What We Say about New Policy.......
The New Exim Policy amended by the Hon’ble
Commerce Minister Shri Arun Jaitley, perhaps, exceeds the expectations of Trade
after a long time.
There are many reasons to feel happy by all and under all the schemes. The
revised edition introduces bold measures for boosting export by Service
Providers and EOU/ AEZ/ SEZ, due to several new incentives and by others due to
procedure being more simple and transparent. Corresponding Customs Notifications
have been also issued simultaneously after a long time. Some of the new features
of the Exim Policy include :
- Duty free import facility for Service
Providers for importing equipments, spares and consumables.
- Fixation of DEPB rate for Agro Products by
considering the duty incidence on input material such as Fertilizers,
Pesticides and Seeds.
- Duty free import entitlement for status
holder having incremental growth of more than 25%.
- The facility of Annual Advance Licence re -
- Permitting Diamond and Jewelery dollar
account for related exporters.
- Treating Sales from DTA to SEZ as export and
therefore eligible for DEPB and refund / exemption of CST and Service Tax.
Foreign bound passengers allowed to take goods from SEZ and EOU units.
Domestic Sales by SEZ exempted from Special Additional Duty. Requirement of
realizing export proceeds within 1 year from the date of export removed for
SEZ units and Requirement of maintaining value addition as per export
performance as per value addition for EOUs substituted by net foreign exchange
- Under EPCG scheme capital goods allowed for
pre-production and post-production facilities. Also import of spares allowed
without restricting them up to 20% of the value of the licence and import of
Second Hand Capital Goods up to 10 years old allowed.
- The export obligation criterion under the
scheme changed from 5 times of CIF value of import to 8 times of duty saved.
Requirement of additional export obligation 50% for down stream products
removed, export of end product manufactured by the exporter for fulfillment of
export obligation instead of goods capable of being manufactured from the
equipment imported under EPCG scheme and swapping of goods with services also
- Extension of export obligation period for
sick unit on the basis of DIFR Rehabilitation Scheme, royalty payments and
testing charges received in foreign exchange also eligible for discharge of
obligation under EPCG scheme.
- Facility of provisional DEPB rate introduced
for promoting export of new products.
- DFRC scheme extended to Deemed export also
and under DFRC scheme import entitlement is now increased from 75% to 80% of
FOB value of export.
- In respect of Advance Licence for supplies to
be made to EOU / SEZ / EHTP /STP exemption of antidumping duty and safeguard
duty is also allowed.
- Application fees for the application filed
electronically reduced to 50%.
- Actual users condition for import of second
hand capital goods up to 10 years old removed.
- Interest rate in the case of default in all
the old cases reduced from 24% to 15%.
Although, a lot has been done but there is always unfinished agenda, as the
expectations of Trade keep the pace with new announcement. Previous year
Ministery of Finance had issued several notifications i.e. reduction of
interest rate in respect of EPCG and Advance Licences from 24% to 15%,
extension in export obligation period to 12 years for EPCG licences having CIF
value of more than 100 Crores and BIFR units with retrospective effect. There
is need to provide similar treatment for the licences issued upto 31.3.2003 so
that the benefit of the new announcement can be made effective for previous
Swapping of goods with services for fulfillment of export obligation should
extended to all the products and services dealt by a Company or even by all
the Companies in the same group. The requirement of manufacturing in the form
of amnesty average export performance for previous licences was also required
to be addressed.
The new Criteria of of export obligation, equivalent to 8 times of duty saved
amount in place of 5 times of import value under EPCG scheme is a welcome step
as it will lead into effective export obligation of 3.664 times of import
value only as against 5 times previously . However, since for additional duty
credit in the form of Cenvat is allowed, the export obligation may be fixed on
the basis of duty saved amount workable at 30.8% duty and not 50.8%. Even if
it is not accepted, there is strong merit for charging the interest in case of
default on duty amount after deducting additional duty on imports.
For Deemed exports last year, the discharge of export obligation was allowed
under EPCG scheme along with DEEC benefits and now DFRC scheme has been also
extended to Deemed Export. Supplies under Deemed Export are made against stiff
international competition and subjected to payment of Sales Tax as against NIL
Sales Tax applicable to overseas supplier. For supplies to be made to SEZ,
refund / exemption of CST and DEPB benefits are now allowed. There is a strong
merit of introducing DEPB benefits and refund of Sales Tax to all types of
supplies made under Deemed Exports. Also for supply of services under Deemed
Export [ para 9.47 (ii) and (iv) ]refund of service tax should be allowed in
similar manner, as the refund of Terminal Excise Duty is allowed for supply of
goods under Deemed export. The exemption of Antidumping Duty and Safeguard
Duty for the advance licences for Deemed Export also brings Deemed Export at
par with physical export. However, such benefit should not be extended to
supply being made to EOU / SEZ / ESTP / STP units only but to all other
eligible supplies also.
In case of Advance Licence scheme, the nexus criteria should be relaxed as has
been done under DFRC scheme. Further, there is a merit in allowing endorsement
of customs notification applicable to DFRC scheme on Advance Licences, also
with applicable condition of DFRC, wherein export obligation has been
fulfilled to make the Advance Licences transferable. This is necessary as on
many occasions Merchant Exporters and Small Exporters are not able to utilise
the Advance Licences issued with A.U. conditions. The need for allowing import
of Fuel under DFRC also merits favourable consideration.
Domestic sale from SEZ is now exempted from Special Additional Duty. By
simplifying the criterion of EOU units related to export performance and
bringing them at par with SEZ (i.e. positive foreign exchange earning) it is
timely that sales from SEZ are also charged customs duty as sales from EOU
(i.e. 50% of Customs Duties applicable on such products. As SEZ units will be
required to compete with supplies from the Most Favoured Nations, the demand
is further justified.
As said earlier, the new announcements are very bold and now one can feel
convinced that Commerce Ministry is receptive will take up the unfinish agenda