTION CAPITAL GOODS SCHEME 55
6 EXPORT ORIENTED UNITS (EOUs), ELECTRONICS 61
HARDWARE TECHNOLOGY PARKS (EHTPs),
SOFTWARE TECHNOLOGY PARKS (STPs) AND
BIO-TECHNOLOGY PARKS (BTPs)
7 SPECIAL ECONOMIC ZONES 75
7A FREE TRADE & WAREHOUSING ZONES 75
8 DEEMED EXPORTS 77
9 DEFINITIONS 81
6
7
FOREIGN TRADE POLICY 2004-09
FOREWORD
Four years ago we had announced India’s first ever integrated Foreign Trade Policy
for the period 2004-09. At that time we had indicated two major objectives, namely
(a) to
double our percentage of global merchandise trade within 5 years, and (b) to use
trade
expansion as an effective instrument of economic growth and employment
generation.
I am pleased to say that our achievements have exceeded our targets. Not only have
we fulfilled our performance in full measure, but we have gone beyond – and done it
in
just four years, instead of five
In 2004 our exports stood at a little over US $ 63 billion. In 2007-08, they have
exceeded US $ 155 billion; our exports are not just double what they were 4 years
ago, but
2½ times that. We have managed an average cumulative annual growth rate
(CAGR) of
23%, year on year, way ahead of the average growth rate of international trade.
Our total merchandise trade – exports and imports together – will be almost
US $ 400 billion this past year, accounting for 1.2% of world trade. If the trade in
services
is added to this, our commercial engagement with the world would be in the region
of
US $ 525 billion.
We have delivered on our second objective as well: that of fashioning trade into an
instrument of economic growth and employment generation. Our total trade in
goods
and services is now equivalent to almost 50% of our GDP. This is unprecedented in
India’s
modern economic history.
On the issue of employment, it is our estimate that during the last 4 years increased
trade activity has created 136 lakh new jobs. I have always maintained that exports
are
not just about earning foreign exchange but about boosting our manufacturing
sector,
8
creating large scale economic activity and generating fresh employment
opportunities.
What is more remarkable about all these achievements is that they have been
accomplished in the face of appreciation of the rupee (by more than 12% in the last
year
alone), high interest rates, spiralling oil prices, withdrawal of some GSP benefits to
India
by other countries and general international economic slowdown in some of our
major
trade markets. In spite of all this our exporters have shown great resilience. For
this,
they deserve our congratulations.
It is in this context that I am happy to present the final Annual Supplement to the
Foreign Trade Policy for 2004-2009. In this Supplement, we have proposed several
innovative steps, which include the following:
i) To promote modernization of our manufacturing and services exports, the import
duty under the EPCG scheme is being reduced from 5% to 3%.
ii) Refund of tax on a large number of services relating to exports has already been
announced by the Government. A few remaining issues regarding refund of service
tax on exports would also be resolved soon.
iii) Income tax benefit to 100% EOUs available under Section 10B of Income Tax
Act
is being extended for one more year, beyond 2009.
iv) Sports and toys are mainly produced by our unorganized labour intensive sector.
To promote export of these items and also to compensate disadvantages suffered
by them, an additional duty credit of 5% over and above the credit under Focus
Product Scheme is being provided.
v) Our export of fresh fruits and vegetables and floriculture suffers from high
incidence of freight cost. To neutralize this disadvantage, an additional credit of
2.5% over and above the credit available under VKGUY is proposed.
vi) Interest relief already granted for sectors affected adversely by the appreciation
of the rupee is being extended for one more year.
vii) The DEPB scheme is being continued till May 2009.
9
We still face many structural problems, which need to be addressed. We have to
plan an integrated strategy to tackle these issues. We need to develop world class
infrastructure. We need to encourage e-commerce, and to facilitate trade through
EDI
such that turn-around time at ports, airports, Inland Container Depots and Land
Custom
Stations match world standards. We cannot rest our laurels in terms of trained
manpower.
We need to establish a chain of sector-specific skill development institutes. Early
implementation of a single Goods and Services Tax (GST) would enable
simultaneous
reimbursement of duties and taxes in line with government’s policy that these
should not
be exported.
Export Credit Guarantee Corporation of India (ECGC) has completed its fifty years
of operations, satisfactorily in the last financial year. Continuing with its mission to
provide a variety of services that would strengthen the exporters by way of
minimizing
the payment risks and their financial position, ECGC has also drawn plans to
operationalise the domestic credit insurance cover for the exporters and its
factoring
services during the year 2008-09. ECGC is also expanding its distribution channels
by
entering into Corporate Agency Arrangements with Commercial Banks, Export
Promotion
Councils and Exporters’ Association.
The remarkable achievements in trade and commerce of the past four years gives
me the confidence to spell out an even more ambitious target – that of achieving a
5%
share of world trade in both goods and services by the year 2020. In practical terms
this
means a four-fold increase in our percentage share in the next 12 years. Considering
that
world trade is itself increasing, this would translate into an eight-fold increase in
absolute
terms. Ambitious the target may be, but achieving it is not impossible.
The task is difficult, but the prize is great. If we achieve it, India will once more
become the trading superpower it was two centuries ago.
(KAMAL NATH)
MINISTER OF COMMERCE & INDUSTRY
GOVERNMENT OF INDIA
New Delhi
April 11, 2008
10
11
GLOSSARY (ACRONYMS)
Acronym Explanation
ACC Assistant Commissioner of Customs
ACU Asian Clearing Union
AEZ Agri Export Zone
ANF Aayaat Niryaat Form
ARO Advance Release Order
ASIDE Assistance to States for Infrastructure Development of Exports
BG Bank Guarantee
BIFR Board of Industrial and Financial Reconstruction
BOA Board of Approval
BOT Board of Trade
BRC Bank Realisation Certificate
BTP Bio-Technology Park
CBEC Central Board of Excise and Customs
CCP Customs Clearance Permit
CEA Central Excise Authority
CEC Chartered Engineer Certificate
CIF Cost, Insurance & Freight
CIS Commonwealth of Independent States
CoD Cash on Delivery
CoO Certificate of Origin
CVD Countervailing Duty
DA Document against Acceptance
DoBT Department of Bio-Technology
DC Development Commissioner
DEPB Duty Entitlement Passbook Scheme
DFIA Duty Free Import Authorisation
DFRC Duty Free Replenishment Certificate
DGCI&S Director General, Commercial Intelligence & Statistics.
DGFT Director General of Foreign Trade
DIPP Department of Industrial Policy & Promotion
DoC Department of Commerce
DoE Department of Electronics
DoIT Department of Information Technology
DoR Department of Revenue
12
DoT Department of Tourism
DTA Domestic Tariff Area
EDI Electronic Data Interchange
EEFC Exchange Earners’ Foreign Currency
EFC Exim Facilitation Committee
EFT Electronic Fund Transfer
EH Export House
EHTP Electronic Hardware Technology Park
EIC Export Inspection Council
EO Export Obligation
EOP Export Obligation Period
EOU Export Oriented Unit
EPC Export Promotion Council
EPCG Export Promotion Capital Goods
EPO Engineering Process Outsourcing
FDI Foreign Direct Investment
FIEO Federation of Indian Export Organisation
FIRC Foreign Exchange Inward Remittance Certificate
FMS Focus Market Scheme
FOB Free On Board
FPS Focus Product Scheme
FT (D&R) Act Foreign Trade ( Development & Regulation) Act, 1992 (No. 22 of 1992)
FTDO Foreign Trade Development Officer
FTP Foreign Trade Policy
GATS General Agreement on Trade in Services
GRC Grievance Redressal Committee
HACCP Hazard Analysis And Critical Control Process
HBP v1 Handbook of Procedures (Vol. 1)
HBP v2 Handbook of Procedures (Vol. 2)
ICD Inland Container Depot
ICM Indian Commercial Mission
IEC Importer Exporter Code
ISO International Standards Organisation
ITC (HS) Indian Trade Classification (Harmonised System) Classification for Export & Import
Items, 2004-2009
ITPO India Trade Promotion Organisation
LoC Line of Credit
13
LoI Letter of Intent
LoP Letter of Permit
LUT Legal Undertaking
MAI Market Access Initiative
MDA Market Development Assistance
MEA Ministry of External Affairs
MoD Ministry of Defence
MoF Ministry of Finance
NC Norms Committee
NFE Net Foreign Exchange
NOC No Objection Certificate
PRC Policy Relaxation Committee
PTH Premier Trading House
PSU Public Sector Undertaking
R&D Research and Development
RA Regional Authority
RBI Reserve Bank of India
REP Replenishment
RCMC Registration-cum-Membership Certificate
RSCQC Regional Sub-Committee on Quality Complaints
S/B Shipping Bill
SEH Star Export House
SEI CMM Software Engineers Institute’s Capability Maturity Model
SEZ Special Economic Zone
SFIS Served from India Scheme
SIA Secretariat for Industrial Assistance
SION Standard Input Output Norms
SSI Small Scale Industry
STE State Trading Enterprise
STH Star Trading House
STP Software Technology Park
TEE Towns of Export Excellence
TH Trading House
TRQ Tariff Rate Quota
VA Value Addition
VKGUY Vishesh Krishi and Gram Udyog Yojana
WHOGMP World Health Organisation Good Manufacturing Practices
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15
CHAPTER-1A
LEGAL FRAMEWORK
Foreword 1.1 The Foreword spells out the broad framework.
Duration 1.2 This Foreign Trade Policy 2004-2009 (FTP), incorporating
provisions relating to export and import of goods and services, shall
come into force with effect from 1st April, 2008 and shall remain
in force upto 31st March, 2009 unless otherwise specified.
Amendments 1.3 Central Government reserves right in public interest to make any
amendments by notification to this Policy in exercise of powers
conferred by Section 5 of FT(D&R) Act.
Transitional 1.4 Authorisation issued before commencement of FTP shall continue
Arrangements to be valid for the purpose and duration for which such Authorisation
was issued, unless otherwise stipulated.
1.5 In case an export or import that is permitted freely under FTP is
subsequently subjected to any restriction or regulation, such export
or import will ordinarily be permitted notwithstanding such restriction
or regulation, unless otherwise stipulated, provided that shipment of
export or import is made within original validity with respect to
available balance and time period of an irrevocable commercial letter
of credit, established before date of imposition of such restriction.
However, a time limit for operationalising such LCs may be
prescribed.
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17
CHAPTER-1B
SPECIAL FOCUS INITIATIVES
Special Focus 1B.1 With a view to continously increasing our percentage share of global
Initiatives trade and expanding employment opportunities, especially in semi
urban and rural areas, certain special focus initiatives have been
identified for Agriculture, Handlooms, Handicraft, Gems &
Jewellery, Leather, Marine, Electronics and IT Hardware
manufacturing Industries and Sports Goods and Toys sectors.
Government of India shall make concerted efforts to promote exports
in these sectors by specific sectoral strategies that shall be notified
from time to time.
New Sectoral Initiatives Further Sectoral Initiatives in other sectors will also be announced
to be announced from time to time.
Thrust sectors shall be extended following facilities:
(i) Agriculture and Village Industry
(a) Vishesh Krishi and Gram Udyog Yojana
(b) Funds shall be earmarked under ASIDE for
development of Agri Export Zones (AEZ)
(c) Deleted.
(d) Deleted.
(e) Capital goods imported under EPCG shall be
permitted to be installed anywhere in AEZ.
(f) Import of restricted items, such as panels, shall be
allowed under various export promotion schemes.
(g) Import of inputs such as pesticides shall be permitted
under Advance Authorisation for agro exports.
(h) New towns of export excellence with a threshold limit
of Rs 250 crore shall be notified.
(i) Certain specified flowers, fruits and vegetables will be
entitled to a special duty credit scrip, in addition to the
normal benefit under VKGUY.
(ii) Handlooms
(a) Specific funds would be earmarked under MAI / MDA
Scheme for promoting handloom exports.
(b) Duty free import entitlement of specified trimmings and
embellishments shall be 5% of FOB value of exports
during previous financial year.
18
(c) Duty free import entitlement of hand knotted carpet
samples shall be 1% of FOB value of exports during
previous financial year.
(d) Duty free import of old pieces of hand knotted carpets
on consignment basis for re-export after repair shall
be permitted.
(e) New towns of export excellence with a threshold limit
of Rs 250 crore shall be notified.
(f) Handloom mark enables handloom products to
develop a niche market with a distinct identity.
(g) Machinery and equipment for effluent treatment plants
shall be exempt from customs duty.
(iii) Handicrafts
(a) New Handicraft SEZs shall be established which
would procure products from cottage sector and
do finishing for exports.
(b) Duty free import entitlement of tools, machinery and
equipment, trimmings and embellishments shall be 5%
of FOB value of exports during previous financial year.
Entitlement is broad banded, and shall extend also to
merchant exporters tied up with supporting
manufacturers.
(c) Handicraft EPC is authorized to import trimmings,
embellishments and consumables on behalf of those
exporters for whom directly importing may not be
viable.
(d) Specific funds would be earmarked under MAI &
MDA Schemes for promoting Handicraft exports.
(e) CVD is exempted on duty free import of trimmings,
embellishments and consumables.
(f) New towns of export excellence with a reduced
threshold limit of Rs 250 crore shall be notified.
(g) Machinery and equipment for effluent treatment plants
shall be exempt from customs duty.
(iv) Gems & Jewellery
(a) Import of gold of 8k and above shall be allowed under
replenishment scheme subject to import being
accompanied by an Assay Certificate specifying purity,
weight and alloy content.
19
(b) Duty Free Import Entitlement (based on FOB value
of exports during previous financial year) of
Consumables, Tools, Machinery and Equipments for:
1. Jewellery made out of
(a) Precious metals (other than
Gold & Platinum) – 2%
(b) Gold and Platinum – 1%
(c) Rhodium finished Silver – 3%
2. Cut and Polished Diamonds – 1%
(c) Duty free import entitlement of commercial samples
shall be Rs. 300,000.
(d) Duty free re-import entitlement for rejected jewellery
shall be 2% of FOB value of exports.
(e) Deleted.
(v) Leather and Footwear
(a) Duty free import entitlement of specified items shall
be 5% of FOB value of exports during preceding
financial year.
(b) Duty free entitlement for import of trimmings,
embellishments and footwear components for footwear
(leather as well as synthetic), gloves, travel bags and
handbags shall be 3% of FOB value of exports of
previous financial year. Such entitlement shall also cover
packing material, such as printed and non-printed
shoeboxes, small cartons made of wood, tin or plastic
materials for packing footwear.
(c) Machinery and equipment for Effluent Treatment Plants
shall be exempt from basic customs duty.
(d) Re-export of unsuitable imported materials such as
raw hides & skins and wet blue leathers is permitted.
(e) CVD is exempted on lining and interlining material
notified at S.No 168 of Customs Notification No 21/
2002 dated 01.03.2002.
(f) CVD is exempted on raw, tanned and dressed fur skins
falling under Chapter 43 of ITC (HS).
(vi) Marine Sector
(a) Duty free import of specified specialised inputs /
chemicals and flavouring oils is allowed to the extent
of 1% of FOB value of preceding financial year’s
export.
20
(b) To allow import of monofilament longline system for
tuna fishing at a concessional rate of duty and Bait
Fish for tuna fishing at Nil duty.
(c) A self removal procedure for clearance of seafood
waste is applicable subject to prescribed wastage
norms.
(d) Specific marine products are considered for VKGUY
scheme.
(vii) Hi-tech products Export Promotion Scheme
The scheme has been introduced to promote export of notified
hi-tech products.
(viii) Electronics and IT Hardware Manufacturing Industries
(a) Expeditious clearance of approvals required from
DGFT shall be ensured.
(b) Exporters /Associations would be entitled to utilize
MAI & MDA Schemes for promoting Electronics and
IT Hardware Manufacturing Industries exports.
(c) Hi-tech products of the Electronics and IT Hardware
Manufacturing Industries Sector would be considered
for inclusion in High Tech Products Export Promotion
Scheme.
(ix) Sports Goods and Toys
(a) Sports goods and toys shall be treated as a priority
sector under MDA / MAI Scheme. Specific funds
would be earmarked under MAI /MDA Scheme for
promoting exports from this sector.
(b) Applications relating to Sports Goods and Toys shall
be considered for fast track clearance by DGFT.
(c) Sports Goods and Toys will be entitled for special
duty credit scrip, inaddition to the normal benefit under
FPS.
1B.2 Deleted.
21
CHAPTER-1C
Board of Trade
Board of Trade (BOT) 1C.1 BOT has a clear and dynamic role in advising government on
relevant
issues connected with Foreign Trade.
Terms of Reference 1C.2 BOT has following terms of reference:
I To advise Government on Policy measures for preparation
and implementation of both short and long term plans for
increasing exports in the light of emerging national and
international economic scenarios;
II To review export performance of various sectors, identify
constraints and suggest industry specific measures to optimize
export earnings;
III To examine existing institutional framework for imports and
exports and suggest practical measures for further
streamlining to achieve desired objectives;
IV To review policy instruments and procedures for imports
and exports and suggest steps to rationalize and channelise
such schemes for optimum use;
V To examine issues which are considered relevant for
promotion of India’s foreign trade, and to strengthen
international competitiveness of Indian goods and services;
and
VI To commission studies for furtherance of above objectives.
Composition 1C.3 Government shall nominate an eminent person or expert on trade
policy to be Chairman of BOT. Government shall also nominate 25
persons, of whom at least 10 will be experts in trade policy. In
addition, Chairmen of recognized EPCs and President or Secretary-
Generals of National Chambers of Commerce will be ex-officio
members. BOT will meet at least once every quarter.
1C.4 Deleted
to
1C.6
22
23
CHAPTER-2
GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS
Exports and Imports 2.1 Exports and Imports shall be free, except where regulated by FTP
free unless regulated or any other law in force. The item wise export and import policy
shall be, as specified in ITC (HS) notified by DGFT, as amended
from time to time.
Import of rough diamond from Cote d’Ivoire shall be prohibited in
compliance to Paragraph 6 of UN Security Council Resolution
(UNSCR) 1643(2005).
2.1.1 Import / export of arms and related material from / to Iraq shall be
prohibited.
2.1.2 Direct or indirect export and import of following items, whether or
not originating in Democratic People’s Republic of Korea (DPRK),
to / from DPRK is prohibited:
All items, materials equipment, goods and technology including as
set out in lists in documents S/2006/814,S/2006/815 and S/2006/
853(United Nations Security Council Documents) which could
contribute to DPRK’s nuclear-related, ballistic missile-related or
other weapons of mass destruction-related programmes.
2.1.3 Direct or indirect export and import of all items, materials, equipment,
goods and technology which could contribute to Iran’s enrichmentrelated,
reprocessing or heavy water related activities, or to
development of nuclear weapon delivery systems, as mentioned
below, whether or not originating in Iran, to / from Iran is prohibited:
i) items, listed in INFCIRC/254/Rev8/Part I in document S/2006/
814, in Sections B.2 to B.7 as well as A.I and B.I except supply,
sale or transfer of equipment covered by B.I when such equipment
is for light water reactors and low-enriched uranium covered by
A.1.2 when it is incorporated in assembled nuclear fuel elements
for such reactors;
ii) items listed in S/2006/815 except supply sale or transfer of items
covered by 19.A.3 of Category II.
Above-mentioned UN Security Council documents are accessible
from DGFT web site.
Compliance 2.2 Every exporter or importer shall comply with the provisions of FT
with Laws (D&R) Act, the Rules and Orders made there-under, FTP and terms
and conditions of any Authorisation granted to him. All imported
goods shall also be subject to domestic Laws, Rules, Orders,
Regulations, technical specifications, environmental and safety norms
as applicable to domestically produced goods. No import or export
of rough diamonds shall be permitted unless accompanied by
24
Kimberley Process (KP) Certificate as specified by Gem &
Jewellery EPC (GJEPC).
Interpretation 2.3 If any question or doubt arises in respect of interpretation of any
of Policy provision contained in FTP, or classification of any item in ITC (HS)
or HBP-v1 or HBP-v2, or Schedule of DEPB Rates (including
content, scope or issue of an authorization there under), said question
or doubt shall be referred to DGFT whose decision thereon shall
be final and binding.
Procedure 2.4 DGFT may, specify procedure to be followed for an exporter or
importer or by any licensing or any other competent authority for
purpose of implementing provisions of FT (D&R) Act, the Rules
and the Orders made there under and FTP. Such procedures shall
be published by means of a Public Notice, and may, in like manner,
be amended from time to time.
Exemption from 2.5 DGFT may pass such orders or grant such relaxation or relief, as he
Policy / Procedure may deem fit and proper, on grounds of genuine hardship and adverse
impact on trade.
DGFT may, in public interest, exempt any person or class or category
of persons from any provision of FTP or any procedure and may,
while granting such exemption, impose such conditions as he may
deem fit. Such request may be considered only after consulting
Committees as under:
Sl. No. Description Committee
(i) Fixation / modification of Norms Committee
product norms under all
schemes
(ii) Nexus with Capital Goods EPCG Committee
(CG) and benefits under
EPCG Schemes
(iii) All other issues Policy Relaxation
Committee (PRC)
Principles of 2.6 DGFT may, through a notification, adopt and enforce any measure
Restriction necessary for: -
i Protection of public morals.
ii Protection of human, animal or plant life or health.
iii Protection of patents, trademarks and copyrights and the
prevention of deceptive practices.
iv Prevention of use of prison labour.
25
v Protection of national treasures of artistic, historic or
archaeological value.
vi Conservation of exhaustible natural resources.
vii Protection of trade of fissionable material or material from
which they are derived; and
viii Prevention of traffic in arms, ammunition and implements of
war.
Restricted Goods 2.7 Any goods, export or import of which is restricted under ITC(HS)
may be exported or imported only in accordance with an
Authorisation or in terms of a public notice issued in this regard.
Terms and Conditions 2.8 Every Authorisation shall be valid for prescribed period of
of a licence / Certificate / validity and shall contain such terms and conditions as may be
Permission / specified by RA, which may include:
Authorisation
(a) Quantity, description and value of goods;
(b) Actual User condition;
(c) Export obligation;
(d) Value addition to be achieved; and
(e) Minimum export / import price.
Authorisation / Licence / 2.9 No person may claim an Authorization as a right and DGFT or RA
Certificate / shall have power to refuse to grant or renew the same in accordance
Permission, with provisions of FT (D&R) Act, Rules made there under and FTP.
not a Right
Penalty 2.10 If an Authorisation holder violates any condition of such Authorisation
or fails to fulfill export obligation, he shall be liable for action in
accordance with FT (D&R) Act, the Rules and Orders made there
under, FTP and any other law for time being in force.
State Trading 2.11 Any goods, import or export of which is governed through exclusive
or special privileges granted to STE(s), may be imported or exported
by STE(s) as per conditions specified in ITC (HS). DGFT may,
however, grant an Authorisation to any other person to import or
export any of these goods.
Such STE(s) shall make any such purchases or sales involving imports
or exports solely in accordance with commercial considerations,
including price, quality, availability, marketability, transportation and
other conditions of purchase or sale in a non discriminatory manner
and shall afford enterprises of other countries adequate opportunity,
in accordance with customary business practices, to compete for
participation in such purchases or sales.
Importer-Exporter 2.12 No export or import shall be made by any person without an IEC
Code (IEC) Number number unless specifically exempted. An IEC number shall be granted
on application by competent authority in accordance with procedure
specified in HBP v1.
26
Trade with 2.13 DGFT may issue instructions or frame schemes as may be required
Neighbouring to promote trade and strengthen economic ties with neighbouring
Countries countries.
Transit Facility 2.14 Transit of goods through India from / or to countries adjacent to
India shall be regulated in accordance with bilateral treaties between
India and those countries and will be subject to such restrictions as
may be specified by DGFT in accordance with International
Conventions.
Trade with Russia 2.15 In case of trade with Russia under Debt Repayment Agreement,
under Debt-Repayment DGFT may issue instructions or frame schemes as may be required,
Agreement and anything contained in FTP, in so far as it is inconsistent with such
instructions or schemes, shall not apply.
Actual User 2.16 Capital goods, raw materials, intermediates, components,
Condition consumables, spares, parts, accessories, instruments and other
goods, which are importable without any restriction, may be
imported by any person.
However, if such imports require an Authorisation, actual user alone
may import such goods unless actual user condition is specifically
dispensed with by RA.
Second Hand Goods 2.17 All second hand goods, except second hand capital goods, shall be
restricted for imports and may be imported only in accordance with
provisions of FTP, ITC (HS), HBP v1, Public Notice or an
Authorisation issued in this regard.
Import of second hand capital goods, including refurbished / reconditioned
spares shall be allowed freely. However, second hand
personal computers / laptops, photocopier machines, air conditioners,
diesel generating sets will only be allowed against a licence.
Import of re-manufactured goods shall be allowed only against a
licence.
Scrap/Waste in SEZ 2.17A Any waste or scrap or remnant including any form of metallic waste
& scrap generated during manufacturing or processing activities of
an SEZ Unit/ Developer/Co-developer shall be allowed to be
disposed in DTA freely subject to payment of applicable Customs
Duty.
Import of samples 2.18 Import of samples shall be governed by HBP v1.
Import of Gifts 2.19 Import of gifts shall be permitted where such goods are otherwise
freely importable under FTP. In other cases, a Customs Clearance
Permit (CCP) shall be required from DGFT.
Passenger Baggage 2.20 Bonafide household goods and personal effects may be imported
as part of passenger baggage as per limits, terms and conditions
thereof in Baggage Rules notified by Ministry of Finance.
Samples of such items that are otherwise freely importable under
FTP may also be imported as part of passenger baggage without an
Authorisation.
27
Exporters coming from abroad are also allowed to import drawings,
patterns, labels, price tags, buttons, belts, trimming and
embellishments required for export, as part of their passenger
baggage without an Authorisation.
Import on 2.21 Freely exportable new or second hand capital goods, equipments,
Export basis components, parts and accessories, containers meant for packing
of goods for exports, jigs, fixtures, dies and moulds may be imported
for export without an Authorisation on execution of LUT / BG with
Customs Authorities.
Re-import of 2.22 Capital goods, equipments, components, parts and accessories,
goods repaired whether imported or indigenous, except those restricted under ITC
abroad (HS) may be sent abroad for repairs, testing, quality improvement
or upgradation or standardization of technology and re-imported
without an Authorisation.
Import of goods 2.23 After completion of projects abroad, project contractors may import,
used in projects without an Authorisation used goods including capital goods provided
abroad they have been used for at least one year.
Sale on High Seas 2.24 Sale of goods on high seas for import into India may be made subject
to FTP or any other law in force.
Import under 2.25 Permission of RA is not required for import of capital goods under
Lease Financing lease financing.
Clearance of 2.26 Goods already imported / shipped / arrived, in advance, but not
Goods from Customs cleared from Customs may also be cleared against an Authorisation
issued subsequently.
Execution of 2.27 Wherever any duty free import is allowed or where otherwise
BG / LUT specifically stated, importer shall execute prescribed LUT / BG /
Bond with Customs Authority before clearance of goods. In case
of indigenous sourcing, Authorisation holder shall furnish LUT / BG
/ Bond to RA concerned before sourcing material from indigenous
supplier / nominated agency as prescribed in HBP v1.
2.27.1 Deleted.
Private / Public 2.28 Private / Public bonded warehouses may be set up in DTA as per
Bonded Warehouses terms and conditions of notification issued by DoR.
for Imports
Any person may import goods except prohibited items, arms and
ammunition, hazardous waste and chemicals and warehouse them
in such bonded warehouses.
Such goods may be cleared for home consumption in accordance
with provisions of FTP and against Authorisation, wherever required.
Customs duty as applicable shall be paid at the time of clearance of
such goods.
28
If such goods are not cleared for home consumption within a period
of one year or such extended period as the custom authorities may
permit, importer of such goods shall re-export the goods.
Free Exports 2.29 All goods may be exported without any restriction except to the
extent that such exports are regulated by ITC (HS) or any other
provision of FTP or any other law for time being in force.
DGFT may, however, specify through a public notice such terms
and conditions according to which any goods, not included in ITC
(HS), may be exported without an Authorisation.
Export of Samples 2.30 Export of samples and Free of charge goods shall be governed by
provisions given in HBP v1.
Export of Passenger 2.31 Bonafide personal baggage may be exported either along with
Baggage passenger or, if unaccompanied, within one year before or after
passenger’s departure from India. However, items mentioned as
restricted in ITC (HS) shall require an Authorisation. Government
of India officials proceeding abroad on official postings shall,
however, be permitted to carry alongwith their personal baggage,
food items (free, restricted or prohibited) strictly for their personal
consumption.
Export of Gifts 2.32 Goods, including edible items, of value not exceeding
Rs.5,00,000/- in a licensing year, may be exported as a gift.
However, items mentioned as restricted for exports in ITC (HS)
shall not be exported as a gift, without an Authorisation.
Export of Spares 2.33 Warranty spares (whether indigenous or imported) of plant,
equipment, machinery, automobiles or any other goods, (except those
restricted under ITC (HS)) may be exported along with main
equipment, or subsequently but within contracted warranty period
of such goods, subject to approval of RBI.
Third Party Exports 2.34 Third party exports, as defined in Chapter 9 shall be allowed under
FTP.
Export of Imported 2.35 Goods imported, in accordance with FTP, may be exported in same
Goods or substantially same form without an Authorisation provided that
item to be imported or exported is not restricted for import or export
in ITC (HS).
Exports of such goods imported against payment in freely convertible
currency would be permitted against payment in freely convertible
currency.
2.36 Goods, including those mentioned as restricted for import (except
prohibited items) may be imported under Customs Bond for export
in freely convertible currency without an Authorisation, provided
that item is freely exportable without any conditionality / requirement
of Licence / permission, as may be required under ITC (HS)
Schedule II.
29
Export of 2.37 Goods or parts thereof, on being exported and found defective /
Replacement Goods damaged or otherwise unfit for use, may be replaced free of charge
by the exporter and such goods shall be allowed clearance by
Customs authorities, provided that replacement goods are not
mentioned as restricted items for exports in ITC (HS).
Export of 2.38 Goods or parts, except restricted under ITC (HS) thereof, on being
Repaired Goods exported and found defective, damaged or otherwise unfit for use,
may be imported for repair and subsequent re-export.
Such goods shall be allowed clearance without an Authorisation
and in accordance with customs notification.
Private Bonded 2.39 Private bonded warehouses exclusively for exports may be set up in
Warehouses for DTA as per terms and conditions of notifications issued by DoR.
Exports
Such warehouses shall be entitled to procure goods from domestic
manufacturers without payment of duty. Supplies made by a
domestic supplier to such notified warehouses shall be treated as
physical exports provided payments are made in free foreign
exchange.
Denomination of 2.40 All export contracts and invoices shall be denominated either in freely
Export Contracts convertible currency or Indian rupees, but export proceeds shall be
realised in freely convertible currency.
However, export proceeds against specific exports may also be
realized in rupees, provided it is through a freely convertible Vostro
account of a non resident bank situated in any country other than a
member country of ACU or Nepal or Bhutan. Additionally, rupee
payment through Vostro account must be against payment in free
foreign currency by buyer in his non-resident bank account. Free
foreign exchange remitted by buyer to his non-resident bank (after
deducting the bank service charges) on account of this transaction
would be taken as export realization under export promotion
schemes of FTP.
Contracts [for which payments are received through Asian Clearing
Union (ACU)] shall be denominated in ACU Dollar. Central
Government may relax provisions of this paragraph in appropriate
cases. Export contracts and Invoices can be denominated in Indian
rupees against EXIM Bank / Government of India line of credit.
Realisation of 2.41 If an exporter fails to realise export proceeds within time specified
Export Proceeds by RBI, he shall, without prejudice to any liability or penalty under
any law in force, be liable to action in accordance with provisions of
FT (D&R) Act, Rules and Orders made there under and FTP.
Free movement 2.42 Consignments of items meant for exports shall not be withheld /
of export goods delayed for any reason by any agency of Central / State Government.
In case of any doubt, authorities concerned may ask for an
undertaking from exporter.
30
No seizure of Stock 2.42.1 No seizure of stock shall be made by any agency, so as to disrupt
manufacturing activity and delivery schedule of exports. In
exceptional cases, concerned agency may seize the stock on basis
of prima facie evidence. However, such seizure should be lifted within
7 days.
Export Promotion 2.43 Basic objective of Export Promotion Councils (EPCs) is to promote
Councils (EPC) and develop Indian exports. Each Council is responsible for
promotion of a particular group of products, projects and services
as given in HBP v1.
Registration -cum- 2.44 Any person, applying for:
Membership
Certificate (RCMC) (i) an Authorisation to import / export, [except items listed as
restricted items in ITC(HS)] or
(ii) any other benefit or concession under FTP
shall be required to furnish RCMC granted by competent authority
in accordance with procedure specified in HBP-v1, unless specifically
exempted under FTP.
Certificate of Registration as Exporter of Spices (CRES) issued by
Spices Board shall be treated as Registration-Cum-Membership
Certificate (RCMC) for the purposes under this Policy.
2.45 Deleted
Trade Facilitation 2.45.1 It is endeavor of Government to work towards greater simplification,
through EDI standardization and harmonization of trade documents using
Initiatives international best practices. As a step in this direction, DGFT shall
move towards an automated environment for electronic filing,
retrieval and authentication of documents based on agreed protocols
and message exchange with other community partners including
Cu.stoms and Banks.
DGCI&S 2.45.2 To enable users to make commercial decisions in a more professional
Commercial manner, DGCI&S trade data shall be made available with a minimum
Trade Data time lag, in a query based structured format, on a commercial criteria.
Fiscal Incentives 2.45.3 With a view to promote use of Information Technology, DGFT will
to promote EDI provide fiscal incentives to user community. Deductions in
Initiatives adoption Application Fee would be admissible for applications signed digitally
or / and where application fee is paid electronically through EFT
(Electronic Fund Transfer). Details are enumerated in HBP v1.
Regularization of 2.46 With a view to providing assistance to firms who have defaulted
EO default and under FTP for reasons beyond their control as also facilitating merger,
settlement of customs acquisition and rehabilitation of sick units, it has been decided to
duty and interest empower Settlement Commission in Central Board of Excise and
through Settlement Customs to decide such cases also with effect from 01.04.2005.
Commission
31
Easing of 2.47 Pending finalisation of Single Common Document (SCD) for
Documentation international trade, Government Departments dealing with exports
Requirement and imports will honour Authorisation issued by other Government
departments based on verification of export documents like
shipping bill, bank realization certificate, Packing list, bill of lading
etc. and will not insist upon fresh submission of these documents.
Exemption / 2.48.1 For all goods and services which are exported from units in DTA
Remission of and units in EOU / EHTP / STP / BTP, exemption / remission of
Service Tax service tax levied and related to exports, shall be allowed, as per
in DTA prescribed procedure in Chapter 4 of HBP v1.
Exemption from 2.48.2 Units in SEZ shall be exempted from service tax.
Service Tax
in SEZ
Exemption from 2.48.3 For all goods and services exported from India, services received /
Service Tax on rendered abroad, where ever possible, shall be exempted from
Services received service tax.
abroad
GRIEVANCE REDRESSAL
DGFT as a 2.49 DGFT has a commitment to function as a facilitator of exports and
facilitator of imports. Focus is on good governance, which depends on clean,
exports / imports transparent and accountable delivery systems.
Citizen’s Charter 2.49.1 DGFT has in place a Citizen’s Charter, giving time schedules for
providing services to clients, and details of grievance committees at
different levels.
Grievance 2.49.2 In order to facilitate speedy redressal of grievances of trade and
Redressal industry, a new grievance redressal mechanism has been put in place
Committee (GRC) in the form of GRC by a Government Resolution.
The Government is committed to resolving all outstanding problems
and disputes pertaining to past policy periods through GRC set
up on 27.10.2004, for condoning delays, regularizing breaches by
exporters in bonafide cases, resolving disputes over entitlements,
granting extensions for utilization of Authorisations.
2.49.3 Deleted
2.50 Deleted.
32
33
CHAPTER-3
PROMOTIONAL MEASURES
Assistance to 3.1 Scheme for Assistance to States for Infrastructure Development of
States for Exports (ASIDE) is formulated to encourage State Governments to
Infrastructure participate in promoting exports, and is administered by Department
Development of Commerce (DoC).
of Exports (ASIDE)
Objectives of ASIDE include:
(i) Developing infrastructure such as roads connecting
production centers with ports,
(ii) Setting up of Inland Container Depots (ICD) and Container
Freight Stations (CFS),
(iii) Creation of new State level export promotion industrial parks
/ zones,
(iv) Augmenting common facilities in existing zones,
(v) Equity participation in infrastructure projects,
(vi) Development of minor ports and jetties,
(vii) Assistance in setting up of common effluent treatment facilities,
(viii) Stabilizing power supply, and
(ix) Any other activity as may be notified by DoC.
Details of ASIDE are available at http://commerce.nic.in.
Market Access 3.2 MAI schemem is intended to provide financial assistance for medium
Initiative (MAI) term export promotion efforts with sharp focus on a country /
product, and is administered by DoC.
Financial assistance is available for Export Promotion Councils
(EPCs), Industry and Trade Associations (ITAs), Agencies of State
Governments, Indian Commercial Missions (ICMs) abroad and
other eligible entities as may be notified.
A whole range of activities can be funded under MAI scheme. These
include, amongst others,
(i) Market studies,
(ii) Setting up of showroom / warehouse,
(iii) Sales promotion campaigns,
(iv) International departmental stores,
(v) Publicity campaigns,
(vi) Participation in international trade fairs,
34
(vii) Brand promotion,
(viii) Registration charges for pharmaceuticals, and term export
promotion efforts with sharp focus on a country / product,
(ix) Testing charges for engineering products.
Each of these export promotion activities can receive financial
assistance from Government ranging from 25% to 100% of total
cost depending upon activity and implementing agency.
Full text of guidelines is available at http://commerce.nic.in.
Marketing 3.2.1 MDA Scheme is intended to provide financial assistance for a range
Development of export promotion activities implemented by EPCs, ITAs on a
Assistance (MDA) regular basis every year. The scheme is administered by DoC.
Assistance includes, amongst others, participation in
(i) Trade Fairs and Buyer Seller meets abroad or in India, and
(ii) Export promotion seminars.
Financial assistance with travel grant is available to exporters traveling
to Latin America, Africa, CIS region, ASEAN countries,
Australia and New Zealand. In other areas, financial assistance
without travel grant is available.
MDA assistance is available for exporters with annual export turnover
upto Rs 15 Crores. Full text of guidelines is available at
http://commerce.nic.in.
Meeting Legal 3.2.1.1 DOC would provide financial assistance to deserving exporters on
Expenses for Trade recommendation of EPCs for meeting cost of legal expenses for
Related Matters trade related matters.
Towns of 3.3 A number of towns have emerged as dynamic industrial clusters
Export contributing handsomely to India’s exports. It is necessary to grant
Excellence recognition to these industrial clusters with a view to maximizing
(TEE) their potential and enabling them to move higher in the value chain
and tap new markets.
Selected towns producing goods of Rs. 1000 Crore or more will
be notified as TEE based on potential for growth in exports. However
for TEE in Handloom, Handicraft, Agriculture and Fisheries
sector, threshold limit would be Rs. 250 Crores.
Recognized associations of units will be able to access funds under
MAI scheme for creating focused technological services. Common
service providers in these areas shall be entitled for EPCG scheme.
Further such areas will receive priority for assistance under ASIDE
scheme.
Notified TEE are listed in Appendix 7 of HBP v1.
35
Brand Promotion 3.4.1 Central Government aims to encourage manufacturers and exporters
and Quality to attain internationally accepted standards of quality for their
products. Central Government will extend support and assistance
to Trade and Industry to launch a nationwide programme on quality
awareness and to promote total quality management.
Test Houses 3.4.2 Central Government will assist in modernisation and upgradation of
test houses and laboratories to bring them at par with international
standards.
Quality Complaints / 3.4.3 Regional Sub-Committee on Quality Complaints (RSCQC) set up
Disputes at Regional Offices of this Directorate shall investigate quality
complaints received from foreign buyers. Guidelines for settlement
of quality complaints, in particular, and such other complaints, in
general, are given in Appendix-16 of HBP v1.
Trade Disputes 3.4.4 If it comes to DGFT notice or he has reason to believe that an
affecting Trade export or import has been made in a manner that
Relations
(i) is gravely prejudicial to trade relations of India with any other
country; and / or
(ii) is gravely prejudicial to interest of other persons engaged in
exports or imports; and / or
(iii) has brought disrepute to the country;
DGFT may take action against such exporter or importer in
accordance with FT (D&R) Act, Rules and Orders made thereunder
and FTP.
3.5 EXPORT AND TRADING HOUSES
Export and 3.5.1 Merchant as well as Manufacturer Exporters, Service Providers,
Trading Houses Export Oriented Units (EOUs) and Units located in Special
Economic Zones (SEZs), Agri Export Zones (AEZs), Electronic
Hardware Technology Parks (EHTPs), Software Technology
Parks (STPs) and Bio-Technology Parks (BTPs) shall be eligible
for Status.
Status Category 3.5.2 Applicant shall be categorized depending on his total FOB (FOR -
for deemed exports) export performance during current plus previous
three years (taken together) upon exceeding limit given below. For
Export House (EH) Status, export performance is necessary in at
least two out of four years (i.e., current plus previous three years).
36
Status Category Export Performance
FOB / FOR Value
(Rupees in Crores)
Export House (EH) 20
Star Export House (SEH) 100
Trading House (TH) 500
Star Trading House (STH) 2500
Premier Trading House (PTH) 10000
Note 1. Exporters in Small Scale Industry (SSI) / Tiny Sector /
Cottage Sector, Units registered with KVICs / KVIBs, Units
located in North Eastern States, Sikkim and Jammu &
Kashmir, Units exporting handloom / handicrafts / hand
knotted or silk carpets, exporters exporting to countries in
Latin America / CIS / sub-Saharan Africa as listed in
Appendix-9, Units having ISO 9000 (series) / ISO 14000
(series) / WHOGMP / HACCP / SEI CMM level-II and
above status granted by agencies listed in Appendix-6 of
HBP v1, exports of services and exports of agro products
shall be entitled for double weightage on exports made for
grant of status. Double Weightage shall be admissible to
Merchant as well as Manufacturer Exporters. However, a
shipment can get double weightage only once in any one of
above categories.
1(a) Transfer of export performance from one to another is not
permitted. Therefore disclaimer system shall not be allowed
for counting of export turnover.
2. Exports made on re-export basis shall not be counted for
recognition.
3. Exports made by subsidiary of a limited company shall be
counted towards export performance of limited company
for recognition, only if limited company has a majority share
holding in subsidiary company.
4. Deleted
Privileges 3.5.2.1 A Status Holder shall be eligible for following facilities:
i) Authorisation and Customs clearances for both imports and
exports on self-declaration basis;
ii) Fixation of Input-Output norms on priority within 60 days;
iii) Exemption from compulsory negotiation of documents
through banks. Remittance / Receipts, however, would be
received through banking channels;
37
iv) 100% retention of foreign exchange in EEFC account;
v) Enhancement in normal repatriation period from 180 days
to 360 days;
vi) Deleted
vii) Exemption from furnishing of Bank Guarantee in Schemes
under FTP; and
viii) SEHs and above shall be permitted to establish Export
Warehouses, as per DoR guidelines.
ix) For status holders, a decision on conferring of ACP Status
shall be communicated by Customs within 30 days from
receipt of application with Customs.
x) As an option, for Premier Trading House (PTH), the average
level of exports under EPCG Scheme shall be the arithmetic
mean of export performance in last 5 years, instead of 3
years.
3.5.3 Deleted
3.6 SERVICES EXPORTS
Services Exports 3.6.1 Services include all 161 tradable services covered under General
Agreement on Trade in Services (GATS) where payment for such
services is received in free foreign exchange. A list of services is
given in Appendix-10 of HBP v1.
Registration cum 3.6.2 Software exporters shall register themselves with Electronics and
Membership Software EPC. Exporters of 14 specific services listed in Sl. No.
Certificate 34 of Appendix-2 of HBP v1 are required to register themselves
(RCMC) for with Services EPC. Other service exporters shall register themselves
Service Providers with Federation of Indian Exporters Organisation (FIEO).
Common Facility 3.6.3 Government shall promote establishment of Common Facility Centres
Centres for use by home-based service providers, particularly in areas like
Engineering & Architectural design, Multi-media operations,
Software developers etc., in State and District-level towns, to draw
in a vast multitude of home-based professionals into services export
arena.
3.6.4 SERVED FROM INDIA SCHEME (SFIS)
Objective 3.6.4.1 Objective is to accelerate growth in export of services so as to
create a powerful and unique ‘Served From India’ brand, instantly
recognized and respected world over.
Eligibility 3.6.4.2 All Service Providers, of services listed in Appendix-10 of HBP v1,
who have a total free foreign exchange earning of at least Rs. 10
Lakhs in preceding financial year shall qualify for Duty Credit scrip.
For Individual Service Providers, minimum would be Rs. 5 Lakhs.
38
Entitlement 3.6.4.3 All Service Providers (except Hotels, Restaurants and other Service
Providers in Tourism Sector) shall be entitled Duty Credit scrip
equivalent to 10% of free foreign exchange earned during preceding
financial year.
However services and service providers as listed in Paragraph 3.18.1
of HBP v1 shall not be entitled.
Remittances 3.6.4.3.1 Free foreign exchange earned through International Credit Cards
and other instruments as permitted by RBI for rendering of service
shall also be taken into account for computation of Duty Credit
scrip.
Hotels, 3.6.4.4 Hotels of one-star and above (including managed hotels) and heritage
Restaurants & hotels approved by Department of Tourism (DOT) and other Service
Other Service providers in tourism sector registered with DOT as well as Clubs
Providers in having residential facility of minimum 30 rooms shall be entitled to
Tourism Sector duty credit scrip equivalent to 5% of free foreign exchange earned
during preceding financial year.
Stand-alone restaurants will be entitled to duty credit scrip equivalent
to 10% of free foreign exchange earned during preceding financial
year.
Imports Allowed 3.6.4.5 Duty Credit scrip may be used for import of any capital goods
including spares, office equipment and professional equipment, office
furniture and consumables; that are otherwise freely importable under
ITC (HS). Imports shall relate to any service sector business of
applicant.
Utilization of Duty Credit scrip earned shall not be permitted for
payment of duty in case of import of vehicles, even if such vehicles
are freely importable under ITC (HS).
In case of hotels; clubs having residential facility of minimum 30
rooms; golf resorts and stand-alone restaurants having catering
facilities, Duty Credit scrip may also be used for import of
consumables including food items and alcoholic beverages.
Non Transferability 3.6.4.6 Entitlement / goods (imported / procured) shall be non transferable
(except within group company and managed hotels) and be subject
to Actual User condition.
3.6.4.7 to Deleted
3.6.4.9
Procurement from 3.6.4.10 Utilization of Duty Credit Scrip shall be permitted for payment of
Domestic Sources excise duty in terms of DoR notification issued in this behalf, for
procurement from domestic sources of items permitted under Para
3.6.4.5.
3.7 Deleted
39
3.8 VISHESH KRISHI AND GRAM UDYOG YOJANA
(VKGUY)
(SPECIAL AGRICULTURE AND VILLAGE INDUSTRY
SCHEME)
Objective 3.8.1 Objective of VKGUY is to promote exports of
(i) Agricultural Produce and their value added products;
(ii) Minor Forest Produce and their value added variants; for
exports w.e.f 1.4.2004;
(iii) Gram Udyog Products, for exports w.e.f 01.04.2006;
(iv) Forest Based Products, for exports w.e.f 01.04.2007; and
(v) Other products, as notified from time to time.
Such products shall be listed in Appendix 37A of HBP v1.
Entitlement 3.8.2 Duty Credit scrip benefits are granted with an aim to compensate
high transport costs. Exporters, of products notified in Appendix
37A of HBP v1, shall be entitled for Duty Credit scrip equivalent to
5% of FOB value of exports (realized in free foreign exchange).
However, Duty Credit scrip benefits shall be granted only at a
reduced rate of 3.5% of FOB value of exports (realized in free
foreign exchange) in such cases where exporter has availed benefits
under Chapter 4 of FTP for import of Agriculture Inputs (other than
catalysts, consumables and packing materials) relating to export item
under this scheme.
However, for exports made w.e.f. 1.4.2008, Flowers, Fruits and
Vegetables, as listed in Table 13 of Appendix 37A, shall be entitled
to an additional duty credit scrip equivalent to 2.5% of FOB value
of exports; over and above the 5% / 3.5% VKGUY entitlement.
Period of exports for which entitlement is granted is given in Appendix
37A of HBP v1. However, New additional products notified / clarified
in Appendix 37A of HBP v1 shall be entitled for Duty Credit Scrip
on exports, w.e.f 1.4.2008, unless otherwise specified.
3.8.2.1 Exports made by EOUs / BTPs who do not avail direct tax benefits/
exemption shall be eligible, provided the same is not covered under
Paragraph 3.8.2.2.
3.8.2.2 Following exports shall not be taken into account for Duty Credit
scrip entitlement.
(a) (i) Export of imported goods covered under Para 2.35 of FTP;
(ii) Exports through transshipment, meaning thereby thatexports
originating in third country but transshipped through India;
40
(b) Deemed Exports;
(c) Exports made by SEZ units; and
(d) Items, which are restricted or prohibited for export under
Schedule-2 of Export Policy in ITC (HS).
3.8.3 Deleted
to
3.8.5
3.8.6 For exports during 2008-09, all Status Holders (having status
recognition w.e.f 1.4.2008) exporting products covered under ITC
HS Chapters 1 to 24, shall be incentivized with duty credit scrip
equal to 10% of FOB value of agricultural exports (including benefits
entitled under paragraph 3.8.2) provided that the total benefits for
all status holders put together does not exceed Rs 100 Cr (i.e. Rs
50 Cr for each half year) and the conditions specified in Para 3.19.10
of HBP v1 (RE2008) are satisfied. Zonal Office CLA, New Delhi
shall be the licensing office for grant of the benefit to all status holders.
The following capital goods / equipments shall be permitted for
import:-
(i) Cold storage units including Controlled Atmosphere (CA)
and Modified Atmosphere (MA) Stores, pre-cooling Units
and mother storage for onions etc.;
(ii) Pack Houses (including facilities for handling, grading, sorting
and packaging etc.);
(iii) Reefer Van / Containers; and
(iv) Other Capital Goods / Equipments as may be notified in
Appendix 37F.
Imported capital goods/equipment shall be utilized for storage,
packing etc. (as in (ii) above) and transportation of agricultural
products (including agro-processed perishable products).
This additional benefit shall be subject to actural user condition and
hence non-transferable.
3.9 FOCUS MARKET SCHEME (FMS)
Objective 3.9.1 Objective is to offset high freight cost and other externalities to select
international markets with a view to enhance our export
competitiveness in these countries.
Entitlement 3.9.2 Exporters of all products to notified countries (as in Appendix 37C
of HBP v1) shall be entitled for Duty Credit scrip equivalent to
2.5% of FOB value of exports for each licensing year commencing
from 1st April, 2006.
41
However New additional Markets notified in Appendix 37C of
HBP v1 shall be entitled for Duty Credit scrip on exports w.e.f
1.4.2008.
3.9.2.1 Exports made by EOUs / EHTPs / BTPs who do not avail direct
tax benefits / exemption shall be eligible, provided the same is not
covered under Paragraph 3.9.2.2.
3.9.2.2 Following exports shall not be taken into account for computation
of entitlement:
(a) (i) Export of imported goods covered under Para 2.35 of FTP;
(ii) Exports through transshipment, meaning thereby thatexports
originating in third country but transshipped through India;
b. Export turnover of SEZ units or supplies made to such units or
SEZ products exported through DTA units;
c. Deemed Exports;
d. Service Exports;
e. Diamonds and other precious, semi precious stones;
f. Gold, silver, platinum and other precious metals in any form,
including plain and studded Jewellery;
g. Ores and Concentrates, of all types and in all forms;
h. Cereals, of all types;
i. Sugar, of all types and in all forms;
j. Crude / Petroleum Oil & Crude / Petroleum based Products
covered under ITC HS codes 2709 to 2715, of all types and in
all forms;
k Items, which are restricted or prohibited for export under
Schedule-2 of Export Policy in ITC (HS);
l. Cement, all types and in all forms; and
m. Primary Steel Products as listed in Public Notice No. 130
(RE2007)/2004-09 dated 27.03.2008, as amended from time
to time.
3.9.2.3 Deleted
3.9.3 to Deleted
3.9.6
3.10 FOCUS PRODUCT SCHEME (FPS)
Objective 3.10.1 Objective is to incentivise export of such products, which have high
employment intensity in rural and semi urban areas, so as to offset
infrastructure inefficiencies and other associated costs involved in
marketing of these products.
42
Entitlement 3.10.2 Exports of notified products (as in Appendix 37D of HBP v1) to all
countries (including SEZ units) shall be entitled for Duty Credit scrip
equivalent to 1.25% of FOB value of exports for each licensing
year commencing from 1st April, 2006.
However, for exports made w.e.f. 1.4.2008, Toys and Sports Goods
as detailed in Table 2 of Appendix 37D shall be entitled to duty
credit scrip equivalent to 6.25% of FOB value of exports. Further,
for exports made w.e.f. 1.4.2008, High Value Added Manufactured
goods, as notified in Table 9 of Appendix 37D, shall be entitled to
duty credit scrip eqivelent to 2.5% of FOB value of exports.
However, New additional products notified / clarified in Appendix
37D of HBP v1 shall be entitled for Duty Credit scrip on exports
w.e.f 1.4.2008.
3.10.2.1 Exports made by EOUs / EHTPs / BTPs who do not avail direct
tax benefits / exemption shall be eligible, provided the same is not
covered under Paragraph 3.10.2.2.
3.10.2.2 Following exports shall not be taken into account for computation
of entitlement.
(a) (i) Export of imported goods covered under Para 2.35 of FTP;
(ii) Exports through transshipment, meaning thereby thatexports
originating in third country but transshipped through India;
b. Export turnover of SEZ units or SEZ products exported through
DTA units; and
c. Deemed Exports.
3.10.2.3 Deleted
3.10.3 to
3.10.6 Deleted
Market Linked 3.10.7 For exports w.e.f 1.4.2008, Products of high export intensity (which
Focus Product are not covered under present FPS List) but which have a low
penetration in countries (which are also not covered under present
FMS list) would be incentivised and entitled to a duty credit scrip
equivalent to 1.25% of FOB value of exports, provided that the
product / sector are destined to specified linked markets for that
particular product / sector. Such products / sectors, along with their
linked markets, shall be notified in Table 10 of Appendix 37D of
HBP v1.
3.11 HIGH-TECH PRODUCTS EXPORT PROMOTION
SCHEME (HTPEPS)
Objective 3.11.1 Objective is to incentivise export of High Technology products.
43
Entitlement 3.11.2 Exports of High Technology products (as notified in Appendix 37E
of HBP v1) in free foreign exchange to all countries, shall be entitled
for Duty Credit Scrip equivalent to:
a) 1.25 % of FOB value of exports; or
b) 5% of incremental growth in FOB value (realized as per BRC/
FIRC) of exports of notified products for current year (i.e., 2008-
09) over previous year (i.e., 2007-08) (all taken together) and
similarly for each subsequent licensing year.
Exporter may opt for either (a) or (b) above. However,
applicants with ‘nil’ exports in base year shall not be eligible.
3.11.2.1 Exports made by EOUs / EHTPs / BTPs who do not avail direct
tax benefits / exemption shall be eligible, provided the same is not
covered under paragraph 3.11.4.
Ceiling 3.11.3 Duty Credit Scrip shall not exceed Rs 15 Cr for an exporter for all
shipments done in a licensing year put together, for which benefit is
being claimed under this scheme.
Ineligible Exports / 3.11.4 Following shall not be counted for entitlement
Categories
(i) Export of imported goods covered under Para 2.35 of FTP;
(ii) Exports originating in third country but transshipped through
India;
(iii) Exports of SEZ units or SEZ products exported through
DTA units; and
(iv) Deemed Exports.
3.12 COMMON PROVISIONS FOR SCHEMES UNDER THIS
CHAPTER, EXCEPT WHERE SPECIFICALLY PROVIDED
FOR.
CENVAT / Drawback 3.12.1 Additional customs duty/excise duty paid in cash or through debit
under Duty Credit scrip shall be adjusted as CENVAT Credit or
Duty Drawback as per DoR rules, except under SFIS.
Special Provisions 3.12.2 Government reserves right in public interest, to specify export
products or services or exports to such countries, which shall not
be eligible for computation of entitlement.
Further Government reserves right to change ceiling on Duty Credit
scrip under this chapter.
Similarly, Government may also notify goods (in Appendix 37B of
HBP v1), which shall not be allowed for import under Duty Credit
scrips.
TRA Facility 3.12.3 Utilization of Duty Credit Scrip for imports from a port other than
port of registration shall be allowed under Telegraphic Release
Advice (TRA) facility as per DoR notification.
44
Imports Allowed 3.12.4 Duty Credit Scrip may be used for import of inputs or goods including
capital goods, provided same is freely importable under ITC (HS).
However, import of items listed in Appendix 37B of HBP v1 shall
not be permitted to be debited.
Free Transferability 3.12.5 Duty Credit scrip and items imported against it would be freely
transferable, except under SFIS.
Exclusivity of 3.12.6 For a shipment, benefit under any one of schemes covered in this
Entitlement Chapter can alone be claimed, at exporter’s option.
Import under 3.12.7 Utilization of Duty Credit scrip shall be permitted for payment of
Lease financing duty in case of import of capital goods under lease financing in terms
of provision in Para 2.25 of FTP.
Transfer of 3.12.8 Transfer of export performance from one to another shall not be
Export Performance permitted. Thus, a shipment bill containing name of applicant shall
be counted in export performance / turnover of applicant only if
export proceeds from overseas are realized in applicant’s bank
account and this shall be evidenced from BRC / FIRC.
45
CHAPTER-4
DUTY EXEMPTION & REMISSION SCHEMES
Duty Exemption 4.1 Duty Exemption Schemes enable duty free import of inputs
and Remission required for export production. Duty Exemption Schemes
Schemes consist of (a) Advance Authorisation and (b) Duty Free Import
Authorisation (DFIA). A Duty Remission Scheme enables post
export replenishment / remission of duty on inputs used in export
product. Duty Remission Schemes consist of (a) Duty Entitlement
Passbook Scheme (DEPB) and (b) Duty Drawback (DBK)
Scheme.
Re-import of 4.1.1 Goods exported under Advance Authorisation / DFIA / DEPB
exported goods under may be re-imported in same or substantially same form subject to
Duty Exemption / DoR specified conditions.
Remission Scheme
Value Addition 4.1.2 Value addition (VA) for the purpose of this Chapter (Except for
Gems and Jewellery Sector) shall be:-
A-B
VA = ————— x 100, where
B
A = FOB value of export realised / FOR value of supply received.
B = CIF value of inputs covered by authorisation, plus any
other imported materials used on which benefit of DBK is
claimed.
ADVANCE AUTHORISATION SCHEME
Advance 4.1.3 An Advance Authorisation is issued to allow duty free import of
Authorisation inputs, which are physically incorporated in export product (making
normal allowance for wastage). In addition, fuel, oil, energy, catalysts
which are consumed / utilised to obtain export product, may also
be allowed. DGFT, by means of Public Notice, may exclude any
product(s) from purview of Advance Authorisation.
Duty free import of mandatory spares upto 10% of CIF value of
Authorisation which are required to be exported / supplied with
resultant product are allowed under Advance Authorisation. Advance
Authorisations are issued for inputs and export items given under
SION. These can also be issued on the basis of Adhoc norms or
self declared norms as per para 4.7 of HBP v1.
46
Advance Authorisation can be issued either to a manufacturer
exporter or merchant exporter tied to supporting manufacturer(s)
for:
i) Physical exports (including exports to SEZ); and / or
ii) Intermediate supplies; and /or
iii) supply of goods to the categories mentioned in paragraph 8.2
(b), (c), (d), (e), (f), (g), (i) and (j) of FTP ;
iv) supply of ‘stores’ on board of foreign going vessel / aircraft
subject to condition that there is specific SION in respect of
item(s) supplied.
In addition, in respect of supply of goods to specified projects
mentioned in paragraph 8.2 (d), (e), (f), (g) and (j) of FTP, an
Advance Authorisation can also be availed by sub-contractor to
such project provided name of sub contractor(s) appears in main
contract.
Such Authorisation can also be issued for supplies made to United
Nations Organisations or under Aid Programme of the United
Nations or other multilateral agencies and which are paid for in free
foreign exchange.
4.1.4 Advance Authorisations are exempted from payment of basic
customs duty, additional customs duty, education cess, anti dumping
duty and safeguard duty, if any. However, imports for supplies
covered under paragraph 8.2 (h) & (i) will not be exempted from
payment of applicable anti-dumping and safeguard duty, if any.
4.1.5 Advance Authorisation and / or materials imported thereunder will
be with actual user condition. It will not be transferable even after
completion of export obligation. However, Authorisation holder will
have option to dispose off product manufactured out of duty free
inputs once export obligation is completed.
4.1.6 Advance Authorisations necessitate exports with a positive value
addition. Exports to SEZ Units / supplies to Developers / Codevelopers,
irrespective of currency of realization, would also be
covered.
For physical exports for which payments are not received in freely
convertible currency, same shall be subject to value addition as
specified in Appendix-11 of HBP v1.
In case of Authorisation for import of Tea, minimum value addition
under Advance Authorisation shall be 100%.
Similarly, in case of spices {covered by Chapter 9 of ITC(HS)},
duty free import of spices shall be permitted only for value addition
purposes, like crushing / grinding / sterlization, or for manufacture
of oils and oleoresins, and not for simple cleaning, grading, repacking
etc. and minimum value addition shall be 15%.
47
4.1.7 Advance Authorisation shall be issued in accordance with Policy
and procedure in force on Authorisation issue date.
Validity period of Advance Authorisation for import shall be as
prescribed in HBP v1.
Free of Cost 4.1.8 Facility of Advance Authorisation shall also be available where some
Supply by or all inputs are supplied free of cost to exporter by foreign buyer.
Foreign Buyer
In such cases, for calculation of value addition, notional value of free
of cost inputs along with value of other duty-free inputs shall be
taken into consideration. However, if all inputs are supplied free of
cost, exporter shall also have option to follow provision prescribed
by DoR.
Export Obligation 4.1.9 Period for fulfillment of export obligation under Advance
Authorisation shall be as prescribed in HBP v1.
Provision for 4.1.9 A Any firm / company registered with BIFR or any firm / company
BIFR units acquiring a unit, which is under BIFR shall be allowed Export
Obligation Period (EOP) extension as per rehabilitation package
prepared, subject to approval of BIFR, or 5 years if not specified,
without payment of composition fee.
Above provisions apply also to SSI units as per rehabilitation scheme
of concerned State government.
Advance Authorisation 4.1.10 Advance Authorisation can also be issued for annual requirement.
for Annual Requirement Status Certificate holder and all other categories of exporters having
past export performance (in preceding two years) shall be entitled
for Advance Authorisation for annual requirement.
Entitlement in terms of CIF value of imports shall be upto 300% of
the FOB value of physical export and / or FOR value of deemed
export in preceding licensing year or Rs 1 crore, whichever is higher.
Advance Release 4.1.11 Holder of Advance Authorisation, Advance Authorisation for annual
Orders (ARO) and requirement, Diamond Imprest Authorisation and Duty Free Import
Invalidation Letter Authorisation intending to source inputs from indigenous sources /
State Trading Enterprises in lieu of direct import, has option to source
them either against Advance Release Order (ARO) or Invalidation
letter denominated in free foreign exchange / Indian rupees. However,
supplies may be obtained against Authorisation from EOU / EHTP/
BTP / STP / SEZ units, without conversion into ARO or Invalidation
letter.
Transferee of DFIA shall also be eligible for ARO / Invalidation
letter facility.
Validity period of ARO shall be as prescribed in HBP v1.
48
Back-to-Back 4.1.12 Holder of Advance Authorisation, Advance Authorisation for annual
Inland Letter requirement, DFIA and Diamond Imprest Authorisation may, instead
of Credit of applying for an ARO or Invalidation letter, avail of the facility of
Back-to-Back Inland Letter of Credit in accordance with procedure
specified in HBP v1.
Prohibited Items 4.1.13 Prohibited items of imports mentioned in ITC(HS) shall not be
imported under Advance Authorisation / DFIA. Further items
reserved for imports by STEs cannot be imported against Advance
Authorisation / DFIA. However those items can be procured from
STEs against ARO or Invalidation letter.
STEs are also allowed to sell goods on High Sea Sale basis to
holders of Advance Authorisation / DFIA holder.
In addition, STEs are permitted to issue “No Objection Certificate
(NOC)” for import by Advance Authorisation / DFIA holder.
Authorisation Holder would be required to file Quarterly Returns of
imports effected against such NOC to concerned STE and STE
would submit half-yearly import figures of such imports to concerned
administrative Department for monitoring with a copy endorsed to
DGFT.
Similarly prohibited items of exports mentioned in ITC(HS) shall
not be exported under Advance Authorisation / DFIA scheme.
Export of restricted items shall be subject to all conditionalities or
requirements of export Authorisation or permission, as may be
required, under Schedule II of ITC (HS).
Admissibility of 4.1.14 In case of an Advance Authorisation, drawback shall be available
Drawback 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). Drawback allowed shall be
mentioned in Authorisation.
DUTY FREE REPLENISHMENT CERTIFICATE (DFRC)
4.2 Deleted.
to
4.2.8
4.2.9 Scheme has been withdrawn for exports with effect from 1.5.2006.
Exports made till 30.4.2006 shall be governed by chapter 4 of FTP
(as amended upto 31.3.2007).
DUTY ENTITLEMENT PASSBOOK (DEPB) SCHEME
Duty Entitlement 4.3 Objective of DEPB is to neutralise incidence of customs duty on
Passbook import content of export product. Component of Special Additional
(DEPB) Scheme Duty and customs duty on fuel shall also be allowed under DEPB
(as brand rate) factored in DEPB rate in case of non-availment of
49
CENVAT credit. Neutralisation shall be provided by way of grant
of duty credit against export product.
4.3.1 An exporter may apply for credit, at specified percentage of FOB
value of exports, made in freely convertible currency or payment
made from foreign currency account of SEZ unit / SEZ Developer
in case of supply by DTA.
Credit shall be available against such export products and at such
rates as may be specified by DGFT by way of public notice. Credit
may be utilized for payment of Customs Duty on freely importable
items. DEPB Scrips can also be utilized for payment of duty against
imports under EPCG Scheme w.e.f 1.1.2009.
4.3.2 DEPB holder shall have option to pay additional customs duty in
cash as well.
Validity 4.3.3 Validity period of DEPB for import shall be as prescribed in HBP
v1.
Transferability 4.3.4 DEPB and / or items imported against it are freely transferable.
Transfer of DEPB shall however be for import at specified port,
which shall be the port from where exports have been made.
Imports from a port other than the port of export shall be allowed
under TRA facility as per terms and conditions of DOR notification.
Applicability of 4.3.5 Additional customs duty / Excise Duty and Special Additional Duty
Drawback paid in cash or through debit under DEPB may also be adjusted as
CENVAT Credit or Duty Drawback as per DoR rules.
DUTY FREE IMPORT AUTHORISATION (DFIA) SCHEME
Scheme 4.4.1 DFIA is issued to allow duty free import of inputs, fuel, oil, energy
sources, catalyst which are required for production of export
product. DGFT, by means of Public Notice, may exclude any
product(s) from purview of DFIA. This scheme is in force from
1st May, 2006.
Entitlement 4.4.2 Provisions of paragraph 4.1.3 shall be applicable in case of DFIA.
However, these Authorisations shall be issued only for products for
which Standard Input and Output Norms (SION) have been notified.
In case of post export DFIA, a merchant exporter shall be required
to mention only name (s) and address(s) of manufacturer(s) of the
export product(s). Applicant is required to file application to
concerned RA before effecting exports under DFIA.
Pre-export Authorisation shall be issued with actual user condition
and shall be exempted from payment of basic customs duty,
additional customs duty / Excise duty, education cess, anti-dumping
duty and safeguard duty, if any.
50
In case of actual user DFIA and where CENVAT credit facility on
inputs have been availed for the exported goods, even after
completion of export obligation, the goods imported against such
DFIA shall be utilized in the manufacture of dutiable goods whether
within the same factory or outside (by a supporting manufacturer).
Import items 4.4.3 Provisions of paragraphs 4.1.11, 4.1.12, 4.1.13 and 4.1.14 of FTP
shall be applicable for DFIA holder.
Value Addition 4.4.4 A minimum 20% value addition shall be required for issuance of
such authorisation except for items in gems and jewellery sector for
which value addition would be as per paragraph 4A.2.1 of HBP
v1. Items for which higher value addition is prescribed under Advance
Authorisation Scheme, shall be applicable.
Export Obligation 4.4.5 Procedure and time period related to fulfillment of Export Obligation
have been laid down in Chapter 4 of HBP v1.
Transferability 4.4.6 Once export obligation has been fulfilled, request for transferability
of Authorisation or inputs imported against it may be made before
concerned RA. Once transferability is endorsed, Authorisation holder
may transfer DFIA or duty free inputs, except fuel and any other
item(s) notified by DGFT. However, for fuel, import entitlement may
be transferred only to companies which have been granted
authorisation to market fuel by Ministry of Petroleum and Natural
Gas.
Once transferability is endorsed, imports / domestic procurement
against authorisation or transfer of imported inputs / domestically
procured inputs shall be subject to payment of applicable additional
customs duty / excise duty. While endorsing transferability,
authorisation would bear a note as to liability of such additional
customs duty / excise duty. However, in case where CENVAT
facility has not been availed, exemption from additional customs
duty / excise duty would be available even after endorsement of
transferability on DFIA.
Wherever SIONs prescribe actual user condition and in case of
Acetic Anhydride, Ephedrine and Pseudo Ephedrine, DFIA shall
be issued with actual user condition for these inputs and no
transferability shall be allowed for these inputs even after fulfillment
of export obligation.
However, for authorisations issued prior to 1.4.2007, exemption
from Additional Customs Duty / Excise Duty shall continue to be
available even after endorsement of transferability, as provided in
FTP (RE-2006).
CENVAT Facility 4.4.7 CENVAT credit facility shall be available for inputs either imported
or procured indigenously.
4.4.8 Deleted.
51
GEMS AND JEWELLERY
Scheme for Gems 4A Exporters of Gems and Jewellery can import / procure duty free
and Jewellery inputs for manufacturing.
Replenishment 4A.1 Exporters may obtain Replenishment (REP) Authorisations from RA
Authorisation in accordance with procedure specified in HBP v1.
4A.1.1 Replenishment authorisation may also be for consumables as per
paragraph 4A.28 of HBP v1.
Export of Cut & 4A.2 Deleted
Polished Diamonds for
Certification / Grading
4A.2.1 Deleted
Schemes for Gold / 4A.3 Exporters of gold / silver / platinum jewellery and articles thereof
Silver / Platinum may import their essential inputs such as gold, silver, platinum,
Jewellery mountings, findings, rough gems, precious and semi-precious stones,
synthetic stones and unprocessed pearls etc. in accordance with
the procedure specified in this behalf.
Nominated Agencies 4A.4 Nominated agencies are MMTC Ltd, Handicraft and Handloom
Export Corporation (HHEC), State Trading Corporation (STC),
the Project and Equipment Corporation of India Ltd (PEC), Premier
Trading House under Paragraph 3.5.2 of FTP and any other agency
authorised by RBI. Exporters (except EOUs and units in SEZ) may
obtain gold / silver / platinum from nominated agency(s).
A bank authorised by RBI is allowed export of gold scrap for refining
and import standard gold bars as per RBI guidelines.
Items of Export 4A.5 Following items, if exported, would be eligible for facilities:
(a) Gold jewellery, including partly processed jewellery and
articles including medallions and coins (excluding legal tender
coins), whether plain or studded, containing gold of 8 carats
and above;
(b) Silver jewellery including partly processed jewellery,
silverware, silver strips and articles including medallions and
coins (excluding legal tender coins and any engineering goods)
containing more than 50% silver by weight;
(c) Platinum jewellery including partly processed jewellery and
articles including medallions and coins (excluding legal tender
coins and any engineering goods) containing more than 50%
platinum by weight.
52
Value Addition 4A.6 Value Addition (VA) for gems and jewellery sector shall be as per
paragraph 4A.2.1 of HBP v1. It would be calculated as under:
A–B
VA = ————— x 100, where
B
A = FOB value of the export realised / FOR value of supply
received.
B = Value of inputs ( including domestically procured ) such as
gold / silver / platinum content in export product plus
admissible wastage along with value of other items such as
gemstone etc. Wherever gold has been obtained on loan
basis, value shall also include interest paid in free foreign
exchange to foreign supplier.
Wastage Norms 4A.7 Wastage or manufacturing loss for gold / silver / platinum jewellery
shall be admissible as per paragraph 4A.2 of HBP v1.
Export against Supply 4A.8 Where export orders are placed on nominated agencies / status
by Foreign Buyer holder / exporters of three years standing having an annual average
turnover of Rs. Five Crores during preceding three licensing years,
foreign buyer may supply in advance and free of charge, gold /
silver / platinum, alloys, findings and mountings of gold / silver /
platinum for manufacture and export.
Such supplies can also be in advance and may involve semi-finished
jewellery including findings / mountings / components for repairs /
re-make and export subject to minimum value addition of 10%.
However, if so imported semi finished gold / silver /platinum jewellery
is exported as studded jewellery, value addition of 15% shall be
achieved. In such cases of export, wastage of 2% may be permitted.
Exports may be made by nominated agencies directly or through
their associates or by status holder / exporter. Import and Export of
findings shall be on net to net basis.
Export Against 4A.9 Exporter may obtain gold / silver / platinum as an input for export
Supply by products from nominated agencies in advance or as replenishment
Nominated Agencies after exports, in accordance with specified procedure.
Export Against 4A.10 An Advance Authorisation may be granted for duty free import of:
Advance
Authorisation (a) Gold of fineness not less than 0.995, and mountings, sockets,
frames and findings of 8 carats and above;
(b) Silver of fineness not less than 0.995, and mountings,
sockets, frames and findings containing more than 50% silver
by weight;
(c) Platinum of fineness not less than 0.900, and mountings,
sockets, frames and findings containing more than 50%
platinum by weight.
53
4A.11 Such authorisations shall carry an export obligation to be fulfilled as
per procedure specified in paragraph 4A of HBP v1.
Advance Authorisation holder may obtain gold / silver / platinum
from nominated agencies in lieu of direct import.
Gem Replenishment 4A.12 Gem Replenishment (Gem & Jewellery REP) Authorisation may be
Authorisation issued as given in paragraph 4A.8, 4A.9 and 4A.10 above.
In case of plain or studded gold / silver / platinum jewellery and
articles, value of such Authorisations shall be determined with
reference to realisation in excess of prescribed minimum VA.
Such Gem REP Authorisations shall be freely transferable.
Gem REP 4A.13 Replenishment Rate and item of import will be as prescribed in
Rate and Item Appendix 12B of HBP v1.
Diamond Imprest 4A.14 Deleted
Authorisation
Eligibility 4A.14.1 Deleted
Export 4A.14.2 Deleted
Obligation (EO)
Export Promotion 4A.15 Nominated agencies and their associates, with approval of
Tours/ Export Department of Commerce, and others, with approval of Gem &
of Branded Jewellery EPC (GJEPC), may export gold / silver / platinum jewellery
Jewellery and articles thereof for exhibitions abroad.
Personal carriage of gold / silver / platinum jewellery, precious, semiprecious
stones, beads and articles and export of branded jewellery
is also permitted, subject to conditions as in HBP v1.
Personal Carriage 4A.16 Personal carriage of gems and jewellery export parcels by foreign
of Export / bound passengers and import parcels by an Indian importer/foreign
Import Parcels national may be permitted as in HBP v1.
Export by Post 4A.17 In case of exports through Foreign Post Office (including via Speed
Post), value of jewellery parcels shall not exceed US$ 75000 and
20 kg. by weight.
Private / Public 4A.18 Private / Public Bonded Warehouses may be set up in SEZ/ DTA
Bonded Warehouse for import and re-export of cut & Polished diamonds, cut & polished
coloured gemstones, uncut & unset precious & semi-precious stones,
subject to achievement of minimum VA of 5%.
Diamond & 4A.19 Firms and companies dealing in purchase / sale of rough or cut and
Jewellery polished diamonds / precious metal jewellery plain, minakari and /
Dollar Accounts or studded with / without diamond and / or other stones, with a
track record of at least 3 years in import or export of diamonds /
54
coloured gemstones / diamond and coloured gemstones studded
jewellery / plain gold jewellery, and having an average annual
turnover of Rs. 5 crore or above during preceding three licensing
years, may also carry out their business through designated Diamond
Dollar Accounts (DDA).
Dollars in such accounts available from bank finance and / or export
proceeds shall be used only for:
(i) Import / purchase of rough diamonds from overseas / local
sources;
(ii) Purchase of cut and polished diamonds, coloured gemstones
and plain gold jewellery from local sources;
(iii) Import / purchase of gold from overseas / nominated agencies
and repayment of dollar loans from the bank; and
(iv) Transfer to Rupee Account of exporter.
Details of this DDA Scheme are given in HBP v1.
A non DDA holder is also permitted to supply cut and polished
diamonds to DDA holder, receive payment in dollars and convert
same into Rupees within 7 days. Cut and polished diamonds and
coloured gemstones so supplied by non-DDA holder will also be
counted towards discharge of his export obligation and / or entitle
him to replenishment Authorisation.
4A.20.1 Gems and Jewellery exporters shall be allowed to export cut and
polished precious and semi-precious stones for the treatment and
re-import as per customs rules and regulations. In case of re-export,
the exporter shall be entitled for duty drawback as per rules.
Import of precious 4A.21 Import of precious metal scrap / used jewellery shall be allowed for
metal scrap / used melting, refining and re-export of jewellery as per the procedure
jewellery for melting laid down in HBP v1. However, such import shall not be allowed
and re-export of through hand baggage.
jewellery
Re-import of 4A.22 Gems & Jewellery exporters shall be allowed to re-import rejected
rejected jewellery precious metal jewellery as per para 4A.32 of HBP v1.
Export on 4A.23 Gems & Jewellery exporters shall be allowed to export diamond,
consignment gemstones & jewellery on consignment basis as per HBP v1 and
basis Customs rules and regulations.
55
CHAPTER-5
EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME
EPCG Scheme 5.1 EPCG scheme allows import of capital goods for pre production,
production and post production (including CKD / SKD thereof as
well as computer software systems) at 3% Customs duty, subject
to an export obligation equivalent to 8 times of duty saved on capital
goods imported under EPCG scheme, to be fulfilled in 8 years
reckoned from Authorisation issue-date.
In case of agro units, and units in cottage or tiny sector, import of
capital goods at 3% Customs duty shall be allowed subject to
fulfillment of export obligation equivalent to 6 times of duty saved
on capital goods imported, in 12 years from Authorisation issuedate.
For SSI units, import of capital goods at 3% Customs duty shall be
allowed, subject to fulfillment of export obligation equivalent to 6
times of duty saved on capital goods, in 8 years from Authorisation
issue-date, provided the landed cif value of such imported capital
goods under the scheme does not exceed Rs.50 lakhs and total
investment in plant and machinery after such imports does not exceed
SSI limit.
However, in respect of EPCG Authorisations with a duty saved
amount of Rs. 100 crores or more, export obligation shall be fulfilled
in 12 years.
In case CVD is paid in cash on imports under EPCG, incidence of
CVD would not be taken for computation of net duty saved,
provided the same is not CENVATed.
Capital goods shall include spares (including refurbished/
reconditioned spares), tools, jigs, fixtures, dies and moulds.
Second hand capital goods, without any restriction on age, may
also be imported under EPCG scheme.
However, import of motor cars, sports utility vehicles/all purpose
vehicles shall be allowed only to hotels, travel agents, tour operators
or tour transport operators and companies owning / operating golf
resorts, subject to the condition that:
(i) total foreign exchange earning from hotel, travel & tourism
and golf tourism sectors in current and preceding three
licensing years is Rs 1.5 crores or more.
(ii) ‘duty saved’ amount on all EPCG Authorisations issued in a
licensing year for import of motor cars, sports utility vehicles/
56
all purpose vehicles shall not exceed 50% of average foreign
exchange earnings from hotel, travel & tourism and golf
tourism sectors in preceding three licensing years.
(iii) vehicles imported shall be so registered that the vehicle is
used for tourist purpose only. A copy of the Registration
certificate should be submitted to concerned RA as a
confirmation of import of vehicle. However, parts of motor
cars, sports utility vehicles/ all purpose vehicles such as
chassis etc. cannot be imported under the EPCG Scheme.
Import of Restricted items of imports mentioned under ITC(HS)
shall only be allowed under EPCG Scheme after approval from
EFC at Headquarters.
5.1A Spares (including refurbished/reconditioned spares), tools, spare
refractories and catalyst for existing plant and machinery (imported
earlier, under EPCG or otherwise) shall be allowed to be imported
subject to an export obligation equivalent to 8 times of duty saved
to be fulfilled in 8 years reckoned from Authorisation issue date.
EPCG for Projects 5.1B An EPCG Authorisation can also be issued for import of capital
goods under Scheme for Project Imports notified by the Central
Board of Excise and Customs under S.No 441 of Customs
Exemption Notification No 21/2002 dated 01.03.2002.
Export obligation for such EPCG Authorisations would be eight times
of duty saved. Duty saved would be difference between the effective
duty under aforesaid Customs Notification and concessional duty
under the EPCG Scheme.
EPCG for 5.1 C To create modern infrastructure in retail sector, concessional duty
Retail Sector benefits under EPCG scheme shall be extended for import of capital
goods required by retailers having minimum area of 1000 sq meters.
Such retailer shall fulfill export obligation i.e. 8 times of duty saved,
in 8 years.
Eligibility 5.2 EPCG scheme covers manufacturer exporters with or without
supporting manufacturer(s) / vendor(s), merchant exporters tied to
supporting manufacturer(s) and service providers.
Conditions for 5.3 Import of capital goods shall be subject to Actual User condition till
import of export obligation is completed.
Capital Goods
Export obligation 5.4 Following conditions shall apply to the fulfillment of the export
obligation:-
(i) Export Obligation shall be fulfilled by export of goods
manufactured/services rendered by the aplicant.
Export obligation under the scheme shall be, over and above,
the average level of exports achieved by him in the preceding
57
three licensing years for the same and similar products within
the overall export obligation period including extended period,
if any; except for categories mentioned in paragraph 5.7.6
of HBP v1. Such average would be the arithmetic mean of
export performance in the last three years for the same and
similar products. Provided that Premier Trading House
(PTH) shall have option of fixing average level of exports
based on arithmetic mean of export performance in the last
five years instead of three years.
Upto 50% Export Obligation may also be fulfilled by exports
of other good(s) manufactured or service(s) provided by
the same firm / company, or group company / managed hotel,
which has the EPCG authorization. However, EPCG
authorization issued prior to 1.4.2008 will be governed by
earlier policy provisions.
However, in such cases, additional export obligation imposed
shall be over and above average exports achieved by the
unit / company / group company / managed hotel in preceding
three years for both the original and the substitute product(s)/
service(s), despite exemption in Para 5.7.6 of HBP v1.
(ii) Shipments under Advance Authorisation, DFRC, DFIA,
DEPB or Drawback scheme, or incentive schemes under
Chapter 3 of FTP; would also count for fulfillment of EPCG
export obligation.
(iii) Export obligation can also be fulfilled by the supply of
ITA-1 items to DTA, provided realization is in free foreign
exchange.
(iv) Exports shall be physical exports. However, deemed exports
as specified in paragraph 8.2 (a), (b), (d), (f), (g) & (j) of
FTP shall also be counted towards fulfillment of export
obligation, alongwith usual benefits available under paragraph
8.3 of FTP.
Royalty payments received in freely convertible currency and foreign
exchange received for R&D services shall also be counted for
discharge under EPCG. Payment received in rupee terms for port
handling services, in terms of Chapter 9 of FTP shall also be counted
for export obligation discharge.
(v) Deleted.
Provision for 5.5.1 Any firm / company registered with BIFR or any firm / company
BIFR units acquiring a unit, which is under BIFR shall be allowed EO extension
as per rehabilitation package, subject to approval of BIFR, or 12
years if not specified.
58
Above provisions apply also to SSI units as per rehabilitation scheme
of concerned State government.
EPCG for 5.5.2 LUT/ Bond or 15% BG (as applicable) may be given for EPCG
agro units Authorisation granted to units in Agri Export Zones provided EPCG
Authorisation is taken for export of primary agricultural product (s)
notified in Appendix 8 or their value added variants.
Indigenous 5.6 A person holding an EPCG Authorisation may source capital goods
Sourcing of from a domestic manufacturer. Such domestic manufacturer shall
Capital Goods be eligible for deemed export benefit under paragraph 8.3 of FTP.
and benefits Such domestic sourcing shall also be permitted from EOUs and
to Domestic these supplies shall be counted for purpose of fulfillment of positive
Supplier NFE by said EOU as provided in Para 6.9 (a) of FTP.
Benefits to 5.7 Deleted
Domestic Supplier
Fixation of 5.7A In case of direct imports, export obligation shall be reckoned with
Export reference to actual duty saved amount. In case of domestic sourcing,
Obligation export obligation shall be reckoned with reference to notional
Customs duties saved on FOR value.
5.8 Deleted
5.9 Deleted
Technological 5.10 EPCG Authorisation holders can opt for Technological Upgradation
Upgradation of of existing capital good imported under EPCG Authorisation.
existing EPCG
machinery Conditions governing Technological Upgradation of existing capital
goods are as under:
(i) Minimum time period for applying for Technological
Upgradation of existing capital goods imported under EPCG
is 5 years from Authorisation issue-date.
(ii) Minimum exports made under old capital goods must be
40% of total export obligation imposed on first EPCG
Authorisation.
(iii) Export obligation would be refixed such that total export
obligation mandated for both capital goods would be sum
total of 6 times of duty saved on both the capital goods, to
be fulfilled in 8 years from new authorisation issue-date.
(iv) Deleted.
(v) Facility for technological upgradation shall be available only
once and the minimum imports to be made shall be at least
10% of the existing investment in plant and machinery by
applicant.
(vi) Capital Goods to be imported must be new and
technologically superior to earlier CG.
59
Incentives for 5.11 To incentivise fast track companies with a view to accelerate exports,
Fast Track in cases where Authorisation holder has fulfilled 75% or more of
Companies export obligation (including average level of exports) in half or less
than half the original export obligation period specified, remaining
export obligation shall be condoned and the Authorisation redeemed
by RA concerned.
However no benefits under Para 5.12 of HBP v1 shall be available
in such cases.
60
61
CHAPTER-6
EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE
TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS
(STPs) AND BIO-TECHNOLOGY PARKS (BTPs)
Eligibility 6.1 Units undertaking to export their entire production of goods and
services (except permissible sales in DTA), may be set up under the
Export Oriented Unit (EOU) Scheme, Electronic Hardware
Technology Park (EHTP) Scheme, Software Technology Park
(STP) Scheme or Bio-Technology Park (BTP) Scheme for
manufacture of goods, including repair, re-making, reconditioning,
re-engineering and rendering of services. Trading units are not
covered under these schemes.
Export and 6.2 (a) An EOU / EHTP / STP / BTP unit may export all kinds of
Import of goods and services except items that are prohibited in ITC
Goods (HS). Export of Special Chemicals, Organisms, Materials,
Equipment and Technologies (SCOMET) shall be subject
to fulfillment of the conditions indicated in ITC(HS).
Procurement and supply of export promotion material like
brochure / literature, pamphlets, hoardings, catalogues,
posters etc. upto a maximum value limit of 1.5% of FOB
value of previous years exports shall also be allowed.
(b) An EOU / EHTP / STP / BTP unit may import and / or
procure, from DTA or bonded warehouses in DTA /
international exhibition held in India, without payment of duty,
all types of goods, including capital goods, required for its
activities, provided they are not prohibited items of import in
the ITC (HS). Any permission required for import under any
other law shall be applicable. Units shall also be permitted to
import goods including capital goods required for approved
activity, free of cost or on loan / lease from clients. Import of
capital goods will be on a self certification basis. Goods
imported by a unit shall be with actual user condition and
shall be utilized for export production.
(c) State Trading regime shall not apply to EOU manufacturing
units. However, in respect of Chrome Ore/Chrome
concentrate, State Trading Regime as stipulated in export
policy of these items, will be applicable to EOUs.
(d) EOU / EHTP / STP / BTP units may import / procure from
DTA, without payment of duty, certain specified goods for
creating a central facility. Software EOU / DTA units may
use such facility for export of software.
62
(e) An EOU engaged in agriculture, animal husbandry,
aquaculture, floriculture, horticulture, pisciculture, viticulture,
poultry or sericulture may be permitted to remove specified
goods in connection with its activities for use outside bonded
area.
(f) Gems and jewellery EOUs may source gold / silver / platinum
through nominated agencies on loan / outright purchase basis.
Units obtaining gold / silver / platinum from nominated
agencies, either on loan basis or outright purchase basis shall
export gold / silver / platinum within 90 days from date of
release.
(g) EOU / EHTP / STP / BTP units, other than service units,
may export to Russian Federation in Indian Rupees against
repayment of State Credit / Escrow Rupee Account of buyer
subject to RBI clearance, if any.
(h) Procurement and export of spares / components, upto 5%
of FOB value of exports, may be allowed to same consignee/
buyer of the export article, subject to the condition that it
shall not count for NFE and direct tax benefits.
Second Hand 6.3 Second hand capital goods, without any age limit, may also be
Capital Goods imported duty free.
Leasing of
Capital Goods 6.4 a) An EOU / EHTP / STP / BTP unit may, on the basis of a firm
contract between parties, source capital goods from a
domestic / foreign leasing company without payment of
customs / excise duty. In such a case, EOU / EHTP / STP /
BTP unit and domestic / foreign leasing company shall jointly
file documents to enable import / procurement of capital
goods without payment of duty.
b) An EOU / EHTP / BTP / STP unit may sell capital goods
and lease back the same from a Non Banking Financial
Company (NBFC) subject to the following conditions:
i) The unit should obtain permission from the jurisdictional
Deputy / Assistant Commissioner of Customs or
Central Excise, for entering into transaction of ‘Sale
and Lease Back of Assets’, and submit full details of
the goods to be sold and leased back and the details
of NBFC;
ii) The goods sold and leased back shall not be removed
from the unit’s premises;
iii) The unit should be NFE positive at the time when it
enters into sale and lease back transaction with NBFC;
63
iv) A joint undertaking by the unit and NBFC should be
given to pay duty on goods in case of violation or
contravention of any provision of the notification under
which these goods were imported or procured, read
with Customs Act, 1962 or Central Excise Act, 1944,
and that the lien on the goods shall remain with the
Customs / Central Excise Department, which will have
first charge over the said goods for recovery of sum
due from the unit to Government under provision of
Section 142(b) of the Customs Act, 1962 read with
the Customs (Attachment of Property of Defaulters for
Recovery of Govt. Dues) Rules, 1995.
Net Foreign 6.5 EOU / EHTP / BTP / STP unit shall be a positive net foreign exchange
Exchange earner except for sector specific provision of Appendix 14-I-C of
Earnings (NFE) Handbook, where a higher value addition shall be required. NFE
Earnings shall be calculated cumulatively in blocks of five years,
starting from commencement of production.
Letter of 6.6 (a) On approval, a Letter of Permission (LoP) / Letter of Intent
Permission/ (LoI) shall be issued by Development Commissioner/
Letter of designated officer to EOU / EHTP / STP / BTP unit. LoP/
Intent and LoI shall have an initial validity of 3 years, by which time
Legal Undertaking unit should have commenced production. Its validity may be
extended further up to 3 years by competent authority.
However, proposals for extension beyond six years shall be
considered in exceptional circumstances, on a case-to-case
basis by BoA. Once unit commences production, LoP / LoI
issued shall be valid for a period of 5 years for its activities.
This period may be extended further by DC for a period of
5 years at a time.
(b) LoP / LoI issued to EOU / EHTP / STP / BTP units by
concerned authority subject to compliance of provision in
para 6.2 above, would be construed as an Authorisation for
all purposes.
(c) Unit shall execute a LUT with DC concerned. Failure to
ensure positive NFE or to abide by any of the terms and
conditions of LoP / LoI / IL / LUT shall render the unit liable
to penal action under provisions of the FT (D&R) Act and
Rules and Orders made thereunder, without prejudice to
action under any other law / rules and cancellation or
revocation of LoP / LoI / IL.
Investment Criteria (d) Only projects having a minimum investment of Rs.1 Crore in
Plant & Machinery shall be considered for establishment as
EOUs . This shall, however, not apply to existing units and
units in EHTP / STP / BTP, Handicrafts / Agriculture /
Floriculture / Aquaculture / Animal Husbandry / Information
Technology, Services, Brass Hardware and Handmade
64
jewellery sectors. Board of Approval (BoA) may also allow
establishment of EOUs with a lower investment criteria.
Application 6.7 (a) Applications for setting up of units under EOU scheme, other
& Approvals than proposals for setting up of units in services sector (except
R&D, software and IT enabled services, or any other service
activity as may be delegated by BoA), shall be approved or
rejected by the Units Approval Committee within 15 days
as per criteria indicated in HBP v1.
(b) In other cases, approval may be granted by BoA set up for
this purpose as indicated in HBP v 1.
(c) Proposals for setting up EOU requiring industrial licence may
be granted approval by Development Commissioner after
clearance of proposal by BoA and DIPP within 45 days.
DTA Sale of 6.8 (a) Entire production of EOU / EHTP / STP / BTP units shall be
Finished Products / exported subject to following:
Rejects / Waste / Scrap /
Remnants and Units, other than gems and jewellery units, may sell goods
By-products upto 50% of FOB value of exports, subject to fulfilment of
positive NFE, on payment of concessional duties. Within
entitlement of DTA sale, unit may sell in DTA, its products
similar to goods which are exported or expected to be
exported from units. However, units which are manufacturing
and exporting more than one product can sell any of these
products into DTA, upto 75% of FOB value of export of the
specific products, subject to the condition that total DTA sale
does not exceed the overall entitlement of 50% of FOB value
of exports for the unit, as stipulated above. No DTA sale at
concessional duty shall be permissible in respect of motor
cars, alcoholic liquors, books, tea (except instant tea), pepper
& pepper products, marble and such other items as may be
notified from time to time. Such DTA sale shall also not be
permissible to units engaged in activities of packaging /
labeling / segregation / refrigeration / compacting /
micronisation / pulverization / granulation / conversion of
monohydrate form of chemical to anhydrous form or viceversa.
Sales made to a unit in SEZ shall also be taken into
account for purpose of arriving at FOB value of export by
EOU provided payment for such sales are made from Foreign
Exchange Account of SEZ unit. Sale to DTA would also be
subject to mandatory requirement of registration of
pharmaceutical products (including bulk drugs). An amount
equal to Anti Dumping duty under section 9A of the Customs
Tariff Act, 1975 leviable at the time of import, shall be payable
on the goods used for the purpose of manufacture or
processing of the goods cleared into DTA from the unit.
65
(b) For services, including software units, sale in DTA in any
mode, including on line data communication, shall also be
permissible up to 50% of FOB value of exports and /or 50%
of foreign exchange earned, where payment of such services
is received in foreign exchange.
(c) Gems and jewellery units may sell upto 10% of FOB value
of exports of the preceding year in DTA , subject to fulfillment
of positive NFE. In respect of sale of plain jewellery, recipient
shall pay concessional rate of duty as applicable to sale from
nominated agencies. In respect of studded jewellery, duty
shall be payable as applicable.
(d) Unless specifically prohibited in LoP, rejects within an overall
limit of 50% may be sold in DTA on payment of duties as
applicable to sale under paragraph 6.8(a) on prior intimation
to Customs authorities. Such sales shall be counted against
DTA sale entitlement. Sale of rejects upto 5% of FOB value
of exports shall not be subject to achievement of NFE.
(e) Scrap / waste / remnants arising out of production process
or in connection therewith may be sold in DTA , as per
SION notified under Duty Exemption Scheme, on payment
of concessional duties as applicable, within overall ceiling of
50% of FOB value of exports. Such sales of scrap / waste /
remnants shall not be subject to achievement of positive NFE.
In respect of items not covered by norms, DC may fix
ad-hoc norms for a period of six months and within this period,
norms should be fixed by Norms Committee. Ad-hoc norms
will continue till such time norms are fixed by Norms
Committee. Sale of scrap / waste / remnants by units not
entitled to DTA sale, or sales beyond DTA sale entitlement,
shall be on payment of full duties. Scrap / waste / remnants
may also be exported.
(f) There shall be no duties / taxes on scrap / waste / remnants,
in case same are destroyed with permission of Customs
authorities.
(g) By-products included in LoP may also be sold in DTA subject
to achievement of positive NFE, on payment of applicable
duties, within the overall entitlement of paragraph 6.8(a). Sale
of by-products by units not entitled to DTA sales, or beyond
entitlements of paragraph 6.8 (a), shall also be permissible
on payment of full duties.
(h) EOU / EHTP / STP / BTP units may sell finished products,
except pepper and pepper products and marble, which are
freely importable under FTP in DTA, under intimation to DC,
against payment of full duties, provided they have achieved
66
positive NFE. An amount equal to Anti Dumping duty under
section 9A of the Customs Tariff Act, 1975 leviable at the
time of import, shall be payable on the goods used for the
purpose of manufacture or processing of the goods cleared
into DTA from the unit.
(i) In case of units manufacturing electronics hardware and
software, NFE and DTA sale entitlement shall be reckoned
separately for hardware and software.
(j) In case of DTA sale of goods manufactured by EOU/ EHTP/
STP/BTP, where basic duty and CVD is nil, such goods
may be considered as non-excisable for payment of duty.
(k) In case of new EOUs, advance DTA sale will be allowed
not exceeding 50% of its estimated exports for first year,
except pharmaceutical units where this will be based on its
estimated exports for first two years.
(l) Units in Textile and Granite sectors shall have an option to
sell goods into DTA in terms of sub-para 6.8 (a), (d), (e), (g)
and (k) above, on payment of an amount equal to aggregate
of duties of excise leviable under section 3 of the Central
Excise Act, 1944 or under any other law for the time being in
force on like goods produced or manufactured in India other
than in an EOU, subject to the condition that they have not
used duty paid imported inputs in excess of 3% of the FOB
value of exports of the preceding year and they have achieved
positive NFE. Once this option is exercised, the unit will not
be allowed to import any duty free inputs for any purpose.
Other Supplies 6.9 Following supplies effected from EOU / EHTP / STP / BTP units to
in DTA DTA will be counted for fulfillment of positive NFE:
(a) Supplies effected in DTA to holders of Advance
Authorisation / Advance Authorisation for annual requirement/
DFIA under duty exemption / remission scheme / EPCG
scheme.
(b) Supplies effected in DTA against foreign exchange remittance
received from overseas.
(c) Supplies to other EOU / EHTP / STP / BTP / SEZ units,
provided that such goods are permissible for procurement in
terms of paragraph 6.2 of FTP.
(d) Supplies made to bonded warehouses set up under FTP
and / or under section 65 of Customs Act and free trade and
warehousing zones, where payment is received in foreign
exchange.
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(e) Supplies of goods and services to such organizations which
are entitled for duty free import of such items in terms of
general exemption notification issued by MoF.
(f) Deleted
(g) Supplies of Information Technology Agreement (ITA -1) items
and notified zero duty telecom / electronic items.
(h) Supplies of items like tags, labels, printed bags, stickers, belts,
buttons or hangers to DTA Unit for export.
(i) Supply of LPG produced in an EOU refinery to Public Sector
domestic oil companies for being supplied to household
domestic consumers at subsidized prices under the Public
Distribution System (PDS) Kerosene and Domestic LPG
Subsidy Scheme, 2002, as notified by the Ministry of
Petroleum and Natural Gas vide notification No. E-20029/
18/2001-PP dated 28.01.2003 (hereinafter referred to as
PDS Scheme) subject to the following conditions:-
(a) Only supply of such quantity of LPG would be eligible
for which Ministry of Petroleum and Natural Gas
declines permission for export and requires the LPG
to be cleared in DTA; and
(b) The Ministry of Finance by a notification has permitted
duty free imports of LPG for supply under the aforesaid
PDS Scheme.
Export through 6.10 An EOU / EHTP / STP / BTP unit may export goods manufactured/
others software developed by it through another exporter or any other
EOU / EHTP / STP / SEZ unit, subject to conditions mentioned in
para 6.19 of HBP v1.
Entitlement for 6.11 (a) Supplies from DTA to EOU / EHTP / STP / BTP units will
supplies from be regarded as “deemed exports” and DTA supplier shall
the DTA be eligible for relevant entitlements under chapter 8 of FTP
besides discharge of export obligation, if any, on the supplier.
Notwithstanding the above, EOU / EHTP / STP / BTP
units shall, on production of a suitable disclaimer from DTA
supplier, be eligible for obtaining entitlements specified in
chapter 8 of FTP. For claiming deemed export duty
drawback, they shall get Brand Rates fixed by Development
Commissioner wherever All Industry Rates of Drawback
are not available.
(b) Suppliers of precious and semi-precious stones, synthetic
stones and processed pearls from DTA to EOU shall be
eligible for grant of replenishment authorisations at rates and
for items mentioned in HBP v1.
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(c) In addition, EOU / EHTP / STP / BTP units shall be entitled
to following:-
i) Reimbursement of Central Sales Tax (CST) on goods
manufactured in India.
Simple interest @ 6% per annum will be payable on
delay in refund of CST on supplies made to EOUs in
respect of reimbursement/refunds that have become
due on or after 01.04.2007 but which have not been
settled within 30 days of its final approval for payment
by the Office of Development Commissioner, SEZ.
ii) Exemption from payment of Central Excise Duty on
goods procured from DTA on goods manufactured
in India.
iii) Deleted
iv) Reimbursement of duty paid on fuel procured from
domestic oil companies / Depots of domestic oil Public
Sector Undertakings as per drawback rate notified
by DGFT from time to time.
v) CENVAT Credit on service tax paid.
Other Entitlements 6.12 Other entitlements of EOU/EHTP/STP/BTP units are as under:
(a) Exemption from Income Tax as per Section 10A and 10B
of Income Tax Act.
(b) Exemption from industrial licensing for manufacture of items
reserved for SSI sector.
(c) Deleted
(d) Export proceeds will be realized within 12 months.
(e) Units will be allowed to retain 100% of its export earning in
the EEFC account.
(f) Unit will not be required to furnish bank guarantee at the
time of import or going for job work in DTA, where
unit has
(i) a turnover of Rupees 5 crores or above;
(ii) unit is in existence for atleast 3 years; and
(iii) the unit:
a) has achieved positive NFE / export obligation
wherever applicable;
b) has not been issued a show cause notice or a
confirmed demand, during the preceding
3 years, on grounds other than procedural
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violations, under the penal provision of Customs
Act, the Central Excise Act, the Foreign Trade
(Development & Regulation) Act, the Foreign
Exchange Management Act, the Finance Act,
1994 covering Service Tax or any allied Acts
or the rules made thereunder, on account of
fraud / collusion / willful mis-statement /
suppression of facts or contravention of any of
the provisions thereof;
(g) 100% FDI investment permitted through Automatic Route
similar to SEZ units.
(h) Units shall pay duty on the goods produced or manufactured
and cleared into DTA on monthly basis in the manner
prescribed in the Central Excise Rules.
Inter Unit 6.13 (a) Transfer of manufactured goods from one EOU / EHTP /
Transfer STP / BTP unit to another EOU / EHTP / STP / BTP unit is
allowed with prior intimation to concerned Development
Commissioner and Customs authorities, following procedure
of in bond movement of goods. Transfer of manufactured
goods shall also be allowed from EOU / EHTP / STP / BTP
unit to a SEZ Developer or Unit following procedure
prescribed in SEZ Rules, 2006.
(b) Capital goods may be transferred or given on loan to other
EOU / EHTP / STP / BTP / SEZ units, with prior intimation
to concerned Development Commissioner and Customs
authorities.
(c) 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.
Sub-Contracting 6.14 (a) (i) EOU / EHTP / STP / BTP units, including gem and
jewellery units, may on the basis of annual permission
from Customs authorities, subcontract production
processes to DTA through job work which may also
involve change of form or nature of goods, through
job work by units in DTA.
(ii) These units may subcontract upto 50% of overall
production of previous year in value terms in DTA
with permission of Customs authorities.
(b) (i) EOU may, with annual permission from Customs
authorities, undertake job work for export, on behalf
of DTA exporter, provided that goods are exported
directly from EOU and export document shall jointly
be in name of DTA / EOU. For such exports, DTA
units will be entitled for refund of duty paid on inputs
by way of Brand Rate of duty drawback.
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(ii) Duty free import of goods for execution of export
order placed on EOU by Foreign Supplier on
jobwork basis, would be allowed subject to
condition that no DTA clearance shall be allowed.
(iii) Subcontracting of both production and production
processes may also be undertaken without any limit
through other EOU / EHTP / STP / SEZ / BTP
units, on the basis of records maintained in unit.
(iv) EOU / EHTP / STP / BTP units may subcontract
part of production process abroad and send
Intermediate products abroad as mentioned in LoP.
No permission would be required when goods are
sought to be exported from subcontractor premises
abroad. When goods are sought to be brought back,
prior intimation to concerned Development
Commissioner and Customs authorities shall be
given.
(c) Scrap / waste / remnants generated through job work may
either be cleared from job worker’s premises on payment
of applicable duty on transaction value or destroyed in
presence of Customs / Excise authorities or returned to unit.
Destruction shall not apply to gold, silver, platinum, diamond,
precious and semi precious stones.
(d) Sub-contracting / exchange by gems and jewellery EOUs
through other EOUs or SEZ units or units in DTA, shall be
as per procedure indicated in HBP v1.
Sale of Unutilized 6.15 (a) In case an EOU / EHTP / STP / BTP unit is unable to utilize
Material goods and services, imported or procured from DTA, it
may be
(i) transferred to another EOU / SEZ / EHTP / STP /
BTP unit; or
(ii) disposed off in DTA with approval of Customs
authorities on payment of applicable duties and
submission of import authorization; or
(iii) exported. Such transfer from EOU / EHTP / STP /
BTP unit to another such unit would be treated as
import for receiving unit.
(b) Capital goods and spares that have become obsolete/
surplus, may either be exported, transferred to another EOU/
EHTP / STP / BTP / SEZ or disposed of in DTA on payment
of applicable duties. Benefit of depreciation, as applicable,
will be available in case of disposal in DTA only when the
unit has achieved positive NFE taking into consideration the
71
depreciation allowed. No duty shall be payable in case capital
goods, raw material, consumables, spares, goods
manufactured, processed or packaged, and scrap / waste /
remnants / rejects are destroyed within unit after intimation
to Customs authorities, or destroyed outside unit with
permission of Customs authorities. Destruction as stated
above shall not apply to gold, silver, platinum, diamond,
precious and semi precious stones.
(c) In case of textile sector, disposal of left over material / fabrics,
upto 2% of cif value or quantity of import, whichever is lower,
on payment of duty on transaction value, may be allowed,
subject to certification of Central Excise / Customs officers
that these are left over items.
(d) Disposal of used packing material will be allowed on payment
of duty on transaction value.
Reconditioning/ 6.16 EOU / EHTP / STP / BTP units may be set up with approval of BoA
Repair and to carry out reconditioning, repair, remaking, testing, calibration,
Re-engineering quality improvement, up-gradation of technology and re-engineering
activities for export in foreign currency. Provisions of paragraphs
6.8, 6.9, 6.10, 6.13, 6.14 of FTP and para 6.29 of HBP v1 shall
not, however, apply to such activities.
Replacement/ 6.17 (a) General provisions of FTP relating to export / import of
Repair of replacement / repair of goods would also apply equally to
imported/ EOU / EHTP / STP / BTP units. Cases not covered by these
Indigenous Goods provisions shall be considered on merits by DC.
(b) Goods sold in DTA and not accepted for any reasons, may
be brought back for repair / replacement, under intimation
to concerned jurisdictional Customs / Excise authorities.
(c) Goods or parts thereof, on being imported / indigenously
procured and found defective or otherwise unfit for use or
which have been damaged or become defective subsequently,
may be returned and replacement obtained or destroyed. In
the event of replacement, goods may be brought back from
foreign suppliers or their authorized agents in India or
indigenous suppliers. The unit can take free of cost
replacement (duty paid) from the authorized agents in India
of foreign suppliers, provided the defective part is reexported
or destroyed. However destruction shall not apply
to precious and semi precious stones and precious metals.
Exit from 6.18 (a) With approval of DC, an EOU may opt out of scheme.
EOU Scheme Such exit shall be subject to payment of Excise and Customs
duties and industrial policy in force.
72
(b) If unit has not achieved obligations, it shall also be liable to
penalty at the time of exit.
(c) In the event of a gem and jewellery unit ceasing its operation,
gold and other precious metals, alloys, gem and other materials
available for manufacture of jewellery, shall be handed over
to an agency nominated by DoC, at a price to be determined
by that agency.
(d) An EOU/EHTP/STP/BTP unit may also be permitted by
Development Commissioner, to exit from the scheme at any
time on payment of duty on capital goods under the prevailing
EPCG Scheme for DTA Units. This will be subject to
fulfillment of positive NFE criteria under EOU scheme,
eligibility criteria under EPCG Scheme and standard
conditions indicated in HBP v 1.
(e) Unit proposing to exit out of EOU scheme shall intimate DC
and Customs and Central Excise authorities in writing. Unit
shall assess duty liability arising out of debonding and submit
details of such assessment to Customs and Central Excise
authorities. Customs and Central Excise authorities shall
confirm duty liabilities on priority basis, subject to the
condition that the unit has achieved positive NFE, taking
into consideration the depreciation allowed. After payment
of duty and clearance of all dues, unit shall obtain “No Dues
Certificate” from Customs and Central Excise authorities.
On the basis of “No Dues Certificate” so issued by the
Customs and Central Excise authorities, unit shall apply to
DC for final debonding.
In case there is no proceeding pending under FT(D&R) Act,
DC shall issue final debonding order within a period of 7
working days. Between “No Dues Certificate” issued by
Customs and Central Excise authorities and final debonding
order by DC, unit shall not be entitled to claim any exemption
for procurement of capital goods or input. Unit can, however,
claim Advance Authorisation / DEPB / Duty Drawback. Since
the duty calculations and dues are disputed and take a long
time, a BG / Bond / Installment processes backed by BG,
shall be provided for expediting the exit process.
(f) In cases where a unit is initially established as DTA unit with
machine procured from abroad after payment of applicable
import duty, or from domestic market after payment of excise
duty, and unit is subsequently converted to EOU, in such
cases removal of such capital goods to DTA after debonding
would be without payment of duty. Similarly, in cases where
a DTA unit imported capital goods under EPCG Scheme
and after completely fulfilling export obligation gets converted
73
into EOU, unit would not be charged customs duty on capital
goods at the time of removal of such capital goods in DTA
when debonding.
(g) An EOU / EHTP / STP / BTP Unit may also be permitted by
Development Commissioner to exit under Advance
Authorization as a one time option. This will be subject to
fulfillment of positive NFE criteria.
Conversion 6.19 (a) Existing DTA units, may also apply for conversion into an
EOU / EHTP / STP / BTP unit, and Income Tax benefits
under Section 10A and 10B will be available for plant,
machinery and equipment already installed.
(b) Existing EHTP / STP units may also apply for conversion /
merger to EOU unit and vice-versa. In such cases, units will
remain in bond and avail exemptions in duties and taxes as
applicable.
Monitoring of NFE 6.20 Performance of EOU / EHTP / STP / BTP units shall be monitored
by Units Approval Committee as per guidelines in HBP v1.
Export through 6.21 EOU/EHTP/STP/BTP are permitted to:
Exhibitions/
Export Promotion (i) Export goods for holding / participating in exhibitions abroad
Tours/Export through with permission of DC.
showrooms abroad/ (ii) Personal carriage of gold / silver / platinum jewellery,
Duty Free Shops precious, semi-precious stones, beads and articles.
(iii) Export goods for display / sale in permitted shops set up
abroad.
(iv) Display / sell in permitted shops set up abroad, or in
showrooms of their distributors / agents.
(v) Set up showrooms / retail outlets at International Airports.
Personal Carriage 6.22 Import / export through personal carriage of gem and jewellery items
of Import/Export may be undertaken as per Customs procedure. Export proceeds
Parcels Including shall, however, be realized through normal banking channel. Import
through Foreign / export through personal carriage by units, other than gem and
bound Passengers jewellery units, shall be allowed provided goods are not in
commercial quantity.
Export/Import 6.23 Goods including free samples, may be exported / imported by
by Post/Courier airfreight or through Foreign Post Office or through courier, as per
Customs procedure.
Administration of 6.24 Details of administration of EOUs and powers of Development
EOUs / Powers of Commissioner are given in HBP v1.
Development
Commissioner
74
Revival of 6.25 Subject to a unit being declared sick by appropriate authority,
Sick Units. proposals for revival of the unit or its take over may be considered
by BoA .
Approval of 6.26 In case of units under EHTP / STP Schemes, necessary approval /
EHTP/STP permission under relevant paragraphs of this Chapter shall be granted
by officer designated by Ministry of Communication and Information
Technology, Department of Information Technology, instead of
Development Commissioner, and by Inter-Ministerial Standing
Committee (IMSC) instead of BoA.
Approval of BTP 6.27 Bio-Technology Parks (BTP) would be notified by DGFT on
recommendations of Department of Biotechnology. In case of units
in BTP, necessary approval / permission under relevant provisions
of this chapter will be granted by designated officer of Department
of Bio-Technology.
75
CHAPTER-7 A
FREE TRADE & WAREHOUSING ZONES
The policy relating to Free Trade and Warehousing Zones is governed by SEZ
Act 2005, and the Rules framed thereunder.
CHAPTER-7
SPECIAL ECONOMIC ZONES
The policy relating to Special Economic Zones is governed by SEZ Act 2005,
and the Rules framed thereunder.
76
77
CHAPTER-8
DEEMED EXPORTS
Deemed Exports 8.1 “Deemed Exports” refers to those transactions in which goods
supplied do not leave country, and payment for such supplies is
received either in Indian rupees or in free foreign exchange.
Categories of Supply 8.2 Following categories of supply of goods by main / sub-contractors
shall be regarded as “Deemed Exports” under FTP, provided goods
are manufactured in India:
(a) Supply of goods against Advance Authorisation / Advance
Authorisation for annual requirement / DFIA;
(b) Supply of goods to EOUs or STPs or EHTPs or BTPs;
(c) Supply of capital goods to holders of Authorisations under
EPCG Scheme;
(d) Supply of goods to projects financed by multilateral or
bilateral agencies / Funds as notified by Department of
Economic Affairs (DEA), MoF under International
Competitive Bidding (ICB) in accordance with procedures
of those agencies / Funds, where legal agreements provide
for tender evaluation without including customs duty;
Supply and installation of goods and equipment (single
responsibility of turnkey contracts) to projects financed by
multilateral or bilateral agencies / Funds as notified by DEA,
MoF under ICB, in accordance with procedures of those
agencies / Funds, which bids may have been invited and
evaluated on the basis of Delivered Duty Paid (DDP) prices
for goods manufactured abroad;
(e) Supply of capital goods, including in unassembled /
disassembled condition, as well as plants, machinery,
accessories, tools, dies and such goods which are used for
installation purposes till stage of commercial production, and
spares to extent of 10% of FOR value to fertilizer plants;
(f) Supply of goods to any project or purpose in respect of
which the MoF, by a notification, permits import of such
goods at zero customs duty;
(g) Supply of goods to power projects and refineries not covered
in (f) above;
(h) Supply of marine freight containers by 100%EOU (Domestic
freight containers-manufacturers) provided said containers
are exported out of India within 6 months or such further
period as permitted by customs;
78
(i) Supply to projects funded by UN agencies; and
(j) Supply of goods to nuclear power projects through
competitive bidding as opposed to ICB.
Benefits of deemed exports shall be available under paragraphs (d),
(e), (f) and (g) only if the supply is made under procedure of ICB.
Benefits for 8.3 Deemed exports shall be eligible for any / all of following benefits in
Deemed Exports respect of manufacture and supply of goods qualifying as deemed
exports subject to terms and conditions as in HBP v1:-
(a) Advance Authorisation / Advance Authorisation for annual
requirement/ DFIA.
(b) Deemed Export Drawback.
(c) Exemption from terminal excise duty where supplies are made
against ICB. In other cases, refund of terminal excise duty
will be given.
Benefits to 8.4.1 (i) In respect of supplies made against Advance
the Supplier Authorisation / DFIA in terms of paragraph 8.2(a) of FTP,
supplier shall be entitled to Advance Authorisation / DFIA
for intermediate supplies.
(ii) If supplies are made against Advance Release Order (ARO)
or Back to Back Letter of Credit issued against Advance
Authorisation / DFIA in terms of paragraphs 4.1.11 and
4.1.12 of FTP, suppliers shall be entitled to benefits listed in
paragraphs 8.3(b) and (c) of FTP, wherever is applicable.
(iii) Deleted.
8.4.2 In respect of supply of goods to EOU / EHTP / STP / BTP in terms
of paragraph 8.2(b) of FTP, supplier shall be entitled to benefits
listed in paragraphs 8.3(a), (b) and (c) of FTP, whichever is
applicable.
8.4.3 In respect of supplies made under paragraph 8.2(c) of FTP, supplier
shall be entitled to the benefits listed in paragraphs 8.3(a), (b) and
(c) of the Policy, whichever is applicable.
8.4.4 (i) In respect of supplies made under paragraphs 8.2(d), (f)
and (g) of FTP, supplier shall be entitled to benefits listed in
paragraphs 8.3(a), (b) and (c), whichever is applicable.
(ii) In respect of supplies mentioned in paragraph 8.2(d), supplies
to projects funded by such agencies alone, as may be notified
by DEA, MoF, shall be eligible for deemed export benefits.
A list of such agencies/funds is given in Appendix 13 of
HBP v1.
(iii) Benefits of deemed exports under para 8.2(f) of FTP shall
be applicable in respect of items, import of which is allowed
79
by DoR at zero customs duty subject to fulfillment of
conditions specified under Notification No. 21/2002-
Customs dated 1.3.2002, as amended from time to time.
(iv) Supply of Capital goods and spares upto 10% of FOR value
of capital goods to power projects in terms of paragraph
8.2(g), shall be entitled for deemed export benefits provided
the ICB procedures have been followed at Independent
Power Producer (IPP) / Engineering and Procurement
Contract (EPC) stage. Benefit of deemed exports shall also
be available for renovation / modernization of power plants.
Supplier shall be eligible for benefits listed in paragraph 8.3(a)
and (b) of FTP, whichever is applicable. However, supply of
goods required for setting up of any mega power projects as
specified in S.No. 400 of DoR Notification No. 21/2002-
Customs dated 1.3.2002, as amended, shall be eligible for
deemed exports benefits as mentioned in paragraph 8.3(a),
(b) and (c) of FTP, whichever is applicable, if such mega
power project is :
(a) an inter state Thermal Power Plant of capacity of
1000MW or more; or
(b) an inter state Hydel Power Plant of capacity of 500
MW or more.
(v) Supplies under paragraph 8.2(g) of FTP to new refineries
being set up during Ninth Plan period and spilled over to
Tenth Plan period, shall be entitled for deemed export benefits
in respect of goods mentioned in list 17 specified in S.No.
228 of Notification No. 21/2002-Customs dated 1.3.2002,
as amended from time to time. Supplier shall be eligible for
benefits listed in paragraphs 8.3(a) and (b) of FTP, whichever
is applicable.
8.4.5 In respect of supplies made under paragraph 8.2(e) of FTP, supplier
shall be eligible for benefits listed in paragraph 8.3(a) and (b) of
FTP , whichever is applicable. Benefit of deemed exports shall be
available in respect of supplies of capital goods and spares to Fertilizer
Plants which are set up or expanded / revamped / retrofitted /
modernized during Ninth Plan period. Benefit of deemed exports
shall also be available on supplies made to Fertilizers Plants, which
have started in the 8th / 9th Plan periods and spilled over to 10th
Plan period.
8.4.6 Supplies of goods to projects funded by UN agencies covered under
para 8.2(i) of FTP are eligible for benefits listed in paragraph 8.3(a)
and (b) of FTP, whichever is applicable.
8.4.7 In respect of supplies made to Nuclear Power Projects under para
8.2(j) of FTP, the supplier would be eligible for benefits given in
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para 8.3(a), (b) and (c) of FTP , whichever is applicable. Supply of
only those goods required for setting up any Nuclear Power Project
specified in list 43 at S.No. 401 of Notification No. 21/2002-
Customs dated 1.3.2002, as amended from time to time having a
capacity of 440MW or more as certified by an officer not below
rank of Joint Secretary to Government of India in Department of
Atomic Energy, shall be entitled for deemed exports benefits in cases
where procedure of competitive bidding (and not ICB ) has been
followed.
Eligibility for 8.5 Supply of goods will be eligible for refund of Terminal Excise Duty
refund of terminal in terms of para 8.3(c) of FTP provided recipient of goods does not
excise duty / avail CENVAT credit / rebate on such goods. Similarly, supplies will
drawback be eligible for deemed export drawback in terms of para 8.3(b) of
FTP on Central Excise paid on inputs / components, provided
CENVAT credit facility / rebate has not been availed by applicant.
Such supplies will however be eligible for deemed export drawback
on customs duty paid on inputs / components.
8.5.1 Simple interest @ 6% per annum will be payable on delay in refund
of Duty Drawback and Terminal Excise Duty under deemed export
scheme in respect of reimbursements/refunds that have become due
on or after 01.04.2007 but which have not been settled within 30
days of its final approval for payment by the Regional Authorities of
DGFT organization.
Supplies to be 8.6.1 In all cases of deemed exports, supplies shall be made directly to
made by the designated Projects / Agencies / Units / Advance Authorisation /
main / sub- EPCG Authorisation holders. Sub-contractor may, however,
contractor make supplies to main contractor, instead of supplying directly to
designated projects / agencies. Such Supplies shall be eligible for
deemed export benefits as per procedure laid down in paragraph
8.4 of HBP v1.
8.6.2 Supplies made by an Indian sub-contractor of an Indian or foreign
main contractor directly to the designated projects / agencies, shall
also be eligible for deemed export benefits provided sub-contractor
is indicated either originally or subsequently in the contract, and
payment certificate is issued by project authority in the name of
sub-contractor as in Appendix 22C of HBP v1.
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CHAPTER-9
DEFINITIONS
9.1 For purpose of FTP, unless context otherwise requires, following
words and expressions shall have the following meanings attached
to them.
9.2 “Accessory” or “Attachment” means a part, sub-assembly or
assembly that contributes to efficiency or effectiveness of a piece of
equipment without changing its basic functions.
9.3 “Act” means Foreign Trade (Development and Regulation) Act, 1992
(No.22 of 1992) [FT(D&R) Act].
9.4 “Actual User” means an actual user who may be either industrial or
non-industrial.
9.5 “Actual User (Industrial)” means a person who utilises imported
goods for manufacturing in his own industrial unit or manufacturing
for his own use in another unit including a jobbing unit.
9.6 “Actual User (Non-Industrial)” means a person who utilises the
imported goods for his own use in
(i) any commercial establishment carrying on any business, trade
or profession; or
(ii) any laboratory, Scientific or Research and Development
(R&D) institution, university or other educational institution
or hospital; or
(iii) any service industry.
9.7 “AEZ” means Agricultural Export Zones notified by DGFT in
Appendix 8 of HBP v1.
9.8 Deleted
9.8.1 “Appeal” is an application filed under section 15 of the Act and
includes such applications prefered by DGFT officials in government
interest against decision by designated adjudicating / appellate
authorities.
9.9 “Applicant” means person on whose behalf an application is made
and shall, wherever context so requires, includes person signing the
application.
9.9.1 “Authorisation” means a permission as included in Section 2 (g) of
FT(D&R) Act to import or export as per provisions of FTP.
9.10 “BoA” means the Board of Approval as notified by DoC.
9.11 “BTP” means Biotechnology Park as notified by DGFT on
recommendation of Department of Biotechnology.
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9.12 “Capital Goods” means any plant, machinery, equipment or
accessories required for manufacture or production, either directly
or indirectly, of goods or for rendering services, including those
required for replacement, modernisation, technological upgradation
or expansion. It also includes packaging machinery and equipment,
refractories for initial lining, refrigeration equipment, power generating
sets, machine tools, catalysts for initial charge, equipment and
instruments for testing, research and development, quality and
pollution control. Capital goods may be for use in manufacturing,
mining, agriculture, aquaculture, animal husbandry, floriculture,
horticulture, pisciculture, poultry, sericulture and viticulture as well
as for use in services sector.
9.13 “Competent Authority” means an authority competent to exercise
any power or to discharge any duty or function under the Act or the
Rules and Orders made thereunder or under FTP.
9.14 “Component” means one of the parts of a sub-assembly or assembly
of which a manufactured product is made up and into which it may
be resolved. A component includes an accessory or attachment to
another component.
9.15 “Consumables” means any item, which participates in or is required
for a manufacturing process, but does not necessarily form part of
end-product. Items, which are substantially or totally consumed
during a manufacturing process, will be deemed to be consumables.
9.16 “Consumer Goods” means any consumption goods, which can
directly satisfy human needs without further processing and includes
consumer durables and accessories thereof.
9.17 “Counter Trade” means any arrangement under which exports/
imports from/to India are balanced either by direct imports/exports
from importing/exporting country or through a third country under a
Trade Agreement or otherwise. Exports/Imports under Counter
Trade may be carried out through Escrow Account, Buy Back
arrangements, Barter trade or any similar arrangement. Balancing
of exports and imports could wholly or partly be in cash, goods
and/or services.
9.18 “Developer” means a person or body of persons, company, firm
and such other private or government undertaking, who develops,
builds, designs, organises, promotes, finances, operates, maintains
or manages a part or whole of infrastructure and other facilities in
SEZ as approved by Central Government and also includes a codeveloper.
9.19 “Development Commissioner” means Development Commissioner
of SEZ.
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9.20 “DFRC” means Duty Free Replenishment Certificate.
9.21 “Domestic Tariff Area (DTA)” means area within India which is
outside SEZs and EOU/ EHTP/ STP/BTP.
9.22 “Drawback” in relation to any goods manufactured in India and
exported, means rebate of duty chargeable on any imported material
or excisable material used in manufacture of such goods in India.
Goods include imported spares, if supplied with capital goods
manufactured in India.
9.23 “EHTP” means Electronic Hardware Technology Park.
9.24 “EOU” means Export Oriented Unit for which an LOP has been
issued by Development Commissioner.
9.25 “Excisable goods” means any goods produced or manufactured in
India and subject to a duty of excise under Central Excise and Salt
Act 1944 (1 of 1944).
9.26 “Exporter” means a person who exports or intends to export and
holds an IEC number, unless otherwise specifically exempted.
9.27 “Export Obligation” means obligation to export product or products
covered by Authorisation or permission in terms of quantity, value
or both, as may be prescribed or specified by Regional or competent
authority.
9.27.1 “FTP” means the Foreign Trade Policy which specifies policy for
exports and imports under section 5 of the Act.
9.28 “Group Company” means two or more enterprises which, directly
or indirectly, are in a position to —
(i) exercise twenty-six per cent, or more of voting rights in other
enterprise; or
(ii) appoint more than fifty percent, of members of board of
directors in the other enterprise.
For group companies to claim benefits or have their exports counted
for benefits to be claimed by another member of group, the group
company should have been in existence at least 2 years prior to
date of application under any of export promotion schemes notified
in FTP.
9.29 “HBP v1” means the Handbook of Procedures (Vol.1) and
“HBP v2” means Handbook of Procedures (Vol.2) published under
provisions of paragraph 2.4 of FTP.
9.30 “Importer” means a person who imports or intends to import and
holds an IEC number, unless otherwise specifically exempted.
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9.31 “Infrastructure facilities” means industrial, commercial and social
infrastructure or any other facility for development of SEZ as notified.
9.32 “ITC(HS)” means ITC(HS) Classifications of Export and Import
Items Book.
9.33 “Jobbing” means processing or working upon of raw materials or
semi-finished goods supplied to job worker, so as to complete a
part of process resulting in manufacture or finishing of an article or
any operation which is essential for aforesaid process.
9.34 Deleted
9.35 “Licensing Year” means period beginning on the 1st April of a year
and ending on 31st March of following year.
9.36 “Managed Hotel” means hotels managed by a three star or above
hotel/ hotel chain under an operating management contract for a
duration of at least three years between operating hotel/ hotel chain
and hotel being managed. Management contract must necessarily
cover the entire gamut of operations/ management of managed hotel.
9.37 “Manufacture” means to make, produce, fabricate, assemble, process
or bring into existence, by hand or by machine, a new product having
a distinctive name, character or use and shall include processes such
as refrigeration, re-packing, polishing, labelling, Re-conditioning
repair, remaking, refurbishing, testing, calibration, re-engineering.
Manufacture, for the purpose of FTP, shall also include agriculture,
aquaculture, animal husbandry, floriculture, horticulture, pisciculture,
poultry, sericulture, viticulture and mining.
9.38 “Manufacturer Exporter” means a person who exports goods
manufactured by him or intends to export such goods.
9.39 “MAI” means Market Access Initiative Scheme notified by
Department of Commerce.
9.40 “Merchant Exporter” means a person engaged in trading activity
and exporting or intending to export goods.
9.40.1 “NC” means the Norms Committee in the Directorate General of
Foreign Trade, for recommending grant of Authorisations under Duty
Exemption Scheme and for recommending Input Output norms and
value addition norms to be notified by DGFT.
9.41 “NFE” means Net Foreign Exchange.
9.42 “Notification” means a notification published in Official Gazette.
9.43 “Order” means an Order made by Central Government under the
Act.
9.44 “Part” means an element of a sub-assembly or assembly not normally
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useful by itself, and not amenable to further disassembly for
maintenance purposes. A part may be a component, spare or an
accessory.
9.45 “Person” includes an individual, firm, society, company, corporation
or any other legal person including the DGFT officials.
9.46 “Policy” means FTP 2004-2009 as amended from time to time.
9.47 “Prescribed” means prescribed under the Act or the Rules or Orders
made thereunder or under FTP.
9.48 “Public Notice” means a notice published under provisions of
paragraph 2.4 of FTP.
9.49 “Raw material” means:
(i) basic materials which are needed for manufacture of goods,
but which are still in a raw, natural, unrefined or
unmanufactured state; and
(ii) for a manufacturer, any materials or goods which are required
for his manufacturing process, whether they have actually
been previously manufactured or are processed or are still in
a raw or natural state.
9.49.1 “Regional Authority” means authority competent to grant an
Authorisation under the Act / Order.
9.50 “Registration-Cum-Membership Certificate” (RCMC) means
certificate of registration and membership granted by an Export
Promotion Council/ Commodity Board/ Development Authority or
other competent authority as prescribed in FTP or HBP v1.
9.51 “Rules” means Rules made by Central Government under Section
19 of the Act.
9.52 “Services” include all tradable services covered under General
Agreement on Trade in Services and earning free foreign exchange.
9.53 “Service Provider” means a person providing
(i) Supply of a ‘service’ from India to any other country;
(ii) Supply of a ‘service’ from India to service consumer of any
other country in India; and
(iii) Supply of a ‘service’ from India through commercial or
physical presence in territory of any other country.
(iv) Supply of a ‘service’ in India relating to exports paid in free
foreign exchange or in Indian Rupees which are otherwise
considered as having being paid for in free foreign exchange
by RBI.
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9.54 “SEZ” means Special Economic Zone notified by Ministry of
Commerce & Industry, Department of Commerce.
9.55 “Ships” mean all types of vessels used for sea borne trade or coastal
trade, and shall include second hand vessels.
9.56 “SION” means Standard Input Output Norms notified by DGFT in
HBP v2, 2004-09 / approved by Board of Approval.
9.57 “Spares” means a part or a sub-assembly or assembly for substitution,
that is ready to replace an identical or similar part or sub-assembly
or assembly. Spares include a component or an accessory.
9.58 “Specified” means specified by or under the provisions of this Policy
through Notification / Public Notice.
9.59 “Status holder” means an exporter recognized as Export House/
Trading House etc. by DGFT/ Development Commissioner.
9.59.1 “Stores” means goods for use in a vessel or aircraft and includes
fuel and spares and other articles of equipment, whether or not for
immediate fitting.
9.60 “STP” means Software Technology Park
9.61 “Supporting Manufacturer” means any person who manufactures
any product or part/ accessories/ components of that product. Name
of supporting manufacturer as well as the exporter must be endorsed
on export documents.
9.62 “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.
9.63 “Transaction Value” is as defined in Customs Valuation Rules of
Department of Revenue.
9.64 Deleted
9.65 “Wild Animal” means any wild animal as defined in Section 2(36) of
Wildlife (Protection) Act, 1972.

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