The Foreign Trade Policy 2023 (FTP) offers various schemes intended to provide incentives to the exporters to compensate the costs incurred while exporting products. These incentives are subject to fulfilment of export obligations and other conditions as may be specified in the policy. The approach of the new FTP is to move away from incentive based regime and create an enabling ecosystem to support the philosophy of ‘Atmanirbhar Bharat’ and ‘Local goes Global’. The Foreign Trade Policy 2023 is focused on e-commerce exports, district level export initiatives, and easing guidelines to promote high technology exports. It is also focused on process re-engineering and automation to facilitate ease of doing business for the exporters.

Special Economic Zones

  • The Hon’ble Finance Minister had announced in her Budget Speech of FY 2021 - 22 that the Special Economic Zones Act will be replaced with a new legislation that will enable the States to become partners in ‘Development of Enterprise and Service Hubs’. This will cover all large existing and new industrial enclaves to optimally utilize available infrastructure and enhance competitiveness of exports.
  • Alongside the new legislation, reforms in the Customs Administration of Special Economic Zones would be undertaken. The administration would be fully information technology driven and function on the Customs National Portal with a focus on higher facilitation and with only risk-based checks. This will ease in doing business by SEZ units considerably.

Remission of Duties and Taxes on Exported products (RoDTEP) Scheme

Objective

  • The RoDTEP scheme reimburses embedded central, state, and local taxes and duties incurred by exporters in relation to exported goods including electricity duty, mandi tax, coal cess, and other local levies on fuel, toll tax, and stamp duty on import-export documentation, that are not compensated for under any other existing scheme.
  • The scheme is available in the form of duty credit /electronic scrips (e scrip) and would be allowed as a percentage of the FOB value of exports.

Highlights

  • The scheme is implemented with end-to-end digitization. The entire process of generation, tracking, utilization and transfer of scrips operates online and through the exporter’s electronic credit ledger maintained on the ICEGATE portal.
  • RoDTEP support is available to eligible exporters at a notified rate as a percentage of Freight on Board (FOB) value with value cap per unit of exported product. For certain products, a fixed quantum of rebate amount per unit is notified.
  • Incentives under RoDTEP are subject to the realisation of sales proceeds within the time frame allowed under the Foreign Exchange Management Act, 1999. Failure to receive money within the time frame shall result in recovery of rebates/ incentives along with penalty. Even suspension/withholding of RoDTEP can be invoked in case of frauds and misuse.
  • These e-scrips can be used for the payment of Basic Customs Duty leviable under First Schedule to the Customs Tariff Act of 1975. The exporters are required to keep records substantiating claims made under the scheme, for the purpose of audit and verification by authorities.
  • The benefit under the RoDTEP Scheme shall be in addition to the refunds being claimed under the GST Act.

Broad Process

  • To avail the scheme, exporters shall make a claim for RoDTEP in the shipping bill by making a declaration. It is mandatory for the exporters to indicate in their shipping bill whether or not they intend to claim RoDTEP on the export items.
  • Once the Export General Manifest is filed, the claim will be processed by Customs.
  • Once processed, a scroll with all individual shipping bills for admissible amount would be generated and made available in the users account at ICEGATE.
  • A robust monitoring and audit mechanism, with an information technology based Risk management system (RMS), would be put in place to physically verify the records of the exporters on sample basis. Exporters must maintain records substantiating their claims for audit purposes. Additionally, an Output Outcome Framework will be maintained for broad-level monitoring and reviewed at regular intervals.
  • User can create RoDTEP credit ledger account under Credit Ledger tab. This can be done by IEC holders who have registered on ICEGATE with a DSC.
  • The exporter can log into his account and generate scrip after selecting the relevant shipping bills.

Advance Authorization

Objective

  • Advance Authorisation is a scheme that entitles the applicant to undertake duty free import of inputs, which are physically incorporated in the export product (making normal allowance for wastage). In addition to the inputs, packaging materials, fuel, oil, and catalyst which is consumed/utilized in the process of production of export product, may also be allowed.
  • The quantity of inputs allowed for a given product is based on specific norms defined for that export product, which considers the wastage generated in the manufacturing process. DGFT provides a sector-wise list of Standard Input-Output Norms (SION) under which the exporters may choose to apply. Alternatively, exporters may apply their own ad-hoc norms in cases where the SION does not suit the exporter.

Eligibility Applicant/ Export/ Supply Criteria

  • Advance Authorisation and / or material imported under Advance Authorisation shall be subject to ‘Actual User’ condition. This means that the actual user alone will be allowed to import the goods. The authorization shall not be transferable even after completion of export obligation. The holder will have the option to dispose of the product manufactured out of duty-free input once export obligation is completed
  • Since Advance Authorisation Scheme comes with an ‘Actual User’ condition, it can be issued to either manufacturer exporter or merchant exporter tied with a supporting manufacturer.

  • Advance Authorisation shall be issued for:

    1. Physical exports including export to SEZ units.

    2. Intermediate supply

    3. Supply of specific categories of goods as specified in Foreign Trade Policy, including deemed exports such as supply of goods to EOU/EHTP/STP/BTP, supply against Advance Release Order/Invalidation Letter, and supply to UN organizations and specified international agencies.

    4.Supply of ‘stores’ on board of foreign going vessel / aircraft, subject to condition that there is specific Standard Input Output Norms in respect of item supplied.

Eligibility Condition

  • Exporters having past export performance (in at least the preceding 2 financial years) shall be entitled to advance authorisation for Annual requirement. 
  • Entitlement in terms of CIF value of imports shall be up to 300% of the FOB value of physical export and / or FOR value of deemed export in preceding financial year or Rs 1,00,00,000, whichever is higher.

Other Highlights

  • The inputs imported shall be subject to pre-import condition and they shall be physically incorporated in the export product (making normal allowance for wastage). In case of local procurement under invalidation/ARO, the inputs shall be procured prior to manufacture of export item and shall be physically incorporated in the export product.
  • Minimum value addition is required to be achieved as per the policy.
  • Advance authorization is valid for 12 months from the date of issue of such authorization
  • Export proceeds shall be realized in freely convertible currency except otherwise specified. Provisions regarding realization and non-realization of export proceeds are provided in the Foreign Trade Policy.
  • Export to SEZ Units shall be considered for discharge of export obligation subject to the condition that payment is realized from the Foreign Currency Account of the SEZ unit.

Export Promotion Capital Goods (EPCG) Scheme

Objective

The objective of the EPCG Scheme is to facilitate import of capital goods for producing quality goods and services and to enhance India’s manufacturing competitiveness. EPCG Scheme allows import of capital goods for pre production, production, and post-production at zero customs duty. Capital goods imported under EPCG Authorisation for physical exports are also exempt from the levy of IGST and Compensation Cess as applicable on imports up to 30 June 2022.

Capital Goods Covered under the Scheme

  • EPCG Authorisation shall be valid for import for 24 months from the date of issue of authorisation. Revalidation of EPCG authorisation shall not be permitted.EPCG Authorisation shall be valid for import for 24 months from the date of issue of authorisation. Revalidation of EPCG authorisation shall not be permitted.Capital Goods for the purpose of the EPCG Scheme shall include.

  • Advance Authorisation shall be issued for:

    1. Capital goods as defined under the scheme.

    2.Computer Systems and software which are part of Capital Goods being imported.

    3. Spares, molds, dies, jigs, fixtures, tools & refractories and

    4.Catalysts for initial charge plus one subsequent charge.

Coverage

  • EPCG scheme covers manufacturer exporters, merchant exporters tied to supporting manufacturer(s) and service providers. The name of supporting manufacturer shall be endorsed by the EPCG authorisation before installation of the capital goods in the factory / premises of the supporting manufacturer.
  • The 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 conditions as specified.

Actual User Condition

Imported capital goods shall be subject to Actual User condition till export obligation is completed and Export Obligation Discharge Certificate (EODC) is granted.

Export Obligation (EO)

  • Export Obligation shall be fulfilled by the EPCG Authorisation holder through export of goods which are manufactured by him, or his supporting manufacturer / services rendered by him, for which the EPCG Authorisation has been granted.
  • Imports under the EPCG Scheme shall be subject to an export obligation equivalent to 6 times of duties, taxes and cess saved on capital goods, to be fulfilled in 6 years reckoned from the date of issue of Authorisation. 
  • Other EO as specified in the scheme shall be fulfilled.

Calculation of Export Obligation

  • In the case of direct imports, export obligation shall be reckoned with reference to actual duty saved amount. In the case of domestic sourcing, export obligation shall be reckoned with reference to notional Customs duties saved on FOR value.
  • Export proceeds realized in Indian Rupees as per FTP 2023 is also counted towards fulfillment of export obligation. EO can also be fulfilled by the supply of ITA-I items to DTA, provided realization is in free foreign exchange. Royalty payments received in freely convertible currency and foreign exchange received for R&D services shall also be counted for discharge under EPCG

 Post Export EPCG Duty Credit Scrips

  • Post Export, EPCG Duty Credit Scrips shall be available to exporters who intend to import capital goods on full payment of applicable duties, taxes and cess in cash and choose to opt for this scheme. 
  • Basic Customs duty paid on capital goods shall be remitted in the form of freely transferable duty credit scrips.

Incentive for early EO fulfilment

With a view to accelerating exports, in cases where Authorisation 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 Authorisation redeemed by RA concerned

 

 

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