“DGFT”
- Trading Internationally
- Scheme for Service Exports from India (SEIS)
- Scheme for Export of Goods from India (MEIS)
- Capital Goods Export Promotion Scheme
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Trading Internationally
The Foreign Trade Policy (FTP) of India is typically created for five years at a time and reviewed once a year. The FTP’s main goals have been to establish a set of guidelines for imports and exports as well as incentives to encourage exports.
India had a very modest footprint on the global trade map fifteen years ago. Exports started to expand noticeably as many sectors of the Indian economy became more competitive on a global scale. Over the past ten years, from 2006–07 to 2016–17, India’s merchandise exports have grown at a compound annual growth rate (CAGR) of 8.1 percent, which includes the most recent period of fall brought on by the global downturn in the years after 2008–09.Similar to how exports increased as the nation’s economic growth rate did, imports increased at a CAGR of 7.5% during the same time period.
The Indian economy is now significantly reliant on foreign trade, which reflects the country’s growing globalization-related integration. Although the merchandise trade deficit has recently been at a manageable level, in part because of the low price of oil on the global market, the nation must continue to be vigilant and adamantly pursue the strategy of encouraging exports, improving domestic availability of key products, and rationalising our import policies.
Trade policy cannot be approached as a straightforward matter of manipulating the export or import of a product because a country’s trade performance is so intricately and inexorably interwoven with its entire economic performance. Domestic economic policies and foreign trade policy are closely related.
Long sectoral value chains have a final phase that is comprised of exports. An incomplete and probably impractical foreign trade policy is one that solely considers the front end of exports without taking into account the back end’s features. The establishment of a suitable environment for the front-end might also have a pulling impact on the industry in issue. Action is spread across a number of entities and stakeholders in each situation.In order to ensure that the framework of laws, procedures, and incentives for trade is contextualised within a composite approach to economic development, it is still the biggest difficulty to appropriately anchor important components of the foreign trade policy in the broader economic strategy.
The government of India launched a number of programmes to re-energize the economy, including “Make in India,” “Digital India,” “Skill India,” “Startup India,” and others that are currently at an advanced level of execution. India will become more competitive across a variety of product areas with better export possibilities as the already apparent effects of these actions get more pronounced. the huge FDI inflows into India and the expansion of product manufacture for things like cell phones and telecom equipment.are evidence of this trend.Therefore, the FTP for 2015-2020 tries to coordinate with such programmes and emphasises a “whole-of-Government” approach to foreign trade policy. As a result, the strategy looks for a vision with accompanying goals and objectives, then identifies the tactics and actions required to realise that vision, before laying out a framework of incentives.
Extensions and Modifications to the FTP 2015–20 and the Procedures Manual
The validity of the FTP 2015-20 and the Hand Book Procedure thereon has been extended by the Government of India through Notification No. 57/2015-2020 and Public Notice No. 67/2015-20, both dated March 31, 2020.
Scheme for Service Exports from India (SEIS)
The Foreign Trade Policy (2015-20) replaced the Served from India Scheme with the Service Exports from India Scheme (“SEIS”), an incentive programme for qualifying service exports (SFIS). In place of the several former programmes with various eligibility and usage requirements, it is intended to enhance exports of services that have been notified. In order to increase exports from SEZs, this strategy has also expanded SEIS benefits to units housed within SEZs.
For the purpose of levelling the playing field for exporters and compensating for inefficient infrastructure and related costs, SEIS offers greater benefits to service exporters.
| Eligibility requirements | Particulars |
|---|---|
| Financial | Minimum net free foreign exchange profits for the following during the applicable fiscal year:
|
| Not financial |
|
SEIS ineligible categories
The following will not be considered when determining eligibility under the program:-
- Foreign currency transfers
- connected to the financial services industry
- raising of all forms of loans in foreign currency;
- export revenue received from clients;
- issuing foreign equity through GDRs, ADRs, or other securities of a similar nature;
- issuing bonds in foreign currencies
- sale of financial products, such as securities, and
- Other accounts payable that are unrelated to services provided by banking institutions.
- derived from contract or regular work abroad (e.g. labour remittances)
- Payments made from the EEFC account for services rendered;
- Healthcare institutions’ foreign exchange transactions, including gifts and stock participation;
- Educational institutions’ foreign exchange transactions, including gifts and equity involvement;
- Export revenue from units providing services under the EOU, EHTP, STPI, or BTP schemes, or from services supplied to such units;
- Combining the service provider turnover of SEZ, EOU, EHTP, STPI, and BTP units with that of DTA service providers;
- Earnings in foreign currency from services rendered by shipping companies, airlines, and other service providers travelling on routes that don’t even touch India; and
- Providers of telecom services.
Utilization and Entitlement
| Entitlement | Utilization |
|---|---|
| A service provider of notified services is eligible for an incentive in the form of Duty Credit Scrip at notified rates on net foreign exchange generated, regardless of constitution or profile. | Scrips can be used to pay the basic customs duty incurred while importing inputs or commodities. |
| The current incentive rates range between 5% and 7%, depending on the type of services. Prior to November 1, 2017, the incentive rates were 3% and 5%. | No Charge Transferable The actual user requirement that allows for free transfer of the files is relaxed by FTP. The scrips can therefore be sold on the open market. |
Choosing the Importer Companies is an option
In some cases, the DGFT Authorities will give exporters duty credit scrip as an export benefit. An exporter may offer to sell tariff credit scrip to an importer on the open market at a reduced price since the scrip has not been used. It will help an importer to avoid paying any basic customs fees when importing products.
Please see the illustrated presentation below for a better understanding:
Application filing deadline
- A SEIS application must be submitted within 12 months of the conclusion of the claim period’s applicable financial year. For the fiscal year 2018–19, the deadline for submitting an SEIS application is March 31, 2020. Depending on the length of the delay, a late cut of between 2% and 10% will be assessed.
- After two years from the due date, the application cannot be submitted.
| Particulars | Credit given on time or earlier than the due date | Proposed late cut rate | Netz admissibility |
|---|---|---|---|
| If the application is submitted within six months of the previous filing date | 100% | 2% | 98% |
| If an application is submitted after six months but before a year has passed after the last filing date | 100% | 5% | 95% |
| If the application is received more than 12 months after the last filing date but less than 2 years afterwards. | 100% | 10% | 90% |
- A digital signature is used to submit the application online on an annual basis for a fiscal year.
Requirement
- Essential Requirement
- (IEC) Importer Exporter Code
- Certificate of Registration and Membership (“RCMC”): The Export Promotion Councils, Commodity Board, Development Entity, or another competent authority as specified in FTP issues the Membership Certificate.
- Digital Key: Necessary to submit an online SEIS application using the DGFT Portal.
- Documentation
- Master Service Agreements made with clients for the purpose of providing services;
- Together with copies of the invoices, the sale invoice register for the fiscal year;
- Bank advice or Foreign Exchange Inward Remittance Certificates (FIRCs) attesting to the receipt of foreign currency from clients;
- Co-connection sheet showing foreign currency received in relation to invoices raised throughout the course of the fiscal year; and
- Information on foreign currency payments made during the financial year for services.
The termination of MEIS
The Government of India has announced the discontinuation of MEIS and approved a new programme, but due to the Covid-19 Pandemic, the FTP 2015–20 is extended until March 31, 2021. Under the extended policy, exporters may continue to receive MEIS benefits through December 31, 2020, with a potential extension to March 31, 2021.
How can we help our customers?
- Determining each exported product’s eligibility.
- Preparation and submission of the application with the necessary certification and documents.
- Providing clarity and working with the department to get duty credit scrip.
- License registration with the customs division.
- Assistance with the market sale of cryptocurrencies.
- Transfer of scrips online by entering the necessary information on the DGFT website.
Capital Goods Export Promotion Scheme
In order to make it easier to import capital equipment for the production of high-quality goods and services and to increase India’s manufacturing competitiveness, the Export Promotion Capital Goods (“EPCG”) Scheme was established. The holder of an EPCG Authorization may also buy Capital Goods from a domestic producer.
EPCG Authorization Types
- Capital goods prior import: Except for those capital goods that are expressly excluded, the EPCG Scheme permits the import of capital goods for pre-production, manufacturing, and post-production for zero customs charge.
- After capital goods imports: EPCG is available from the department in the form of duty credit scrips, which can either be used to pay customs duties on imported goods or sold on the open market.
Except for items mentioned in the negative list in Appendix 5 F*, the EPCG Scheme permits the import of capital goods for pre-production, production, and post-production at zero customs charge. For the purposes of the EPCG plan, capital goods must include:
- Capital goods, including those in their CKD/SKD condition, as specified in Chapter 9.
- The software and computer hardware that make up the imported capital goods;
- Tools, jigs, fixtures, spare parts, moulds, dies, refractories, etc
- Catalysts for the first charge and one further charge.
In Public Notice No. 47/2015-20, issued December 6, 2017, the DGFT announced a list of capital items that are not eligible for the EPCG Scheme. The following is a list of capital goods:
- Each and every used capital commodities
- Printers and computers
- Tractors
- All-purpose, sports utility, and motor vehicles
- Ground handling equipment for airports
- Only the hotel sector is allowed to provide furniture, carpets, tableware, marble chandeliers, tiles, flooring, and doors for rooms.
Requirements for EPCG
- The export obligation of the authorization holder shall be satisfied by the export of items produced by him, his supporting manufacturer, or services provided by him.
- Imports made under the EPCG Scheme are subject to an export requirement that must be fulfilled six years after the authorization was issued. This obligation must equal the amount of tariffs, taxes, and cess saved on capital goods.
- The following procedures should be followed to fulfil export obligations:
| Starting with the day the authorization was issued | Minimum export obligation must be met |
|---|---|
| Exports of notified goods/products with ITC[HS] codes are eligible for rewards in the form of Duty Credit Scrip at notified rates on the realised FOB value of exports to notified markets as specified in Appendix 3B. | The basic customs duty on the import of inputs or goods can be paid with scrips. |
| The MEIS rate of rewards ranges from 2% to 5% for the majority of purchases, depending on the product. Sometimes, the MEIS rate is 7% as well. | No Charge Transferable The actual user requirement that allows for free transfer of the files is relaxed by FTP. The scrips can therefore be sold on the open market. |
- Early export obligation fulfilment incentive
The remaining export requirement may be waived if the authorization holder fulfils 75% or more of the export obligations and 100% of the average export obligations before the deadline.
- Failure to comply with an export obligation
If the export obligation is not met by the authorization holder during the first block, the term may be extended by the DGFT in exchange for payment of 2% of the duty saved.
- Extension of the export obligation period by six years
The DGFT may extend the export obligation period in exchange for payment of a specific percentage of duty saved, which may range from 5% to 20%.
Validity
The importation of capital goods must occur within 18 months of the date the authorization was issued because it is only valid for 18 months. EPCG Authorization revalidation is not permitted.
Current User Situation
The Actual User condition will apply to imported capital goods up until the export obligation is fulfilled.
How to apply for authorization under EPCG
EPCG Authorization Renewal
- The holder of the authorization should submit a redemption request to the DGFT Authority when the export obligation has been fulfilled.
- Holder must file the required paperwork and documentation showing that the Export Obligation was fulfilled in order to claim for redemption.
- When satisfied, the RA in question issues the EPCG licence holder a certificate of discharge of export obligations and sends a copy to the Customs Authorities with whom BG/LUT has been executed.
Capital Goods Post Import – EPCG
- On EPCG in the form of duty credit scrips, which may either be used to pay customs duty on imported products or sold on the open market, can be received from the department.
- The exporter may submit a request in the required format for duty credit scrip in proportion to the amount of export obligations fulfilled within the allotted time.
- In this instance, the primary documentation will be as follows:
- Evidence of capital goods tariff payments made
- Capital Goods Nexus and Installation Certificate(s)
- Evidence that an export obligation has been met
- Evidence of the preservation of the Average Export Obligation
Mandatory Conditions
- (IEC) Importer Exporter Code
- Certificate of Registration and Membership (“RCMC”)
- Digital signaturel0
- Pan Card
- Registering for Excise (if registered)
- GST Registration Document
- Formal Bill of Sale
- Capital goods brochure
- Self-Certified Copy + Original of Chartered Accountant Certificate attesting to the accuracy of the information, including export information and other records.
- Chartered Engineer, who certifies the information including the capital goods’ description, a step-by-step Process/Flow Chart showing the steps at which the capital goods are to be used, any stated wastage by the holder, etc.
How may we assist you?
- Determining whether capital goods are eligible for the EPCG Scheme.
- Preparation and submission of the application together with the necessary certificates and papers.
- Providing clarity and coordinating with the department to get EPCG authorization.
- Redemption of the EPCG authorization upon the fulfilment of the export duty.