EXPORT INCENTIVE SCHEME IN INDIA 2022
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EXPORT INCENTIVE SCHEME IN INDIA
Export incentives are economic assistance provided by the government to secure the foreign markets. We can say that export incentives are certain benefits that exporters receive from the government as concession for bringing in foreign exchange and as compensation for the costs they incur on sending goods and services out of the country. Government provides such incentives to boost the exports.
Many of the export incentives are formulated and implemented by Directorate General of Foreign Trade (DGFT).
Listed below are a few export incentives:
Export Promotion Capital Goods (EPCG) Scheme
EPCG Scheme facilitate import of capital goods for manufacturing quality goods and to strengthen the competitiveness of India’s export.
EPCG scheme allows import of capital goods for pre-production, production and postproduction without the payment of customs duty. However, the scheme is subject to a condition that the business have to bring in foreign currency which should be equal to 6 times of duty saved on such importation of capital goods within 6 years of availing benefit of this scheme.
Capital goods here means
·??????Any plant, machinery, equipment or accessories required in manufacture or production or for rendering services and include packaging machinery and equipment, refrigeration equipment, power generating sets, machine tools, equipment and instruments for testing.
·??????Computer systems and software which are a part of the capital goods being imported
·??????Spares, moulds, dies, jigs, fixtures, tools & refractories
·??????Catalysts for initial charge plus one subsequent charge.
Import of capital goods for project imports notified by central board of excise and customs is also permitted under EPCG scheme.
An application is required to filed with the authority. The application shall be attached with the required documents along with the company and personal details.
EPCG license authorisation shall be valid for a period of 18 months from the date of authorisation.
Second?hand goods of any nature are not permitted under EPCG scheme.
In case integrated tax and compensation cess is paid in cash on imports under EPCG, incidence of the same would not be taken for computation of net duty saved, provided the ITC is not availed.
Incentives for early export obligation fulfilment:
Where the authorization holder has fulfilled 75% or more of 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.
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Raw materials & inputs related incentives: Allows duty-free import of raw materials for export production.
1.????Advance authorization scheme:
Advance authorization scheme is a scheme where the import of inputs will be allowed to be made duty-free if they are incorporated in a product which is going to be exported.
The following items can be imported without payment of duty under this scheme:
The inputs imported are exempt from duties like basic customs duty, additional customs duty, education cess, anti-dumping duty, safeguard duty and transition product-specific safeguard duty, integrated tax, and compensation cess.
Under advance authorization, the minimum value addition to be achieved is 15%. In case of tea, minimum value addition shall be 50%.
2.????Duty free import authorisation scheme (DFIA)
Duty free import authorization (DFIA) is a scheme under which duty-free import of inputs, oil, catalyst which is required for the production of export goods is allowed.
Basic customs duty is exempted under this scheme.
Minimum value addition of 20% is compulsory to be required to achieved.
The applicant shall file an application to regional authority concerned before starting export under DFIA.
Export shall be completed within 12 months from the date of online filing of application and generation of file number.
3.????Items under duty free import authorisation:
In case of products to be exported in which following inputs are incorporated, exporter shall be required to provide declaration regarding technical characteristics, quality and specification in shipping bill. The inputs are:
Finished goods related incentive’s
MERCHANDISE EXPORTS FROM INDIA SCHEME (MEIS).
MEIS intends to promote the exports of goods manufactured in India or produced in India.
Under MEIS duty scrips are given by the government as a reward to the exporter. The value of the scrips is ranging from 2% to 5% of the fob value of goods exported.
The following exports shall be ineligible under MEIS
????Supplies made from DTA units to sez units
????Export of imported goods covered under paragraph 2.46 of ftp
????Exports through trans-shipment, meaning thereby exports that are originating in third country but trans-shipped through India
????Deemed exports
????SEZ/ EOU /EHTP/ BTP /FTWZ products exported through DTA units
????Export products which are subject to minimum export price or export duty
????Exports made by units in FTWZ.
SERVICE EXPORTS FROM INDIA SCHEME (SEIS)
Service exports from India scheme (SEIS) promote?the export of notified services from India. Under the scheme, service providers, located in India, would be rewarded?under the SEIS scheme,?for all notified export of services from India. Under the seis scheme, the government will give incentives in the range of 3% to 5% to all service providers who are providing services from India to organizations outside India.
The service provider should have minimum net free foreign exchange earnings of us$15,000 in year of rendering service to be eligible for duty credit scrip.
In case of sole proprietorship business and individual service providers, the minimum net free foreign exchange earnings for the preceding financial year should be $10,000 in order to be eligible for the duty credit scrip.
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For claiming reward under this scheme, the service provider should have an active iec(import export code) at the time of rendering such services.
The duty credit scrips can be used for paying customs duties for importing goods and inputs, service taxes on acquisition of services, excise duties on acquisition of input and capital goods, etc.
International markets
DUTY-FREE IMPORT OF GOODS/ PROCUREMENT BY SEZ:
A special economic zone is an area in which the business and trade laws are different from the rest of the country. SEZs aim to increase trade balance, employment, increased investment, job creation and effective administration.
An export promotion scheme name as ‘special economic zone’ (sez) was introduced in the export and import (exim) policy that aims to make sezs an engine for economic growth supported by quality infrastructure with an attractive fiscal package, both at the centre and the state level, with the minimum possible regulations.
Salient features of the SEZ scheme are:
??No licence required for import.
??manufacturing or service activities allowed.
??the sez unit shall achieve positive net foreign exchange to be calculated cumulatively for a period of five years from the commencement of production.?
??sez units will have freedom for subcontracting.
??no routine examination by customs authorities of export/import cargo.
Incentives for SEZS to enhance exports:
??Duty-free import of goods for development, operation, and maintenance of sez units.
??100 % income tax exemption on export income for sez units under section 10aa of the income tax act for first 5 years, 50 percent for the next 5 years.
??Tax holiday for sez developers in a block of 10 years in 15 years under section 80-iab of the income tax act.
??Tax exemption for offshore banking units in sez.
??Exemption from central sales tax, service tax, and state sales tax that have now been subsumed into the goods and services tax (gst) and supplies to sezs are zero-rated under the igst act, 2017.
??Single window clearance for central and state level approvals.
??Exemption from capital gains tax (subject to conditions)
FAQS:
1.????What is the purpose of export promotion schemes?
Export promotion schemes under foreign trade policy?provides promotional measures to boost India’s exports with the objective to offset infrastructural inefficiencies and associated costs involved to provide exporters a level playing field
2.????What are the main problems in export promotion in India?
4 problems exporters in India face are:
??Inadequate infrastructure.
??Low credit access.
??Document-heavy process.
??Trade barriers.
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3.????What is the benefit of EPCG scheme?
The main benefit of the EPCG scheme is importing capital goods with zero customs duty. Benefits under EPCG scheme can be applied by any exporter irrespective of his turnover.
4.????Who can benefit from the EPCG scheme?
Manufacturer exporters with or without supporting manufacturer, merchant exporters tied to supporting manufacturer and service providers.
5.????What is export obligation?
Export obligation means obligations to export products cover by advance authorisation or permission in terms of quantity, value or both as may be prescribed or specified by regional or competent authority.
6.????Who can apply for advance authorisation scheme?
Advance authorisation can be issued to:-
??Manufacturer exporter
??Merchant exporter tied to supporting manufacturer
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7.????What is duty free import authorisation scheme?
Duty free import authorization (DFIA) is a scheme under which duty-free import of inputs, fuel, oil, energy sources, a catalyst which is required for the production of export goods is allowed.
8.????What is DFIA scrip?
Dgft has created a facility to record the information about the transfer of DFIA scrips to facilitate paperless transactions and improving the ease of doing business.
9.????Can MEIS be used for payment of IGST?
The duty credit scrips cannot be used for payment of IGST (integrated goods and services tax) and gst compensation cess in imports, and CGST, SGST, IGST and GST compensation cess for domestic procurement.
10.?Can sez land be sold?
No. Land or built-up space in a sez cannot be sold, but can only be leased to a co-developer or unit holding a valid letter of approval.
11.?How much is the maximum deduction available to a company in sez?
The deduction shall be for 100 percent of income for five consecutive years beginning from the year in which permission/ registration has been obtained under the banking regulation act or the SEBI act or any other relevant law and 50 percent of income for next five years.