foreign trade policy toolkit_june 2019.pdf · exim export-import fieo federation of indian exports...

Foreign Trade Policy

June 2019

Background

India’s Foreign Trade Policy (FTP) 2015-20, announced on 1 April 2015, has an objective to supportmanufacturing and service sectors with special emphasis on improving ease of doing business in the Country.The Policy introduces new schemes for exporters from India, including the Merchandise Exports from IndiaScheme (MEIS) and Service Exports from India Scheme (SEIS). Special focus on trade facilitation is also one ofthe features of Foreign Trade Policy of India 2015-20. The Ministry of Commerce and Industry undertook a mid-term review of the FTP post which a revised FTP 2015-20 was released on 5 December 2017. The highlights ofthe revised Policy include 24x7 Customs clearance facility for all types of bills of entry, increased MEIS and SEISrates for specified products and a new Self Ratification Scheme.

The objective of this Toolkit is to help investors understand the export – import landscape in India as a ready-to-use guide. It offers information on the existing ecosystem including key stakeholders such as the CentralGovernment and supporting agencies, various schemes and applicable governance and legislative framework,processes and procedures to start trading in India including setting up business and application processes toavail various incentives under MEIS, SEIS and other schemes. The Toolkit also covers existing trade facilitationagencies in India and mechanisms for grievance/ dispute redressal. Some excerpts of FTP 2015-20 are alsoprovided.

Readers are suggested to use this Toolkit as a reference guide and refer to various links for useful websites anddocuments for further reading.

AbbreviationsAA Advance AuthorizationANF Aayat Niryat FormASEAN Association of South- East Asian Nations and

other Allied ActivitiesACD Additional Custom DutyAOA Articles of AssociationASIDE Assistance to States for Developing Export InfrastructureBCD Basic Customs DutyBOA Board of ApprovalBTP Biotechnology ParkCAPEXIL Chemical and Allied Export Promotion Council of IndiaCBEC Central Board of Excise and CustomsCBIC Central Board of Indirect Taxes and CustomsCCI Chamber of Commerce and IndustryCDDO Cheque Drawing and Disbursing OfficerCEC Independent Chartered EngineerCENVAT Central Value Added TaxCEPA Comprehensive Economic Partnership AgreementCIN Corporate Identification NumberCIF Cost, Insurance and FreightCITD Capacity Building Initiative for Trade DevelopmentCQCTD Committee on Quality Complaint& Trade DisputeCVD Countervailing DutyDBK Duty Drawback ScheduleDEPB Duty Entitlement Passbook SchemeDFIA Duty Free Import AuthorisationDFRC Duty Free Replenishment CertificateDGAD Directorate General Of Anti- Dumping and Allied DutiesDGCI&S Directorate General Commerce

Intelligence and Statistics DGFT Directorate General of Foreign TradeDGT Director General of Tourism DIN Director Identification Number DOC Department of Commerce

DOR Department of RevenueDPIIT Department for Promotion of Industry &

Internal TradeDPIN Designated Partnership Identification NumberDSC Digital Signature CertificateDTA Domestic Tariff AreaECB External Commercial BorrowingED Excise DutyEDI Electronic Data InterchangeEEPC Engineering Export Promotion CouncilEHTP Electronic Hardware Technology ParkEIC Export Inspection CouncilEO Export ObligationEOU Export-oriented UnitEPC Export Promotion CouncilEPCG Export Promotion of Capital GoodsEPZ Export Processing ZoneEXIM Export-ImportFIEO Federation of Indian Exports OrganizationFOB Free on BoardFT Foreign TradeFTP Foreign Trade PolicyFTWZ Free Trade and Warehousing ZonesGATS General Agreement on Trade in ServicesGOI Government of IndiaGST Goods and services taxHBP Handbook of ProceduresIEC Import Export CodeIGST Integrated goods and services taxINR Indian RupeeIPCS Institute of Peace and Conflict StudiesITC (HS) Indian Trade Classification based on Harmonised System

of CodingLAC Latin America and Caribbean

AbbreviationsLCS Land Customs StationsLLPIN Limited Liability Partnership Identification NumberLOC Letter of CreditLOI Letter of IntentLOP Letter of PermissionMERCOSUR Southern Common MarketMEIS Merchandise Export from India SchemeMFN Most Favoured NationMMTC Metals & Minerals Trading Corporation of IndiaMOA Memorandum of AssociationNAFTA North American Free Trade AgreementNFE Net Foreign ExchangeNAMA Non-Agricultural Market AccessNSDL National Securities Depository Ltd.PAN Permanent Account NumberPD Protective DutyPSU Public Sector Undertaking PTA Preferential Trade AgreementRA Registered AuthorityRCMC Registration cum Membership CertificateROC Registrar of CompaniesROO Rules of OriginR&D Research & DevelopmentSAD Special Additional DutySCOMET Special Chemicals, Organisms, Materials, Equipment and

TechnologiesSD Safeguard DutySEIS Service Exports from India SchemeSEZ Special Economic ZoneSION Standard Input Output NormsSPS Sanitary and Phytosanitary MeasuresSSI Small Scale IndustriesSTA Special Trade AgreementSTC State Trading Corporation of India

STE State Trading EnterpriseSTP Software Technology Park

TBT Technical Barriers to TradeTED Terminal Excise DutyTR Treasury ReceiptTRIPS Trade Related Aspects of Intellectual Property RightsUTIITSL UTI Infrastructure Technology and Services Ltd. VAT Valued Added Tax WTO World Trade Organisation

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Legislative & governance framework: Acts & Schemes

Processes/ procedures► Mandatory documents to export/ import► Types of duties & levies► Setting up an EXIM unit► Application for MEIS/ SEIS/ EPCG/ Duty exemption/ remission schemes► Setting up export units: EOU/ EHTP/ STP/ BTP► Setting up export units: SEZ/ FTWZ► Incoterms

EXIM trade facilitation bodies

Dispute & grievance redressal

Excerpts from FTP 2015-20

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Ecosystem mappingGovernment bodies and agencies involved

Responsible for matters related to agriculture, NAMA, disputes and rules,SPS, TBT, TRIPS, labour & services/ trade facilitation w.r.t. functions of WTOand international bodies.

Facilitates and promotes exports in agriculture, marine, leather and sportsgoods, gems & jewelry, engineering goods etc.

Deals with trade promotion, policy, negotiation and other related activitieswith regions and countries (Africa, Latin America, Europe, ASEAN etc.)

Deals with international trade in tea, coffee, rubber and notified spices. Alsoimplements statutory and policy framework for production, developmentand marketing of related commodities.

Responsible for export and market development assistance, trade finance,implementation and monitoring of ‘Assistance to States for DevelopingExport Infrastructure and other Allied Activities (ASIDE)’ and matters relatedto EPZs/ EOUs, etc.

Dissects and analyses information on India’s trade performance with focuson improvement of exports.

Deals with appointments for various positions, maintenance of servicerecords, fixation of pay and grant of leave , gratuity etc. for Gazetted andNon-gazetted Officers.

Preparation & monitoring of budget of the Department of Commerce, adviceand review of financial expenditure, monitoring of schemes, release ofgrants etc.

Cadre management, administration, vigilance, policies & procedures relatingto purchase, inspections and payments, etc.

Ministry of Commerce and Industry

International Trade Policy Division

Foreign Trade Territorial Division

Export Products Division

Export Industries Division

Export Services Division

Economic Division

Administration & General Service Division

Finance Division

Supply Division

Ecosystem mappingGovernment bodies and agencies involved

Responsible for regulation and promotion of Foreign Trade with the aim of promotion and facilitationof exports/imports, keeping in view the interests of the country. DGFT also issues variousAuthorisations to exporters/Importers and monitors their obligations, various export incentives.

DIRECTORATE GENERAL OF FOREIGN TRADE

(DGFT)

Responsible for carrying out investigations and recommending, where required, under the CustomsTariff Act, the amount of anti-dumping duty/ countervailing duty on the identified articles as wouldbe adequate to remove injury to the domestic industry.

DIRECTORATE GENERAL OF ANTI-DUMPING AND ALLIED DUTIES (DGAD)

Entrusted with the work of collecting, compiling and publishing/ disseminating trade statistics andvarious types of commercial information required by the policy makers, researchers, importers,exporters, traders and overseas buyers.

DIRECTORATE GENERAL OF COMMERCIAL INTELLIGENCE &

STATISTICS (DGCI&S)

Payment and accounting of Supply Division are performed by the Office of Chief Controller ofAccounts (Supply Division) under the Departmentalized Accounting System. Payment to suppliers aremade through this Organization at New Delhi, Kolkata, Mumbai and Chennai.

PAY AND ACCOUNT OFFICE (SUPPLY,

COMMERCE AND TEXTILES)

The main objectives of the SEZ is generation of additional economic activity, promotion of exports ofgoods and services, promotion of investment from domestic and foreign sources, creation ofemployment opportunities along with the development of infrastructure facilities.

SPECIAL ECONOMIC ZONES (SEZ)

Ecosystem mappingSupporting agencies: PSUs handling EXIM

Undertakes exports/ imports of a diverse range of items to/from countries all over the world. Alsomonitors counter-trade commitments against Government purchases and import of technical andscientific equipment on behalf of forensic science laboratories, paramilitary organisations, etc.

STATE TRADING CORPORATION (STC)

Created in 1963 as an independent entity on separation from State Trading Corporation of India Ltd.primarily to deal in exports of minerals and ores and imports of non-ferrous metals. MMTC alsoimports and export various other items like steel, diamond, bullion, hydrocarbon, etc.

An export promotion organization, seeking to improve the competitiveness of the Indian exports byproviding them with credit insurance covers. It manages credit risks through insurance covers forexporters as well as banks and worthiness analysis of buyers/ bankers/ countries, etc.

EXPORT CREDIT GUARANTEE

CORPORATION OF INDIA LIMITED

A premier trade promotion agency of India and acts as a catalyst for growth of India’s trade throughparticipation in Indian and international trade fairs, supporting in access to market for SMEs,dissemination of trade information for e-commerce, etc.

INDIA TRADE PROMOTION

ORGANISATION

METALS & MINERALS TRADING CORPORATION

OF INDIA (MMTC)

Deals with export of projects, engineering equipment & manufactured goods, defence equipment &stores, import of industrial raw materials, bullion, diversification in export of non-engineering itemsedible oils, steel scraps and structuring counter trade/ special trading.

PEC LIMITED

Ecosystem mappingSupporting agencies: Autonomous bodies

Responsible for development of the marine-products industry with special preference to export units.Focus area of the Authority includes facilitating enhanced export of marine products from the Country.

MARINE PRODUCTS EXPORT DEVELOPMENT

AUTHORITY

Actively engaged in development of markets and upgradation of infrastructure to promote export ofagro products. It provides financial assistance to registered exporters and supervises export promotionof 14 agricultural and processed food product groups listed in the Schedule to the APEDA Act.

5 statutory Commodity Boards under the Department of Commerce are responsible for production,development and export of tea, coffee, rubber, spices and tobacco.COMMODITY BOARDS

Official export-certification body of India, which ensures that products notified under the Export(Quality Control and Inspection) Act 1963 meet the quality and safety standards of the importingcountries.

EXPORT INSPECTION COUNCIL (EIC)

AGRICULTURAL & PROCESSED FOOD

PRODUCTS EXPORT DEVELOPMENT AUTHORITY

Indian Institute of Plantations Management, Indian Institute of Packaging and Indian Institute ofForeign Trade are set up as autonomous institutions by the Ministry of Commerce to offer education,research, training, development and consultancy for industry and agencies in these sectors.

EDUCATION & RESEARCH INSTITUTES

EEPC is the premier trade and investment promotion organization in India, sponsored by the Ministryof Commerce. It is an advisory body that actively contributes to the policies of Government of Indiaand acts as an interface between the engineering industry and the Government.

ENGINEERING EXPORT PROMOTION COUNCIL

(EEPC)

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Excerpts from FTP 2015-20Special cases: Export and Import

A. Import of specific categories of goods:1. Import of samples

• No authorisation shall be required for import of bonafide technical and trade samples of items restricted in ITC (HS)except vegetable seeds, bees and new drugs. Samples of tea not exceeding INR 2,000 (CIF) in one consignment shall beallowed without an authorisation by any person connected with the tea industry.

• Duty free import of samples up to INR 300,000 for all exporters shall be allowed as per terms and conditions of CustomsNotification.

2. Re – import of goods repaired abroad• Capital goods, equipment, components, parts and accessories, whether imported or indigenous, except those restricted

under ITC (HS) may be sent abroad for repairs, testing, quality improvement or upgradation or standardization oftechnology and re-imported without an Authorisation.

3. Import of goods used in projects abroad• Project contractors after completion of projects abroad, may import without an authorisation, goods including capital

goods used in the project, provided they have been used for at least one year.

4. Import of prototypes

• Import of new/ second-hand prototypes/ second-hand samples may be allowed on payment of duty without anauthorisation to an actual user (industrial) engaged in production of or having industrial license/ letter of intent forresearch in item for which prototype is sought for product development or research, as the case may be, upon a self-declaration to that effect, to satisfaction of customs authorities.


A. Import of specific categories of goods:

5. Import policy for second-hand goods

S.No. Category Conditions

1 • Personal computers/ laptops including refurbished/ re-conditioned spares

• Photocopier machines/ digital multifunction print & copying machines • Air conditioners • Diesel generating sets

Restricted (Importable against authorization)

2 Refurbished/ re-conditioned spares of capital goods Free (Subject to production of chartered engineer certificate to the effect that such spares have at least 80% residual life of original spare.)

3 All other second hand capital goods [other than (1) & (2) mentioned above] Free

4 Second-hand goods other than capital goods Restricted (Importable against authorisation)

5 Second-hand goods imported for the purpose of repair/ refurbishing/ re-conditioning or re-engineering

Free (Subject to condition that waste generated during the repair/ refurbishing of imported items is treated as per domestic laws/ rules/ orders/ regulations/ technical specifications/ environmental/ safety and health norms and the imported item is re-exported back as per the Customs Notification.


B. Import of restricted goods:• An application for grant of an authorisation for import or export of items mentioned as ‘Restricted’ in ITC (HS) may be made

to the regional authorities (RA), with a copy to DGFT (Hqrs) in ANF 2M along with documents prescribed therein. Originalapplication along with treasury receipt (TR)/ demand draft shall be submitted to RA concerned and self-attested copy ofsame shall be submitted to DGFT in duplicate along with proof of submission of application to concerned RA.

Restricted-item authorisation may be granted by DGFT or any other RA authorised by the DGFT in his/her behalf.

C. Import of restricted items required by hotels, restaurants, travel agents, tour operators and other specifiedcategories:• Hotels, including tourist hotels, recognised by Director General of Tourism (DGT), GoI or a State Government shall be

entitled to import authorisation up to a value of 25% of foreign exchange earned by them from foreign tourists during thepreceding licensing year, for import of essential goods related to hotel and tourism industry.

• Travel agents, tour operators, restaurants, and tourist transport operators and other units for tourism, like adventure/wildlife and convention units, recognized by DGT, shall be entitled to import authorisation up to a value of 10% of foreignexchange earned by them during the preceding licensing year, for import of essential goods which are restricted for importsrelated to travel and tourism industry, including office and other equipment required for their own professional use.

• Such imported goods may be transferred after 2 years with permission of DGFT. No permission for transfer will be requiredin case the imported goods are re-exported. However, re-export shall be subject to all conditionality, or requirement oflicence, or permission, as may be required under Schedule II of ITC (HS).

• An application for grant of an authorisation to be made in ANF 2M to DGFT through DGT, who will forward the application toRA concerned along with their recommendations.


Source : Updated FTP 2015-20

D. Import of restricted items for R&D by units of the Government:• All restricted items and items permitted to be imported by STEs, except live animals, required for R&D purpose may be

imported without an authorisation by the GoI-recognized R&D units.

E. Import for export:1. Goods imported, in accordance with FTP, may be exported in same or substantially the same form without an authorisation

provided that item to be imported or exported is not restricted for import or export in ITC (HS).

2. Goods, including capital goods (both new and second hand), may be imported for export provided:

• Importer clears goods under Customs Bond;

• Goods are freely exportable, i.e., are not ‘restricted’/ ‘prohibited’/ subject to ‘exclusive trading through State Trading

Enterprises’ or any conditionality/ requirement as may be required under Schedule 2 – Export Policy of the ITC (HS);

• Export is against freely convertible currency

3. Goods in point 2 will include ‘restricted’ goods for import (except ‘prohibited’ items)

F. Export of repaired goods:• Goods or parts thereof, except restricted under ITC (HS), on being exported and found defective, damaged or otherwise

unfit for use may be imported for repair and subsequent re-export. Such goods shall be allowed clearance without an

authorisation and in accordance with the Customs notification unless imported exclusively for undertaking root cause

analysis, testing and evaluation purpose.



G. Import of Metallic waste and Scrap:

• Import of any form of metallic waste, scrap will be subject to the condition that it will not contain hazardous, toxic waste,radioactive contaminated waste/scrap containing radioactive material, any types of arms, ammunition, mines, shells, live orused cartridge or any other explosive material in any form either used or otherwise.

• Certain categories of ‘freely’ importable metallic waste and scraps (shredded) as notified shall be permitted through allports of India, subject to conditions.

• Importer has to furnish to the Customs a pre-shipment inspection certificate as per the notified format from any of theInspection & Certification Agencies, to the effect that the consignment was checked for radiation level and scrap does notcontain radiation level (gamma and neutron) in excess of the natural background.

• Importer shall also furnish copy of the contract with the exporter stipulating that the consignment does not contain anyradioactive contaminated material in any form.

• Import from Hodaideh, Yemen and Bandar Abbas, Iran will be in shredded form only.• The imported item(s) are actually metallic waste/ scrap/ seconds/ defective as per the internationally accepted parameters

for such a classification.• Import of scrap would take place only through the designated ports only.• Import of other kinds of metallic waste and scrap will be allowed in terms of conditions of ITC (HS).



H. Bonded Warehouses:

• Private/ Public bonded warehouses may be set up anywhere in the country as per the rules, regulations and notificationsissued under the Customs Act, 1962.

• Any person may import goods except prohibited items, arms & ammunition, hazardous waste and chemicals and warehousethem in such bonded warehouses.

• On receipt of goods, such warehouses shall keep these goods without the payment of applicable customs duties until theirclearance from the warehouse.

• With the permission of the Customs authorities, the owner of any bonded goods may carry on any manufacturing process orother operations in the bonded warehouse in relation to the warehoused goods.

• Warehoused goods can be cleared against Bill of Entry for home consumption, on payment of customs duty and onsubmission of authorisation wherever required, after an order for clearance of such goods for home consumption is issuedby competent customs authorities.

• Customs duty as applicable shall be paid at the time of clearance of such goods from the bonded warehouse and suchclearance of the warehoused goods shall be as per the rules, regulations and notifications issued under the Customs Act,1962.

• Clearance against duty-free categories/ concessional duty categories, exemption/ concession from duty shall be allowed.• Finished goods can be exported without payment of deferred customs duty on the imported inputs, provided shipping bill or

a bill of export is presented in respect of such goods; and order for export of such goods has been made by competentcustoms authorities.

Excerpts from FTP 2015-20Ease of Doing Business


• Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentarycompliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment ofgoods.

• The Government of India has been taking various initiatives to increase the ease of doing business in India.• As a first initiative in this direction, number of mandatory documents required have been reduced to 3 each for export and

import. Earlier 7 documents were required for exports and 10 for imports.• In addition, a number of measures have been introduced for reducing the cost and time of export and import-related

operations.• Several initiatives have been taken or are in the pipeline for simplification of procedures and digitization of various

processes involved in trade transactions in consultation with various Ministries and Departments.• Initiatives such as self-certification of various export and import documents and innovative revenue models are being

implemented to improve the ease of doing business in India.• Indian Customs has introduced SWIFT (Single Window Interface for Facilitating trade) w.e.f. 1 April 2016 for ensuring ease of

doing business. Benefits of Single Window Scheme include:– Reduced cost of doing business– Enhanced transparency– Reduced duplicity and cost of compliance– Optimal utilization of manpower

• With the aim of ease of doing business and promoting paperless clearance, the Central Board of Indirect Taxes & Customshas done away with routine print-outs of several documents including GAR 7 Forms/ TR6 Challans, TP copy, ExchangeControl copy of Bill of Entry and Shipping Bills and Export Promotion copy of Shipping Bill.

Excerpts from FTP 2015-20Indian Trade Classification


Indian Trade Classification (Harmonised System) [ITC (HS)] of Exports and Imports

1. ITC (HS) is a compilation of codes for all merchandise/ goods for export/ import.2. Goods are classified based on their group or sub-group at 2/ 4/ 6/ 8 digits.3. ITC (HS) is aligned at 6 digit level with International Harmonized System Goods Nomenclature maintained by World

Customs Organization. However, India maintains National Harmonized System of Goods at 8 digit level for import goodsand export goods.

4. The import/ export policies for all goods are indicated against each item in ITC (HS). Schedule 1 of ITC (HS) lays down theImport Policy regime while Schedule 2 of ITC (HS) details the Export Policy regime.

a. Schedule I of the ITC-HS code is divided into 21 sections and each section is further divided into chapters. The totalnumber of chapters in Schedule-I is 98. The chapters are further divided into sub-headings under which different HScodes are mentioned.

b. Export Policy Schedule-II of the ITC-HS code contains 97 chapters giving all the details about the guidelines related tothe export policies.

5. Exports and imports shall be ‘free’ except when regulated by way of ‘prohibition’, ‘restriction’ or ‘exclusive trading throughState Trading Enterprises (STEs)’ as laid down in Indian Trade Classification (Harmonized System) [ITC (HS)] of Exports andImports.

6. Except where it is clearly specified, Schedule-I of ITC (HS), Import Policy is for new goods and not for the second-handgoods. For second-hand goods, the Import Policy regime is given in Para 2.31 of the FTP.

7. Any changes or formulation or addition of new codes in ITC-HS Codes are carried out by DGFT (Directorate General ofForeign Trade). Commodity description, weeding out of defunct codes, addition of new codes, change of productdescription, etc., are taken up periodically as a part of the ongoing process towards perfection.

http://dgft.gov.in/sites/default/files/Ischedule1.pdfhttp://dgft.gov.in/sites/default/files/Eschedule2.pdf

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GST- Imports • Import of goods to India is treated as inter-state supply. Therefore, Integrated Goods and Service Tax (IGST) is levied on

import of goods• After introduction of GST, CVD and SAD have been replaced with IGST• IGST and Basic Customs Duty are the main components in determining the total import duty payable at Customs at the

time of import of goods to India• For imports, IGST is computed on transaction value of imported goods plus duties and taxes etc. charged under any

statute other than the GST Law.

GST- Exports• Exports are treated as zero-rated supplies. No tax will be payable on exports of goods or services, however credit of input

tax credit will be available and same will be available as refund to the exporters.

Duties applicable to imports:• Basic Customs Duty• Additional Duty of customs• Antidumping Duty*• Tariff Duty• Safeguard Duty*• IGST Levy

* These duties are not applicable to all imports

Sr. No. Particulars Rate* Amount(in INR)

I. PROCUREMENT

A Value of goods imported 100.00

B BCD 10% 10.00

C SWS** (on BCD) 10% 1.00

D IGST (on A+B+C) 28% 31.08Total Landed Cost (Imports)

142.08

E Value of goods procured locally (Vendor’s sale price + Profit Margin) 100.00

F IGST or CGST+SGST 28% 28.00

Total Landed Cost (Local Procurements) 128.00

Total Landed Cost 270.08

Total Tax Cost 70.08

Duties and GST- Applicability to international tradeIllustration – Duty payable

Sr. No. Particulars Rate* Amount(in INR)

II. SALES

E Add: Profit margin (say 20%) 54.02

F Transaction Value under GST 324.10

G IGST or CGST+SGST on supply 28% 90.75

Invoice Value 414.85

Notes:

• Tax highlighted in blue are non-creditable and in green are creditable. Note that out of the tax cost of INR 70.08, tax costamounting to INR 59.08 is creditable under GST law.

• These rates are only indicative. Applicable rate for goods intended to be procured will have to be evaluated independentlywith credit applicability.

• The Anti-Dumpling Duty, Safeguard Duty & Tariff Duties are product and country-specific and will be applicable on theimported goods as notified.

• SWS on IGST is exempted vide Notification No. 13/2018 - Customs dated 2 February 2018. Hence, SWS is not applicable onIGST element of import duties.

Duties and GST- Applicability to international tradeIllustration – Duty payable

Activity IGST SGST CGST Customs Duty

Import of goods a X x a

Inter-state sale/ purchase (supply) of goodsa x x x

Intra-state sale/ purchase (supply) of goodsx

a a X

Import of service a x x x

Inter-state sale/ purchase (supply) of service a x x x

Intra-state sale/ purchase (supply) of service x a a x

Inter-state stock transfer of goods a x x x

Intra-state stock transfer of goods x x x x

Export of goods x x x x

a – Eligible Input Tax Credita – Ineligible Input Tax Credit

• IGST is applicable on import of service as per the IGST Act. Further, the entity may be liable to

pay IGST on reverse charge mechanism, as applicable.

• Export of service is zero rated supply as per IGST Act.

Duties and GST- Applicability to international tradeSummary of applicable taxes

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Legislative & governance framework Schemes for various categories of goods

a) Merchandise Exports from India Scheme (MEIS)b) Service Exports from India Scheme (SEIS)

Duty exemption schemes:a) Advance Authorization/ Annual Advance Authorizationb) Duty Free Import Authorization

Raw materials & inputs

Allows duty free import of raw materials for export production

Export Promotion Capital Goods Scheme (EPCG Scheme)Capital goods &

machinery

Allows duty free import of machinery & equipment for export production and services

Finished goodsDuty Credit Scrips are provided against exports that can be used to pay duties/ taxes

SEZs/ EOUs/ FTWZsInternational

markets

• Special status• Duty free procurements for

exports• TED exemptions/ refund• Export/ Deemed export

considered for DTA supplier

Category Schemes Description

Legislative & governance framework Schemes: Merchandise Export Import Scheme

Introduced to reduce costs to promote manufacturing for export of goods.

The Scrips can be used for payment of: > Customs duties for import of inputs or goods, > Excise duties on domestic procurement of inputs or goods including capital goods, payment of custom duties and fee as per paragraph 3.18 of new FTP 2015-20

The Scrips can’t be used for payment of any type of GST. They are freely transferrable, used for import of those listed in Appendix 3A, or for domestic procurement (without exception to Appendix 3A items) or for payment of service tax on procurement of services

Can be claimed by:

> Company/ Firm which has realized foreign exchange

> Supporting manufacturer (subject to disclaimer from the company/firm who has realized foreign exchange)

While non-SEZ units should apply to RA, DGFT; SEZ/EOUs should apply to concerned Development Commissioner, SEZ to avail these benefits

These incentives are for export of notified goods with ITC (HS) Code

The basis of calculation of the reward would be the lesser of FOB value of exports in free foreign exchange or FOB value of exports as given in shipping bills in free foreign exchange.

The reward rate may be 2%, 3% or 5% depending on the product and group of countries as listed.**

An application for claiming rewards on exports shall be filed online, using digital signature, on DGFT website with RA concerned in ANF 3A. The relevant shipping bills and e-BRC shall be linked with online application. Applications are approved under automatic approval mechanism.

Note: The Scrips cannot be utilized for payment of Integrated Tax, Compensation Cess, CGST, SGST or IGST for domestic procurement

**http://dgft.gov.in/Exim/2000/PN/PN15/pn0215.pdf

http://dgft.gov.in/sites/default/files/ft17-051217.pdfhttp://dgft.gov.in/Exim/2000/PN/PN15/pn0215.pdf

Legislative & governance framework Schemes: Service Export Import Scheme

Service providers of notified services, located in India, shall be rewarded under SEIS. The notified services and rates of rewards are listed in Appendix 3D.

Service providers having minimum net free foreign exchange earnings of US$ 15,000 (US $ 10,000 for individual service providers and sole proprietorship) in year of rendering service are eligible for Duty Credit Scrip.

If the IEC holder is a manufacturer of goods as well as service provider, then the foreign exchange earnings and total expenses /payment / remittances shall be taken into account for service sector only.

Scrips are freely transferrable and can be used for import of any item except those listed in Appendix 3A and ANF, or for domestic procurement (without exception for Appendix 3A items) or for payment of service tax on procurement of services. Duty free credit scrips are of 5% or 7%

In order to claim reward under the Scheme, service provider shall have an active IEC at the time of rendering such services for which rewards are claimed.

Payment in Indian Rupees for service charges earned on specified services, shall be treated as receipt in deemed foreign exchange as per guidelines of Reserve Bank of India. The list of such services is indicated in Appendix 3E.

List of items not allowed under Appendix 3A

https://dgft.gov.in/sites/default/files/3A.pdf

Legislative & governance framework Schemes: Service Export Import Scheme

Appendix 3E(against foreign exchange earnings/ INR)

Illustrative list of services eligible for SEIS

► Professional services

► Research & development services

► Management consultancy services

► Market research and advertising services

► Tourism and travel

► Maritime/ air/ road transport and auxiliary services

► Communication services

► Construction and related engineering services

► Educational services

► Environmental and health services

► Maritime transport services:

► Rental of vessel with crew

► Maintenance and repairs of vessel

► Pushing and towing services

► Support services for maritime transport such as port dues, birth hire, terminal handling charges, etc.

► Air transport services:

► Ground-handling services

Appendix 3D (only against foreign exchange earnings)

For other than Export of goods through courier or foreign post offices using e-Commerce, filed online, using digital signature, on DGFT website at http://dgft.gov.in with RA concerned in ANF 3A.

For exports through EDI ports, hard copy of documents need not be submitted to RA (applications to DGFT, EDI shipping bills, e-BRC and RCMC. The applicant shall submit the proof of landing along with it.

For non EDI ports, submit export promotion copy of non EDI shipping bills. Also submit proof of landing as prescribed under paragraph 3.03 of HBP. Hard copy of applications to DGFT need not be submitted.

Applicant can file single application for different port of exports.

Processing of Non EDI Shipping bills at RA: In cases the shipping bills not received through the Message Exchange from Customs, concerned RA shall verify the details from original bills before grant ofscrip.

For EDI Shipping Bill, no manual feeding of Shipping bill details shall be allowed to the applicants in the online system. Rewards will be granted by RAs without the need for cross verifying EDI Shipping Bill details.

RA shall process the electronically acknowledged files and scrip shall be issued after due scrutiny of electronic documents.

For SEIS, application filed online for a financial year on annual basis in ANF 3B using digital signature. RA shall process the application received online after due scrutiny.

Legislative & governance framework Schemes: MEIS & SEIS (contd.)

Application process for the Schemes

Additional points


MEIS List of products eligible under MEIS

List of ineligible categories include: Supplies made from DTA units to SEZ units, export of imported goods, exports through trans-shipment, deemed exports, SEZ/ EOU/ EHTP/ BTP/ FTWZ products exported through DTAunits, export products subject tominimum export price or export duty, exports made by units in FTWZ

Steps for online application

For MEIS & SEIS

Applicant shall have option to choose jurisdictional RA on the basis of corporate office/ registered office/ head office/ branch office address endorsed on IEC. This option will be exercised at the beginning of financial year.

For details on respective jurisdiction for MEIS and SEIS, refer to page-90, para 3.06 of FTP 2015-20

Duty Credit Scrip issued on or after 1 January 2016 shall be valid for a period of 24 months from the date of issue. Revalidation of DutyCredit Scrip shall not be permitted unless specified in the HBP.

Duty Credit Scrips need to be registered at the port of exports

http://dgftcom.nic.in/exim/2000/pn/pn15/pn0215.pdfhttp://dgftcom.nic.in/exim/2000/MEIShelp.pdf

Additional points


For MEIS & SEIS

Excise Duty (ED) paid in cash or through debit under Duty Credit Scrip shall be adjusted as CENVAT Credit or Duty Drawback as per Department of Revenue (DOR) rules/ notifications.

Basic Customs Duty (BDC) paid in cash or through debit under Duty Credit Scrip shall be adjusted for Duty Drawback as per notifications by DOR.

Transfer of export performance from one IEC holder to another IEC holder shall not be permitted.

Duty Scrips are now issued electronically instead of the physical paper based Scrips.

Duty exemption/remission schemes:These schemes enable duty free import of inputs for export production, including replenishment of input or duty

remission. These are of two types - duty exemption and duty remission

Legislative & governance framework Schemes: Duty exemption schemes

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AA

Duty free import (exempted from payment of BasicCustoms Duty, Additional Customs Duty, Education Cess,Anti-dumping Duty, Countervailing Duty, Safeguard Dutyand applicable on imports subject to conditions. Also,exemption from payment of IGST up to 31.03.2020) ofinputs, including fuel, oil, catalyst which is physicallyincorporated or supports in the final export product.

Advance Authorisation is issued for inputs in relation toresultant product, on the basis of:i. Standard Input Output Norms (SION) notifiedii. Self declaration as described in section 4.07 of HBPiii. Applicant-specific prior fixation of norm by the Norms

Committeeiv. On the basis of Self Ratification Scheme of Para 4.07A of

FTP

AA shall be issued for:i. Physical export (including export to SEZ)ii. Intermediate supplyiii. Supply of goods to the certain categories of Deemed

Exportsiv. Supply of ‘stores’ on board of foreign going vessel/

aircraft, subject to condition that there is specific SIONfor item supplied

Special case for spices & pharma products:i. Spices covered under Chapter-9 of ITC (HS) shall be

permitted only for activities like crushing/ grinding/sterilization/ manufacture of oils or oleoresins

ii. Pharma products manufactured through non-infringing(NI) process (as indicated in paragraph 4.18 of HBP) shallbe issued to manufacturer exporters only

• It can be issued to a manufacturer exporter ormerchant exporter tied to supporting manufacturer.

• Minimum value addition should be 15%, except incase of gems and jewellery and as specified

• The importer has to fulfil export obligations within18 months normally, with certain exceptions ofshorter or longer durations

• Validity period for import of AA is 12 months fromthe date of issue of authorisation and co-terminuswith contracted duration of project execution or 12months from the date of issue of authorisation,whichever is more. Revalidation of 6 months ispossible on approval by the RA.

Legislative & governance framework Schemes: Duty exemption schemes (contd.)

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AA

Advance Authorisation for annual requirement:• Shall only be issued for items notified in SION, not

available in case of adhoc norms on self-declaration orthose mentioned in Appendix 4J of the FTP.

Eligibility:i. Exporters with past export performance (in at least

preceding 2 financial years)ii. 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 financialyear or INR 1 crore, whichever is higher

Pre-import condition in certain cases:• DGFT may, by notification, impose pre-import condition

for inputs under this Chapter.

Admissibility of drawback:• Drawback as per rate determined and fixed by Customs

Authority shall be available for duty-paid imported orindigenous inputs (not specified in the norms) used inthe export product, subject to conditions.

Import of mandatory spares:• Those required to be exported/ supplied with the

resultant product shall be permitted duty free to theextent of 10% of CIF value of authorisation.

Ineligible categories of import on self declaration basis:• Vegetable/ edible oils, cereals, spices other than light

black pepper and more as described in section 4.11 of FTPand ITC (HS) book

Domestic sourcing of inputs:• Holder of an Advance Authorisation/ Duty Free Import

Authorisation can procure inputs from indigenoussupplier/ state trading enterprise/EOU/EHTP/BTP/STP inlieu of direct import. Such procurement can be againstAdvance Release Order (ARO), or Invalidation Letter.

Actual user condition under AA:i. AA and/ or material imported under AA not transferable

even after completion of export obligation.Authorisation holder can dispose of productmanufactured out of duty free input once exportobligation is completed.

ii. Waste/ scrap arising out of manufacturing process, asallowed, can be disposed off on payment of applicableduty even before fulfilment of export obligation.

Paperless Issue of Authorisations:• The issue of physical copies of the authorisations has

been discontinued in respect of EDI Ports.


Currency for realisation of export proceeds:• Export proceeds shall be realized in freely convertible

currency except otherwise specified.• Export to SEZ units shall be taken into account for

discharge of export obligation provided payment isrealised from foreign currency account of the SEZ unit.

• Export to SEZ developers/ co-developers can also betaken into account for discharge of export obligationeven if payment is realised in INR.

Pre-import condition in certain cases:• DGFT may, by notification, impose pre-import condition

for inputs under this Chapter.

Admissibility of Drawback:• Drawback as per rate determined and fixed by Customs

Authority shall be available for duty paid imported orindigenous inputs (not specified in the norms) used inthe export product, subject to conditions.

Re-import of exported goods under Duty exemptionschemes:• Goods exported under Advance Authorisation/ Duty Free

Import Authorisation may be re-imported in same orsubstantially same form subject to such conditions asmay be specified by DOR. Authorisation holder shall also

inform about such re-importation to the RA which hadissued the Authorisation within 1 month from date of re-import.

Free of cost supply:• Advance Authorisation shall also be available where some

or all inputs are supplied free of cost to exporter byforeign buyer. In such cases, notional value of free of costinput shall be added in the CIF value of import and FOBvalue of export for the purpose of computation of valueaddition. However, realization of export proceeds will beequivalent to an amount excluding notional value of suchinput.

Accounting of input:• The inputs imported under the Advance Authorisation as

well as the finished products exported, the description ofwhich must be endorsed in the relevant Bill of Entry/Shipping Bill, the authorisation in case of mismatch willnot be redeemed. Also, the name/ description of theinput used (or to be used) in the authorisation mustmatch exactly with the name/ description endorsed in theshipping bill. Above provisions will also be applicable forsupplies to SEZs and supplies made under Deemedexports.

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AA


Export Obligation (EO) period and its extension:• Period for fulfilment of export obligation under Advance

Authorisation shall be 18 months from the date of issueof authorisation. Period of EO fulfilment under an AAshall commence from date of issue of authorisation,unless otherwise specified.

• RA may consider a request of AA holder for oneextension of EO period up to 6 months from the date ofexpiry of EO period subject to payment of compositionfee of 0.5% of the shortfall in EO.

• Request for further extension of 6 months after firstextension can be considered by RA, providedauthorisation holder has fulfilled minimum 50% exportobligation in quantity as well as in value, on pro-ratabasis.

• Whenever a ban/ restriction is imposed on export of anyproduct, export obligation period in respect of AdvanceAuthorisation already issued prior to imposition of ban,would stand automatically extended for a periodequivalent to the duration of ban, without anycomposition fee.

Re-export of goods imported under Advance AuthorisationScheme:• Goods imported against Advance Authorisation Scheme,

which are found defective or unfit for use, may be re-exported, as per DOR guidelines. The authorisation holderhas to inform the RA who has issued the authorisationbefore re-export of such defective goods.

Export Obligation Discharge Certificate (EODC):• On completion of exports and imports, the authorisation

holder shall submit application in ANF 4F. In such cases, ifexport obligation (EO) has been fulfilled, the RA may issueEODC/ Redemption Certificate to authorisation holder andforward a copy to the Customs Authority at the port ofregistration of authorisation indicating the same details ofproof of fulfilment of EO, evidencing fulfilment of EO.

Regularisation of bonafide default:Cases of bonafide default in fulfilment of EO may beregularised by the RA as per various conditions and onpayment of applicable Customs Duty along with applicableinterest to the Customs Authority.

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AA


Duty Free Import Authorisation:• Similar to AA but issued on post export basis for goods

included in SION.• Importer exempted only from payment of BCD while

ED is adjusted as CENVAT credit as per DOR.• Minimum value addition should be 20% or as

mentioned. Not applicable for raw sugar.• Export shall be completed within 12 months from the

date of online filing of application and generation of filenumber.

Eligibility:i. Issued on post export basis for products for which

SION have been notified.ii. Merchant exporter required to mention name and

address of supporting manufacturer of exportproduct on the export document viz. shipping bill/airway bill/ bill of export/ ARE-1/ ARE-3.

iii. Application to be filed with concerned RA beforeeffecting export under DFIA.

• No Duty Free Import Authorisation shall be issued for aninput which is subject to pre-import condition or whereSION prescribe ‘Actual User’ condition or Appendix 4Jprescribes pre-import condition for such an input

Additional points:

• Separate DFIA shall be issued for each SION and each port

• Exports under DFIA shall be made from a single port

• Regional Authority shall issue transferable DFIA with a

validity of 12 months from the date of issue

• Some sensitive items require exporters to provide

declaration w.r.t. technical characteristics (Section 4.30 of

FTP)

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DFI

A

Legislative & governance framework Schemes: Duty remission schemes

All Industry Rate of Duty Drawback (AIR)• The rate is fixed under Rule 3 of Drawback

Rules by considering average quantity andvalue of each class of inputs imported ormanufactured in India

• Average amount of duties paid is considered• Rates are fixed for broad categories

of products• Rates include drawback on packing materials• Normally, the rates are revised every year

after considering the impact of budget, whichis presented in February every year.

• AIR is available as a percentage of the FOBvalue of exports, as per the rate fixed in theDBK Schedule.

Brand Rate Fixation under Duty Drawback• AIR can be fixed only for some standard products but cannot be fixed

for special type of products• In such cases, the DBK is remitted by way of fixation of Brand Rate

under rule 6/7 of the Customs and Central Excise Duties DrawbackRules, 2017

• Brand Rate application can be filed in cases only where AIR is less than80% of the duties paid

• Proportionate duties actually paid are remitted to the extent of theduties paid on the inputs used in the goods exported

• Manufacturer has to submit an application with all details to Dy./Asst.Commissioner, Customs, at the port of export for the fixation of theBrand Rate

• Such application must be made within 90 days from the date of exports• Rates are fixed by the Brand Rate Unit & then the final Drawback is

disbursed by the Customs Authorities at the port of export.

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Duty Drawback• The only Scheme, though a duty remission/export incentive, not being governed/ administered under the Foreign Trade

Policy• The Scheme is under the direct control of the Department of Revenue, Ministry of Finance.• ‘Drawback’ in relation to any goods manufactured in India and exported, means rebate of duty chargeable on any

imported material or excisable material used in manufacture of such goods in India. List of goods include importedspares, if supplied with capital goods manufactured in India.

• Drawback shall be available for any duty paid material, whether imported or indigenous, used in goods exported.• Duty Drawback is available by two methods:

i. All Industry Rate of Duty Drawbackii. Brand Rate Fixation

Legislative & governance framework Schemes: Export Promotion Capital Goods Scheme

The objective of the Scheme is to facilitate import of capital goods for producing quality goods and services to enhanceIndia’s export competitiveness.

• Exemption from payment of Basic Customs Duty on imports• Exemption from payment of IGST and Compensation Cess. This exemption is available up to 31.03.2020 subject to other

conditions• Authorisation holder may also procure capital goods from indigenous sources subject to conditions

Capital goods for the purpose of the EPCG Scheme shall include:• Capital Goods as defined in Chapter 9 including in CKD/SKD condition thereof• 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

• Can be granted for procurement of capital goods for pre-production, production and post-production activities• Import of capital goods under the Scheme for project imports notified by CBIC• Import of second hand capital goods will not be permitted under EPCG• Import of restricted items shall be allowed only after approval• Spares (including refurbished/ reconditioned spares), tools, jigs, fixtures, dies, moulds and components for new plant

and machinery can be procured under EPCG Scheme• Authorisation can be issued to:

• Manufacturer• Merchant exporter tied to supporting manufacturer• Service providers

• Imports are subject to actual user condition till the export obligation is met

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Benefits

Capital goods for EPCG

Eligibility


The EPCG authorisation is valid for imports for a period of 18 months from the date of issue

• Import under EPCG Scheme shall be subject to an export obligation equivalent to 6 times of duties, taxes and cess savedon capital goods, to be fulfilled in 6 years

• In case IGST and Compensation Cess are paid in cash on imports under EPCG, incidence of the said taxes would not betaken for computation of net duty saved, provided Input Tax Credit is not availed

• EO shall be fulfilled by the authorisation holder through export of goods which are manufactured/ services rendered, forwhich the EPCG authorisation has been granted

• EO can be of two types:• Specific EO• Average EO

• Indigenous sourcing of capital goods will have EO less by 25% than the EO stipulated• If the authorisation holder fulfils 75% or more of specific export obligation and 100% of average export obligation in half

or less than half the original export obligation period specified, remaining export obligation shall be condoned• The authorisation holder shall, while maintaining the average export obligation, fulfil the specific export obligation over

the prescribed block period in the following proportions:• Block of first to fourth year – 50%• Block of fifth and sixth year – Balance EO

• Two extensions of one year each in export obligation period may be considered on payment of composition fee• EO can be fulfilled on the basis of:

• Physical/ direct exports• Deemed exports

• Shipments under AA, DFIA, DEPB or Drawback scheme shall also count for fulfilment of EPCG export obligation

Validity

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• A nexus certificate from an Independent Chartered Engineer (CEC) needs to be submitted at the time of issue of theEPCG authorisation

• Authorization holder shall submit a certificate from the jurisdictional Customs Authority or a CEC confirming theinstallation of capital goods at factory/ premises of authorization holder or his/her supporting manufacturer(s) within 6months from the date of completion of import

• One time extension for producing the installation certificate may be granted for a maximum period of 12 months withthe payment of composition fee of INR 5,000

• The authorization holder shall be permitted to shift capital goods during this period to other units mentioned in the IECand RCMC of the authorization holder subject to production of fresh installation certificate

• The EPCG authorisation is valid for imports for a period of 18 months from the date of issue

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• The royalty and R&D fee received in convertible foreign currency shall also be counted for EO• For exporters of green technology product such as solar collectors, wind mills, water treatment plants etc., EO shall be

75%

Nexus certification

Installation certificate

Validity

Legislative & governance framework Schemes: Post EPCG Scheme

• Capital goods to be imported on payment of applicable customs duty under the cover of post export EPCG. If finishedgoods manufactured using these capital goods are exported then such exporter would get duty credit scrip to theextent of basic customs duty paid on capital goods on achievement of export obligation

• Capital goods required for pre or post or during production activities• Capital goods covered under Project Imports Scheme• Import of restricted items after due approval• Spares (including refurbished/ reconditioned spares), tools, jigs, fixtures, dies, moulds and components for new plant

and machinery• Computer systems and software which are part of capital goods• Second-hand capital goods not permitted under EPCG

• Actual user condition till fulfilment of export obligation• Duty Credit Scrip in proportion of EO which would be 85% of [6 times of duties, taxes and cess saved on import of

capital goods, to be fulfilled in 6 years by export of goods manufactured using such capital goods]• Condoning EO for early achievement or condoning delay in achieving EO possible subject to prescribed condition.• Duty remission shall be in proportion to the EO fulfilled• All provisions for utilization of scrips as applicable for duty Scrips under the Chapter 3 of the FTP shall be applicable to

Post Export EPCG Duty Credit Scrip.• All other provisions of the existing EPCG scheme will also be applicable to Post Exports EPCG Scheme.

Benefits

Coverage

Conditions

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Legislative & governance framework Schemes: Deemed exports

01

Applicable for transactionsin which goods supplied donot leave country, andpayment for such supplies isreceived either in INR or infree foreign exchange

02

Supply of goods againstAdvance Authorisation/Advance Authorisation forannual requirement/ DFIA

03

Supply of goods to EOU/

STP/ EHTP/ BTP

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Supply of capital goods

against EPCG Authorisation

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Supply of goods & installation of equipment (single responsibility of turnkey contracts) to projects financed by multilateral or bilateral Agencies notified by Department of Economic Affairs (DEA)

07

Supply of goods to projectsfinanced by multilateral orbilateral Agencies / Fundsas notified by Departmentof Economic Affairs.

08

Others as mentioned in FTP

Legislative & governance framework Schemes: Deemed exports

Deemed exports shall be eligible for following benefits in respect of

manufactured and supply of goods subject to terms and conditions:

• Advance Authorisation/ Advance Authorisation for annual requirement/

DFIA

• Deemed export drawback for BCD

• Refund of terminal excise duty for excisable goods mentioned in Schedule 4

of Central Excise Act, 1944 provided the supply is eligible under that

category of deemed exports and there is no exemption

Categories of supplies as per Para 7.02 Benefits on supplies, as given in Para 7.03, whichever is applicable.

Para 7.03 (a) Advance Authorisation

Para 7.03 (b) Duty Drawback

Para 7.03 (c) Terminal Excise Duty

Advance Authorisation / Advance Authorisation forannual requirement /DFIA

Yes (for inter mediate supplies against an invalidation letter)

Yes (against ARO) Yes

EOU / STP / EHTP /BTP Yes Yes Yes

EPCG Authorisation Yes Yes NA

Projects financed by multilateral or bilateral Agencies / Funds

Yes Yes NA

Mega Power projects as notified Yes Yes Yes, only for para 7.08(iii)(a)

United Nations or International organization

Yes Yes NA

Nuclear Power projects Yes Yes NA

Benefits to the supplier/ recipient

Benefits for deemed exports

Conditions

• Supplies shall be made directly to the entities

as specified in the Foreign Trad Policy

• Third party supply shall not be eligible for

benefits/exemption.

Legislative & governance framework Key Acts

The Foreign Trade (Development &

Regulation) Amendment Act, 2010

To provide a framework for development & regulation of foreign trade by facilitating imports into the country and taking measures to increase exports from India. It empowers the government to make provisions through policies to fulfil its objectives.

The Marine Product Export Development Authority Act, 1972

An Act to provide for the establishment of an authority for the development of the marine products industry.

Export Quality Control Inspection Act, 1963

An Act to provide for the sound development of the export trade of India through quality control and inspection and for matters connected therewith.

Special Economic Zone, 2005

An Act to provide for the establishment, development and management of SEZs for the promotion of exports through simplification of procedures and single window clearance on matters relating to Central and State governments along with incentives to promote domestic manufacturing.

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Annexures8

Processes/ proceduresMandatory documents to export/ import

• As per DGFT’s notification dated June, 2015 only 3 documents mentioned below are mandatory for export and import:

Note: Click here to know more about the DGFT Notification on mandatory documents for EXIM

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However, exporters and importers have the option of filing a separate 'Commercial Invoice' and ‘Packing List’ if they desire.

Shipping Ministry has also done away with the requirement of 'Terminal Handling Receipt' and has made the process online.

Customs have merged 'Commercial Invoice' with the 'Packing List' and have issued a circular for accepting 'Commercial Invoice cum Packing List' that incorporates required details of both the documents.

RBI has done away with 'Foreign Exchange Control Form (SDF)' by incorporating declaration in 'Shipping Bill' (for exports) and dispensing with 'Foreign Exchange Control Form (Form A-1)' (for imports).

To improve ‘Ease of Doing Business’ in India, the number of mandatory documents for export and import have been reduced from 11 to just 3 documents.

S. No.

For export For import

1 Bill of Lading/ Airway Bill/ Lorry Receipt/ RailwayReceipt/ Postal Receipt

Bill of Lading/ Airway Bill/ Lorry Receipt/ RailwayReceipt/ Postal Receipt in form CN-22 or CN 23

2 Commercial Invoice cum Packing List Commercial Invoice cum Packing List

3 Shipping Bill/ Bill of Export/ Postal Bill of Export Bill of Entry

https://dgft.gov.in/sites/default/files/note-08.15.pdf

Levied as per Section 12 of the Customs Act. It is levied as a percentage of value as determined under Section 14(1) of the Customs Act; called the assessable value. It is mostly at 10% except on agricultural products, 7.5% on capital goods, 5% on projects, 2% on minerals, etc.

Instrument of fair competition which is permitted by WTO to rectify trade distortive effect of dumping. It is levied to protect domestic industry from cheap imports of goods.

Applicable on certain goods at the time of import for specified period in order to check their excessive import, which may be injurious to the domestic industry.

Imposed to protect domestic industry from imports. If the Tariff Commission issues a recommendation for Protective Duty, the Central Government may impose this at a rate not exceeding as directed by the Commission. The Government can specify period up to which it will remain in force and adjust the effective rate.

Currently levied only on hides, skins and leather, snake skins, fur lamb skins, certain specified minerals and metals. Depending on the economic scenario, export duty is levied on the goods to discourage exports.

Note: Click here to access the duty calculator by the Central Board of Indirect Taxes & Customs

Processes/ proceduresTypes of duties & levies

Basic Customs Duty (BCD)

Anti Dumping Duty

Safeguard duty (SD)

Protective duty (PD)

Export duty

https://www.icegate.gov.in/Webappl/

Processes/ proceduresTypes of duties & levies

Integrated GST now applicable in case of inter-state supply, IGST credit can be used to pay CGST/ SGST

Imports: In place of Countervailing Duty (CVD)/ Special Additional Duty (SAD) to countervail excise and sales tax, IGST is applicable on total assessable value

Input Tax Credit applicable on IGST but not on BCD

Total import value with BCD = Assessable value + BCD (% of Assessable value) + Additional duties if applicable (safeguard/ antidumping duty, % of BCD)

Total value of imports including all duties = Total import value with BCD + IGST (% of Total import value with BCD) + compensation cess if applicable [% of (Assessable value + BCD + education cess)]

GST on inputs (domestic or imported) to be paid/ exempted, as applicable

GST paid for inputs can be claimed as refund under Section 96A of CGST rules

Refund = (Zero rated supplies x Net Input Tax Credit)/ Adjusted Total Turnover

Processes/ proceduresSetting up an EXIM unit in India

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Incorporation of company: Set up a sole proprietary concern/ partnership firm/ company

Open current account with a bank authorized in foreign exchange

Obtain an Importer Exporter Code by filing an application through Aayat Niryaat Form 2A to the Regional Authority DGFT. IEC is a unique 10 digit code (same as the applicant’s PAN number)

Registration cum membership certificate: To avail concessions, one must obtain RCMC from EPC/ FIEO/ Commodity Boards

Cover risks through Export Credit Guarantee Corporation Ltd. through an appropriate policy


Setting up of a company

GoI has outlined guidelines to incorporate a new company,accessible through the web portal of Ministry of CorporateAffairs. A new company may be registered by filing online FormINC-29. This is a single application form for integrated approvalof registration of the name of the company, incorporation,application for allotment of DIN and application for allotment ofDSC. The e-form is accompanied by supporting documentsincluding details of Directors & subscribers, MoA and AoA, etc.

Opening of a bank account

Details of opening a bank account are attached in the Annexure3 as per the type of entity. Click here to know more aboutCorporate Bank Accounts.

PAN Card and IEC

> To apply for a PAN Card, visit the website of the Income TaxDepartment

> To apply for IEC online, visit the portal of DGFT for onlineapplication

RCMC

To apply for RCMC, visit the website of Federation of IndianExports Organisation or other export promotion councils asapplicable for the export product

ECGC

For details of various schemes available to exporters andimporters, visit the website of Export Credit GuaranteeCorporation of India

http://www.mca.gov.in/MinistryV2/stepstoformanewcompany.htmlhttp://www.mca.gov.in/MCA21/dca/downloadeforms/eformTemplates/NCA/Form_INC-29.ziphttp://www.mca.gov.in/mca/html/mcav2_en/home/helpandfaq/payment/corporatebankaccount/corporatebankaccount.htmlhttps://www.tin-nsdl.com/services/pan/pan-index.htmlhttp://dgft.gov.in/services/online-e-iec-applicationhttp://www.ntrade.in/FIEO/NewLogin.aspx?EPCID=EP012https://www.ecgc.in/


Process Steps and forms needed Whom to contact No. of days

Setting up of a company

Details mentioned in Annexure 4 of this document Ministry of Corporate Affairs

20-25 days

Opening up of a bank account

Details mentioned in Annexure 3 of this document Respective branch manager/ customer relationship officer of the bank

2 days

PAN Card The applicant completes Form 49A (statutory form for applying for PAN), pays the due fees of INR 93 (plus applicable taxes currently at 12.36%) either online or otherwise and submits the application form together with proof of identity, proof of address and 2 recent photographs to the authorized agent/ designated service centres for verification.

Private agencies authorized by UTIITSL or NSDL, as outsourced by the Income Tax Department (Federal)

7-10 days

IEC An online application can be for obtaining e-IEC along with payment of application fee of INR 500, to be paid online through net banking or credit/debit card. Documents required to be uploaded along with the application form are listed in the Form (ANF 2A). Documentsrequired under various categories include:

A. Fresh IEC: • Digital Photograph (3x3 cm) of the signatory applicant • Copy of PAN Card• Bank Certificate or cancelled cheque bearing applicant entities

namePost GST implementation, PAN of an entity is used for the purpose of IEC. Click here to know more.

Jurisdictional DGFT, however, the entire process for obtaining IEC has been made online

2-3 days

http://www.nsez.gov.in/resources/TN0918.pdf



B. Proprietorship • Digital photograph (3x3 cm) of the proprietor • Copy of PAN Card of the proprietor• Copy of either of passport (first & last page)/ voter ID/ driving licence/

UID (Aadhaar Card) • Sale deed in case business premise is self-owned; or rental/ lease

agreement, in case office is rented/ leased; or latest electricity or telephone bill

• Bank certificate as per ANF 2A(I)/ cancelled cheque bearing pre-printed name of the applicant and bank account number

C. Partnership firm • Digital photograph (3x3 cm) of the managing partner• Copy of PAN Card of the applicant entity• Copy of either of passport (first & last page)/ voter ID/ UID (Aadhaar

Card) / driving licence/ PAN Card of the managing partner signing the application

• Copy of partnership deed• Sale deed in case business premise is self-owned; or rental/ lease

agreement, in case office is rented/ leased; or latest electricity / telephone bill

• Bank certificate as per ANF 2A (I)/ cancelled cheque bearing pre-printed name of the applicant entity and bank account number



D. LLP firm/ Government undertaking/ Public limited company/ Private limited company/ Section 25 Company• Digital photograph (3x3 cm) of the designated partner/ director of the

company signing the application• Copy of PAN Card of the applicant entity• Copy of either of passport (first & last page)/ Voter ID/ UID (Aadhar

Card)/ driving licence/ PAN (any one of these) of the managing partner/ director signing the application

• Certificate of incorporation as issued by the RoC• Sale deed in case business premise is self-owned; or rental/ lease

agreement, in case office is rented/ leased; or latest electricity/ telephone bill

• Bank certificate as per ANF 2 A(I)/ cancelled cheque bearing pre-printed name of the applicant entity and bank account number

E. Registered society/ trust• Digital photograph (3x3 cm) of the signatory applicant/ secretary or

chief executive • Copy of PAN Card of the applicant entity• Copy of either of passport (first & last page)/ voter ID/UID (Aadhar

Card)/ driving licence/ PAN Card of the secretary or chief executive/ managing trustee signing the application

• Sale deed in case business premise is self-owned; or rental/ lease agreement, in case office is rented/ leased; or latest electricity/ telephone bill

• Registration certificate of the society/ copy of the trust deed• Bank certificate as per ANF 2A(I)/ cancelled cheque bearing pre-

printed name of the registered society or trust and account number



F. HUF• Digital photograph (3x3 cm) of the Karta• Copy of PAN Card of the Karta• Copy of either of passport (first & last page)/ voter ID/ UID (Aadhar

Card)/ driving licence (any one of these) of the Karta• Sale deed in case business premise is self-owned or rental/ lease

agreement, in case office is rented/ leased or latest electricity/ telephone bill

• Bank certificate as per ANF 2A(I)/ cancelled cheque bearing pre-printed name of applicant and bank account number

RCMC • IEC (mandatory pre-requisite) • Chartered accountant’s certificate certifying the last 3 years’ export• RCMC can applied for at the relevant export promotion council or at

FIEO

Respective export promotion council based-on final product or service

8-10 days


The following categories of importers or exporters are exempted from obtaining IEC:

• Importers covered by clause 3(1) [except sub-clauses (e) and (l)] and exporters covered by clause 3(2) [except sub-clauses (i) and

(k)] of Foreign Trade (Exemption from application of Rules in certain cases) Order, 1993

• Ministries/ Departments of Central/ State Governments

• Persons importing or exporting goods for personal use not connected with trade or manufacture or agriculture

• Persons importing or exporting goods from/to Nepal; Myanmar (through Indo-Myanmar border areas); and China (through Gunji,

Namgaya Shipkila and Nathula ports), provided that the CIF of single consignment of import or export of goods from/to Nepal; and

Myanmar (through Indo-Myanmar border areas) does not exceed INR 25,000; and in the case of China, (a) for import or export of

goods through Gunji and Namgaya Shipkila, CIF of single consignment does not exceed Indian .INR 100,000; and (b) for import or

export of goods through Nathula, CIF of single consignment does not exceed INR 200,000

• Further, exemption from obtaining IEC shall not be applicable for export of special chemicals, organisms, materials, equipments and

technologies (SCOMET) as listed in Appendix 3, Schedule 2 of ITC (HS)

IEC-exempted Categories

Processes/ proceduresSetting up export units in EOU/ EHTP/ STP/ BTP

Introduction Units undertaking to export their entire production of goods and services may be set up under the ExportOriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software TechnologyPark (STP) Scheme or Bio-Technology Park (BTP) Scheme.

Objective The objective of these schemes is to promote exports, enhance foreign exchange earnings, attractinvestment for export production and employment generation.

Benefits • Exemption from payment of Basic Customs Duty on imports• Exemption from payment of IGST and Compensation Cess for imports. The exemption is available up to

31 March 2018 subject to conditions• Exemption by way of refund of GST for procurement from indigenous sources subject to conditions• Second hand capital goods, without any age limit, may also be imported with or without payment of

duty/ taxes• Sourcing of capital goods from a domestic/ foreign leasing company with or without payment of duties/

taxes

Other entitlements • Exemption from industrial licensing for manufacture of items reserved for SSI sector• Export proceeds will be realized within 9 months• Units will be allowed to retain 100% of its export earnings in the EEFC account• Unit will not be required to furnish bank guarantee at the time of import or going for job work in DTA,

subject to conditions• 100% FDI investment permitted through automatic route similar to SEZ units• Sharing of infrastructural facilities among EOU/ EHTP/ STP, however, sharing of facilities between EOU

and SEZ units shall not be permitted


Activities allowed • The EOU unit can be setup for manufacturing of goods, including repair, re-making, reconditioning, re-engineering, rendering of services, development of software, agriculture including agro-processing,aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisciculture, viticulture, poultryand sericulture.

• Units undertaken to export their entire production of goods and services (except permissible sales in DTA)• Unit cannot be setup for the purpose of trading activity

Investment criteria

• Only projects having a minimum investment of INR 1 crore in plant & machinery shall be considered forestablishment as EOU

• Investment criteria shall not apply to conversion of existing DTA units, units in EHTP/ STP/ BTP Schemes• BOA may allow establishment of EOU with a lower investment criteria

Application & approvals

• Application for setting up an EOU shall be filed with the Development Commissioner who will forward thesame for consideration to the Unit Approval Committee (UAC)/ Board of Approval (BoA)

• In case of units under EHTP / STP schemes, necessary approval / permission shall be granted by officerdesignated by Ministry of Communication and Information Technology, Department of Electronics &Information Technology, instead of DC, and by Inter-Ministerial Standing Committee (IMSC) instead of BOA.

• Bio-Technology Parks (BTP) would be notified by DGFT on recommendations of Department ofBiotechnology. In case of units in BTP, necessary approval / permission will be granted by designated officerof Department of Biotechnology

• On approval, a Letter of Permission (LoP) / Letter of Intent (LoI) shall be issued by DC / designated officer toEOU / EHTP / STP / BTP unit

• LoP / LoI shall have an initial validity of 2 years to enable the Unit to construct the plant & install themachinery and by this time the unit should have commenced production. An extension of 3 years can begranted for commencement subject to terms and conditions

• Once unit commences production, LoP / LoI issued shall be valid for a period of 5 years for its activities• LoP / LoI shall specify item(s) of manufacture / service activity, annual capacity, projected annual export, Net

Foreign Exchange (NFE) earnings, and such other matter as may be necessary and also impose suchconditions as may be required


Net foreign exchange earnings

• EOU/ EHTP/ STP/ BTP unit shall be a positive net foreign exchange earner• NFE earnings shall be calculated cumulatively in blocks of 5 years, starting from commencement of

production• Items of manufacture for export specified in LoP/ LoI alone shall be taken into account for calculation of

NFE• NFE will be calculated as below:

• Positive NFE = A – B > 0• ‘A’ is FOB value of exports by EOU/ EHTP/ STP/ BTP unit• ‘B’ is sum total of CIF value of all imported inputs and CIF value of all imported capital goods,

value of goods procured from another EOU/ EHTP/ STP/ BTP/ SEZ unit lump sum payment offoreign technical know-how fee and value of all payments made in foreign exchange by way ofcommission, royalty, fees, dividends, interest on external borrowings/ high sea sales or any othercharges

• It will also include payment made in INR on high sea sales

Other supplies from EOU

• Following supplies effected from EOU/ EHTP/ STP/ BTP units will be counted for fulfilment of positive NFE• Supplies effected in DTA to holders of Advance Authorisation/ DFIA/ EPCG Authorisation• Supplies effected in DTA against foreign exchange remittance received from overseas• Supplies to other EOU/ EHTP/ STP/ BTP/ SEZ units• Supplies made to bonded warehouses and free trade and warehousing zones, where payment is received

in foreign exchange• Supplies of goods and services to such organizations which are entitled for duty free import as notified

by MoF• Supplies of Information Technology Agreement (ITA-1) items and notified zero duty telecom/ electronics

items• Supplies of items like tags, labels, printed bags, stickers, belts, buttons or hangers to DTA unit for export• Supply of LPG produced in an EOU refinery to Public Sector domestic oil companies


DTA sale of finished products/ rejects/ waste/ scrap/ remnants and by-products

• Units, other than gems and jewellery units may sell finished goods manufactured by them as specifiedin LoP, subject to fulfilment of positive NFE, on payment of excise duty, if applicable, and/ or paymentof GST and compensation cess

• DTA sales may include by-products, rejects, waste and scraps arising in the course of production,manufacture, processing or packaging of such goods

• Reversal of duties of Custom availed as exemption, if any on the inputs utilized for the purpose ofmanufacturing of such goods is to be made. This reversal of Customs Duty would be as per theprevailing SION norms or norms fixed by Norms Committee

• The restriction of sale of finished goods in DTA up to 50% of FOB value of exports, at concessional rateof duty, has now been done away as announced in the mid-term review of the Foreign Trade Policy

• No DTA sale shall be permissible in respect of pepper & pepper products, marble and such other itemsas may be notified from time to time

• An amount equal to the Anti Dumping Duty leviable at the time of import, shall be payable on thegoods used for the purpose of manufacture or processing of the goods cleared into DTA from the unit

DTA sale of finished products/ rejects/ waste/ scrap/ remnants and by-products

• Such DTA sale shall also be subject to refund of any benefits under Chapter 7 of FTP availed by the EOU/supplier

• The restriction of DTA sale up to 50% of FOB value of exports still continues for services, includingsoftware units

• There shall be no duties/ taxes on scrap/ waste/ remnants, in case same are destroyed with permissionof Customs Authorities

• In case of units manufacturing electronics hardware and software, NFE and DTA sale entitlement shallbe reckoned separately for hardware and software

• In case of new EOUs, advance DTA sale will be allowed not exceeding 50% of its estimated exports forfirst year, except pharmaceutical units where this will be based on its estimated exports for first twoyears


Entitlement for supplies from the DTA

• Supplies from DTA to EOU/ EHTP/ STP/ BTP units for use in their manufacture for exports will be eligiblefor deemed export benefits

• DTA supplier shall also be eligible for discharge of export obligation for the supplies made to these units• The refund of GST paid on supplies from DTA to EOU would be available to the supplier subject to such

conditions and documentations as specified under GST Rules

Sub-contracting • EOU/ EHTP/ STP/ BTP units may on the basis of annual permission from Customs Authorities, sub-contract production processes up to 50% of overall production of previous year in value terms to DTAunits

• EOU may, with annua