Foreign Trade Policy and Special Economic Zone. Foreign Trade Policy. Agenda. Understanding Policy Organisation The Law Structure of Policy Important Schemes under FTP. Agenda. Fundamentals of SEZ Tax Incentives SEZ Act, 2005 [important provisions]
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Agenda • Understanding Policy • Organisation • The Law • Structure of Policy • Important Schemes under FTP
Agenda • Fundamentals of SEZ • Tax Incentives • SEZ Act, 2005 [important provisions] • SEZ Rules, 2006 [important provisions] • Concept and Procedure for Setting up of SEZ • Concept and Procedure for Setting up of SEZ unit • Supplies to SEZ by DTA unit • Supplies from SEZ to DTA units
U N D E R S T A N D I N G P O L I C Y
Understanding Policy • Foreign Trade Policy : • Drafted by Director General of Foreign Trade under the Ministry of Commerce. The governing Act is Foreign Trade Development Regulation Act, 1992 and Rules framed there under. • Implemented with the help of various other Departments mainly Customs, Excise and RBI. • In order to understand the co-relation, one must get familiar with the various laws and functions of various departments. • As far as implementation is concerned, the co-relation of Foreign Trade Policy with the following Acts, Laws and Regulations must be taken into account :
Understanding Policy • Customs Act, 1962 • Customs Tariff Act, 1975 • Foreign Exchange Management Act, 1999 • Central Excise Act, 1944 • Central Excise Tariff Act, 1985 • Industrial Policy Resolution, 1956. • Industries Development and Regulation Act, 1951 • Laws of Weights and Measures All the above Laws are primarily taken into account at the time of actual implementation of export/import activities. Physical movement of goods inward and outward is monitored mainly by Customs and Excise Field Formations which work under Department of Revenue [DoR], Ministry of Finance [MoF].
Ministry of Finance Dept. of Revenue C o n t d…
Understanding Policy • Export or import involves movement of goods as well as receipt/remittance of foreign exchange. • Though foreign exchange regulations are relaxed, monitoring of forex operations is still being carried out by Reserve Bank of India.
RBI Coverage Monitoring Foreign Exchange Inflow – on account of exports of goods and services Outflow – on account of imports of goods and services Governing Acts/Laws/Manual 1) Foreign Exchange Management Act 1999 2) Foreign Exchange Manual Tools: Master Circulars FEMA Notifications A.P. (DIR. Srs.) Circulars
In order to understand full implications of Foreign Trade Policy one must get himself familiarized with all the above mentioned departments and their working
Export and Trading Houses • Export Performance based Scheme. • The applicant has to make application depending on his total FOB/FOR export performance during the current plus the previous three years (taken together) upon exceeding limit [given in the table below].
Export and Trading Houses • For Export House (EH) Status, export Performance is necessary in at least two out of four years (i.e., Current plus previous three years).” The criteria is
Export and Trading Houses • Following two new facilities are provided to Status Holders [as per Annual Supplement to FTP]: • For status holders, a decision on conferring of ACP Status shall be communicated by Customs within 30 days from receipt of application with Customs; • 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. Contd……
Application Criteria • Application can be filed by 31st March. • Application is to be filed with Jurisdictional Regional Authority [RA] or in case of EOUs, Development Commissioner [DC]. • In case if export performance of EOU/SEZ is clubbed together with company/firm/group company in DTA, the application is to be made to Jurisdictional RA only. • Existing status holders who have applied for recognition before the expiry of their status would get a grace period of 6 months, which are pending for finalisation of the applications for grant of recognition. In other words, status holder continue to be recognized as Status holders even after the expiry of earlier status certificate i.e. till September, during grace period of 6 months.
List of documents for obtaining Status Certificate • Application in Aayaat Niryaat Form –ANF 3A • Self certified copy of IEC. • Self certified copy of valid RCMC. • Appendix 22B (BANK CERTIFICATE OF EXPORT REALISATION/ DEEMED EXPORTS FOR STAR EXPORT HOUSE CERTIFICATE). • Self certified copy of Power of Attorney if the signatory is other than Proprietor/Partner/Director. • Statement of exports duly certified by C.A & Bank as per format.
Focus Market Scheme [FMS] • Export of all products to the notified countries. • Entitlement – 2.5% of the FOB value of exports [w.e.f. 01.04.2006]. • List of Countries eligible for benefit under this scheme is given in Appendix 37C of HBPv1. • In the annual supplement to FTP, 10 new countries have been notified, which are: 1. MONGOLIA, 2. DJIBOUTI, 3. SUDAN, 4. GHANA, 5. COLOMBIA, 6. HONDURAS, 7. ALBANIA, 8. MACEDONIA, 9. BOSNIA- HRZGOVIN, 10. CROATIA. • Exports made by EOUs/EHTPs/BTPs who do not avail direct tax benefits/exemptions, will be eligible to get benefits under this scheme.
FMS • Following exports can not be taken into account: a. (i) Export of imported goods covered under Para 2.35 of FTP; (ii) Exports through transshipment, meaning thereby that exports 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; Contd…..
FMS 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; and
FMS 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. [Note: Sr. nos. l & m have been added by Annual Supplement to FTP]
Application Criteria • An application for exports made during 2006-07, 2007-08 and 2008-09 shall be filed separately, with RA concerned in ANF 3D along with documents prescribed therein. • Each application should contain not more than 50 shipping bills. • For exporter with more than 50 shipping bills in one year, multiple applications can be filed and supplementary cut (Para 9.4 of HBP v1) shall not be applicable. • Shipments from EDI Ports and Non-EDI Ports cannot be clubbed in one application.
Application Criteria • Port of registration for EDI enabled ports shall be any one EDI port of exports, as per the choice of the applicant. • In case of exports through non-EDI port, the port of registration shall be the relevant non EDI port of exports. Accordingly separate application shall be filed for each non-EDI port. • Eligibility of Focus Market (as in Appendix 37C) shall be determined from date of export as per Para 9.12 of HBP v1. • Last date for filing application should be considered as per Pol. Cir. No. 27 Dtd. 14.08.2008.
Application Criteria • Applicants are required to submit ‘proof of landing’ of export consignment. • Duty Credit scrip shall be granted on FOB value realized as per BRC / FIRC.
List of Documents • Application form as per ANF 3D. • Bank Receipt / Demand Draft / EFT details evidencing payment of application fee in terms of Appendix 21B. • Self Certified copy of IEC. • Self Certified copy of RCMC. • Original EP Copy of Shipping Bill. • Original Bank Realisation Certificate/FIRC • Self certified copy of Bill of Entry.
Corresponding Customs Notification • Customs Notification No. 90/2006 Dtd. 01.09.2006
Common Provisions for Schemes under Promotional Measures • Cenvat/Drawback: 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: 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.
Common Provisions for Schemes under Promotional Measures • TRA Facility: 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. • Imports Allowed: 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.
Common Provisions for Schemes under Promotional Measures • Free Transferability: Duty Credit scrip and items imported against it would be freely transferable, except under SFIS. • Exclusivity of Entitlement: For a shipment, benefit under any one of schemes covered in this Chapter can alone be claimed, at exporter’s option. • Import under Lease financing: 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.
Common Provisions for Schemes under Promotional Measures • Transfer of Export Performance: 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. • Jurisdictional RA / RA Concerned: Applicant shall have option to choose Jurisdictional RA on basis of Corporate Office, Registered Office, Branch Office address endorsed on IEC. However, once opted, no change would be allowed.
Common Provisions for Schemes under Promotional Measures • Jurisdictional RA / RA Concerned: Provisions contained in Chapter 2, 9 of this HBP shall apply to all Promotional Schemes. • Port of Registration: Duty Credit scrip (including splits) shall be issued with a single port of registration as per choice of applicant. After issue of Duty Credit Scrip, but before registration with Customs, the Applicant can change the port of registration from RA concerned. Before registration, authorities shall verify genuineness of Duty Credit scrip, from RA concerned, until EDI system of message exchange is put in place. [As amended by PN No.47 Dtd.08.07.08]
Common Provisions for Schemes under Promotional Measures • Facility for Split Scrips: Split certificates of Duty Credit scrip subject to a minimum of Rs 5 lakh each and multiples thereof may also be issued, on request at the time of application with different port of registration. A fee of Rs 1000/- each shall be paid for each split certificate. After issue, request of splits shall be permitted with same port of registration as appearing on the original scrip. The above procedure shall be applicable only in respect of EDI enabled ports. In case of exports through non-EDI ports, the facility of splits shall not be allowed, after issue of scrip.
Common Provisions for Schemes under Promotional Measures • Import from private / public bonded warehouses: Entitlement can be used for import from private / public bonded warehouses subject to fulfillment of paragraph 2.28 of FTP and terms and conditions of DoR notification. • Re-export of defective / unfit goods: Goods imported which are found defective or unfit for use, may be re-exported, as per DoR guidelines. Where Duty Credit scrip has been used for imports, Customs shall issue a certificate containing particulars of scrip used, date of import of re-exported goods and amount debited while importing such goods. Based on this certificate, upon application, a fresh Scrip shall be issued by concerned RA to extent of 98% of debited amount, with same port of registration and valid for a period equivalent to balance period available on date of import of the defective / unfit goods.
Common Provisions for Schemes under Promotional Measures • Validity Period & Revalidation: Duty Credit scrip shall be valid for a period of 24 months. Revalidation of Duty Credit scrip shall not be allowed. • Declaration of Intent on Free Shipping Bills: For export shipments filed under Free Shipping Bill category, for exports after 31.5.2008 of products / markets eligible under Chapter 3 of FTP (Appendix 37A, 37C, 37D, 37E), the exporter shall state the intention to claim benefits under chapter 3 of FTP by declaring on the Free Shipping Bills as under: ‘I/We, hereby, declare that I/We shall claim the benefits, as admissible, under Chapter 3 of FTP’.
Common Provisions for Schemes under Promotional Measures This declaration shall not be required for export shipments under any of the schemes of Chapter 4 (including drawback) or Chapter 5 of FTP. Further for products, markets notified during the year, this declaration shall be necessary for exports under Free Shipping Bills, only after a grace period of two months from the date of relevant public notice. Moreover for exports made prior to date of notification of products/ markets, such a declaration will not be required, since export shipments under Free Shipping Bills have already taken place.
Common Provisions for Schemes under Promotional Measures • Utilization of Duty Credit Scrips under Chapter 3 for payment of duty under EPCG Scheme: From 1.1.2009, the duty credit scrips issued under Chapter 3 of FTP can also be utilized for payment of duty against imports under EPCG Scheme. • Last date of filing of application for Duty Credit Scrips, except Para 3.8.6: Application for obtaining Duty Credit scrip shall be filed within a period of twelve months from date of exports or within six months from date of realization, or within three months from date of printing / release of shipping bill, whichever is later, in respect of shipments for which claim is being filed. For SFIS, last date shall be 31st December.
Important Amendments • PN No.47 Dtd.08.07.08 -Amends Para 3.23.3 - Port of Registration Port of registration mentioned in the Duty credit scrips [issued under the relevant provisions of Chapter 3 of FTP] can be changed after issue of scrip but before registration with Customs.
Important Amendments • Ntfn.No.31 Dtd.19.08.08 -FMS benefit can be claimed the supporting manufacturer as well • Benefits allowed under FMS now can be claimed by supporting manufacturer or by the company who has realised the foreign exchange directly from overseas. • In case supporting manufacturer is claiming benefits, he will have to obtain disclaimer from the company who has realised the foreign exchange.
Export Promotion Capital Goods Scheme • EPGC 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 fulfillment of export obligation. • Export Obligation [EO]: • EO equivalent to 8 times of duty saved on capital goods imported under EPCG scheme • EO is to be fulfilled over a period of 8 years reckoned from the date of issuance of Authorisation. • Where duty saved amount is Rs. 100 crores or more the same EO has to be fulfilled over a period of 12 years.
Important Provisions • Imports under EPCG: • The capital goods, including • 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 the EPCG scheme. • Import of restricted items under EPCG Scheme allowed to be imported after approval from the Exim Facilitation Committee at Headquarters.
Important Provisions • Imports under EPCG: • Import of Spares: Spares (including refurbished / reconditioned spares), tools, spare refractories and catalyst for existing plant and machinery (imported earlier, under EPCG or otherwise) is 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. Contd……
Important Provisions • Imports under EPCG: • Import of spares: • The application shall contain list of plant/ machinery installed in the factory/ premises of applicant, duly certified by Chartered Engineer or Jurisdictional Central Excise Authorities. • EPCG Authorisation must indicate the following: • Name of plant/machinery for which spares are required. • Value of duty saved allowed under the Authorisation. • Description of product to be exported with value of export obligation as per the Policy. Contd……
Important Provisions • Imports under EPCG: • Import of spares: • The installation certificate from Jurisdictional C.Excise Authority or independent Chartered Engineer shall be submitted by the importer within a period of three years from the date of import. [PN NO. 22/2007 (RE) DTD.17.07.2007 and PN No. 54/2007 Dtd. 01.10.2007]. • At the time of final redemption of export obligation Authorisation holder will have to submit certificate from the Independent Chartered Engineer confirming the use of spares, tools, spare refractories and catalysts in the installed capital goods on the basis of stock & consumption register maintained by Authorisation holder.
Important Provisions • Eligibility: The scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers. • Conditions for import of Capital Goods: Import of capital goods is subject to Actual User condition till the export obligation is completed.
Important Provisions • Incentives for Fast Track Companies: In cases where the Authorisation holder has fulfilled 75% or more of the export obligation under the Scheme (including average level of exports) in half or less than half the original export obligation period specified in the Authorisation, the remaining export obligation is condoned and the Authorisation redeemed by the licensing authority concerned.
Important Provisions • Indigenous Sourcing of Capital Goods • A person holding an EPCG Authorisation may source the capital goods from a domestic manufacturer instead of importing them. • The domestic manufacturer supplyingcapital goods to EPCG Authorisation holders are eligible for deemed export benefits • Advance Authorisation for critical components or raw materials or Deemed Export Drawback. and • Refund of terminal excise duty. • The domestic sourcing from EOU unit is also permitted. Such supply by EOU will be counted for the purpose of fulfillment of NFE.
Important Provisions • Port of Registration: • Single Port of Registration. TRA Facility is also allowed. • Execution of Legal Undertaking and Bank Guarantee: • Same provisions will apply as in case of Advance Authorisation
Important Provisions • Fulfillment of Export Obligation: • Export Obligation is 8 times of duty saved amount and it is to be fulfilled over a period of 8 years as under: