Export promotion and incentives
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The document summarizes various export promotion incentives and policies available to Indian exporters, including tax exemptions, duty drawbacks, import concessions, and special economic zones. It discusses sales tax/VAT exemptions, excise exemptions, duty drawback rates, income tax concessions, import concessions like the Export Promotion Capital Goods Scheme and Duty Free Import Authorization Scheme, and special zones like Special Economic Zones, Export Oriented Units, and Software Technology Parks that provide tax holidays and other benefits.
Export promotion and incentives
- 1. Export Promotion and Incentives INTERNATIONAL MARKETING MARZIEH ARIANFAR BIMS-UNIVERSITY OF MYSORE APRIL 2013
- 2. The various incentives/exemptions available to exporters in India : Sales Tax/VAT Exemption Excise Exemption Duty Drawback Income Tax Concessions Import Concessions Special Economic Zones Free Trade & Warehousing Zones Star Export Houses EOUs(Export Oriented Units), Electronic Hardware Technology Parks(EHTPs), Software Technology Parks(STPs),Bio-Technology Parks(BTPs) Deemed Exports
- 3. Sales Tax/VAT Exemption VAT at zero rate and full credit of input tax is also available to a dealer directly selling to an exporter provided the same goods are actually exported. - The exporter needs to provide the following documents as evidence of goods exported: Copy of export contract or order from a foreign buyer Copy of the customs clearance certificate Copy of the commercial invoice issued to the foreign buyer Copy of Bill of Lading/Air-Way Bill Proof of payment from the foreign purchaser or letter of credit
- 4. ‘ H ’ form The exporter can make use of 'H Forms' supplied by the CST (Central Sales Tax) authorities that are being continued even now in the VAT regime. - The application has to be supported by the following documents: Copy of Customs Certified Shipping Bill Copy of Customs Certified Invoice Copy of Letter of Credit Copy of Confirmed Export Order The supplier, on the other hand, can submit the following documents with his VAT return to justify zero rating of his particular sale to the exporter: Purchase order from exporter. Form 'H'. Copy of Bill of Lading/Air-Way Bill
- 5. Excise Exemption Excise is a tax on production or manufacture of goods. It is a duty levied on the production of goods and the liability of payment of excise duty arises immediately upon manufacture of goods. In India, excise duty is governed by the provisions of the Central Excise Act, 1944. - Exporters can avail excise clearance in the following ways: Exports under Claim of Excise Rebate Export under Bond
- 6. Procedure for Filing the Rebate Claim and its Sanction 1. Application in the prescribed form 2. Duplicate copy of ARE-I/ARE-II in sealed cover received from Customs Officer 3. Duly attested copy of Bill and Lading 4. Duly attested copy of shipping bill (export promotion copy) 5. Original copy of duly ARE-I/ARE-II duly endorsed by the Customs Officer certifying the export of the consignment 6. disclaimer certificate in case where the claimant is other than the exporter. - Export under Bond Under Rule 19 of Central Excise Rules, an exporter is permitted to remove excisable goods for export without payment of excise duty by executing a bond (legal undertaking) in favor of the excise authorities for the amount of the excise duty payable.
- 7. Duty Drawback Duty drawback is an incentive given to the exporters of different categories of goods under the “ Customs and Central Excise Duty Drawback Rules, 1995” The duty drawback scheme is administered by the Directorate of Duty Drawback in the Ministry of Finance, Government of India. -There are two types of drawback rates: All Industry Rates Brand/Special Brand Rates
- 8. Income Tax Concessions Under Section 10A of the Income Tax Act, 1961 undertaking operating from a Special Economic Zone (SEZ ) that manufactures articles/things or computer software are eligible for deduction of export profits. For undertaking commencing operation from the notified Special Economic Zones (SEZs) on or after 1st April, 2002, the tax holiday is available for a total period of seven assessment years, comprising of a deduction of 100% of export for five years followed by deduction of 50% of export profits for subsequent two years.
- 9. Import Concessions The Government of India has several schemes in place that allow the exporters to import inputs/ capital goods at concessional rates of import duty. The schemes are discussed below: Export Promotion Capital Goods Scheme (EPCG) Duty Free Import Authorization Scheme Duty Exemption Passbook Scheme (DEPB)
- 10. Export Promotion of Capital Goods Scheme (EPCG) what are capital goods? Capital goods are the things you need ,in order to manufacture your products or give your services.(including spares for pre production, production and post production) Examples: Textile machines, big agro-harvesting vehicles, expensive lab instruments for medicines, printing press for magazine/newspaper, sophisticated computer-server for your call center etc. What is Export Promotion Capital Goods Scheme? (EPCG) Under EPCG scheme, you can import these instruments (capital goods) at only 5% customs duty (some times zero duty). But it is subject to an export obligation ranging from 6 to 8 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 to 8 years reckoned from Authorization issue-date. This EPCG is part of India’s EXIM policy (Export-import)
- 11. Duty Free Import Authorization Scheme This scheme is the latest improvement announced in the Annual Supplement 2006 to the FTP 2004-09. The new scheme seeks to clubs the Advance Licensing scheme and the Duty Free Replenishment Certificate and were to come into effect from May 1, 2006. - Advance License can be issued for the following: Physical exports Intermediate supplies Deemed exports - An Advance License contains: 1. The names and description of items to be imported and exported/supplied. 2. The quantity of each item to be imported or wherever the quantity cannot be indicated, the value of the item shall be indicated 3. The aggregate CIF value of imports. 4. The FOB/FOR value and quantity of exports/supplies.
- 12. Duty Entitlement Passbook (DEPB) Scheme Under DEPB (Duty Entitlement Passbook) Scheme, exporters are allowed to claim customs duty credit as a specified percentage of FOB value of exports made in freely convertible currency. The objective of DEPB is to neutralize the incidence of Customs duty on the import content of the export product. The neutralization shall be provided by way of grant of duty credit against the export product. The scheme launched in 1997 is likely to be replaced by some superior alternative that is being worked out through a dialogue with the export community. Under the DEPB. The DEPB is valid for a period of 24 months from the date of issue.
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- 14. Special Economic Zones In order to create an internationally competitive and smooth working environment for exports in India, the Government of India formulated the Special Economic Zone policy on 1/4/2000. Under the current foreign trade policy, Special Economic Zone (SEZ) is defined as a specifically delineated duty free enclave that is deemed to be foreign territory for the purposes of trade operations and duties and tariffs. Goods and services going into the SEZ area from DTA (Domestic Tariff Area) are to be treated as exports and goods coming from the SEZ area into DTA are to be treated as imports.
- 15. The following facilities/incentives are available to units in SEZs: No license required for import. Exemption from customs duty on import of capital goods, raw materials, consumables, spares etc. Supplies from DTA (Domestic Tariff Area) to SEZ units treated as deemed exports. Reimbursement of Central Sales Tax paid on domestic purchases. 100% income tax exemption for a block of five years, 50% tax exemptions for two years and up to 50% of the profits ploughed back for the next three years under Section 10-A of Income Tax Act. SEZ units may be for manufacturing, trading or service activity. SEZ unit to be positive net foreign exchange earner within three years. 100% Foreign Direct Investment in manufacturing sector allowed through automatic route, barring a few sectors. Facility to realize and repatriate export proceeds within 12 months. cCont…
- 16. Facility to retain 100% foreign exchange receipts in EEFC(exchange earner’s foreign currency) Account. Re-export imported goods found defective, goods imported from foreign suppliers on loan basis etc. Domestic Sales on full duty subject to import policy in force. No fixed wastage norms. Full freedom for sub-contracting including sub-contracting abroad. Job work on behalf of domestic exporters for direct export allowed. No routine examination by Customs of export and import cargo. No separate documentation required for Customs and Exim Policy. In-house customs clearance. Support services like banking, post office clearing agents etc.
- 17. Free Trade and Warehousing Zones The units functioning out of such zones will be extended from: Income Tax Exemption as per Section 80-IA of the Income Tax Act Exemption from Service Tax Free foreign exchange currency transactions Other benefits as applicable to units in Special Economic Zones
- 18. Star Export Houses -Under the current foreign trade policy Merchants as well as Manufacturer exporters, service providers, Export Oriented Units (EOUs),and Units located in Special Economic Zones(SEZs),Agri Export Zone(AEZs), Electronic Hardware Technology Parks(EHTPs), Software Technology Parks(STPs),Bio-Technology Parks(BTPs) are eligible for applying for status as Star Export Houses. They are allowed license/certificate/permissions and Customs clearances for both imports and exports on self-declaration basis. Fixation of Input-Output norms on priority within 60 days. They are allowed exemption from compulsory negotiation of documents through banks. The remittance, however, needs to be received through banking channels. 100% retention of foreign exchange in EEFC account. They are permitted enhancement in normal repatriation period from180 days to 360 days. They are entitled for consideration under the Target Plus Scheme. They enjoy exemption from furnishing of Bank Guarantee in schemes under the foreign trade policy.
- 19. Deemed Exports Supply of goods against Advance License/Advance License for annual requirement. Supply of goods to Export Oriented Units. Supply of capital goods to holders of licenses under the Export Promotion Capital Goods (EPCG) scheme. Supply of goods to projects financed by multilateral or bilateral agencies. Supply of capital goods, including in unassembled/disassembled condition as well as plants, machinery, accessories, tools, dyes. Supply of goods to any project or purpose in respect of which the Ministry of Finance. Supply of goods to the power projects and refineries not covered in (vi) above. Supply of marine freight containers by 100% EOU. Supply to projects funded by UN agencies. Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding. Cont….
- 20. Deemed exports are allowed the following privileges: Advance License for intermediate supply/deemed export / DFRC (Duty Free Replenishment Certificate) / DFRC for intermediate supplies Deemed Export Drawback Exemption from terminal excise duty where supplies are made against International Competitive Bidding. In other cases, refund of terminal excise duty will be given.
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