Export Incentives

EXPORT INCENTIVES

• DGFT is the nodal body formulating the Export Import Policy.

• It works under the Ministry of Commerce.

• DGFT perform its functions in coordination with state governments and all the other departments of Ministry of Commerce and Industry, Government of India.

• DGFT is a government organization in India responsible for the formulation of exim guidelines and principles for Indian importers and Indian exporters of the country.

• DGFT has several offices in various parts of the country which issues licenses, incentives etc based on the policy formed by the headquarters at Delhi.

• Before 1991, DGFT was known as the Chief Controller of Imports & Exports (CCI&E).

DGFT Offices in IndiaDGFT New Delhi

DGFT Chennai

DGFT Kolkata

DGFT Mumbai

DGFT Bhopal

DGFT Chandigarh

DGFT Cochin

DGFT Coimbatore

DGFT Cuttack

DGFT Ludhiana

DGFT Moradabad

DGFT Panipat

DGFT Patna

DGFT Pune

DGFT Rajkot

DGFT Ahmedabad

DGFT Surat

DGFT Vadodara

DGFT Kanpur

DGFT Bangalore

DGFT Jaipur

DGFT Amritsar

DGFT Jammu

DGFT Dehradun

DGFT Panjim

DGFT Raipur

DGFT Gauhati

DGFT Shillong

DGFT Kochi

DGFT Trivendrum

DGFT Hyderabad

DGFT Madurai

DGFT Pondicherry

DGFT Vishakhapatnam

Main Function

Preparation, formulation and implication of Exim Policies is one of the main functions of DGFT.

Other Functions• DGFT is also responsible for issuing IEC or Import

Export Code.

• DGFT also play an important role in controlling DEPB Rates

• Setting standard input-output norms is also controlled by the DGFT.

• DGFT permits or regulate Transit of Goods from India or to countries adjacent to India in accordance with the bilateral treaties between India and other countries.

• Any changes or formulation or addition of new codes in ITC-HS Codes are also carried out by DGFT

• It also deals with the quality complaints of the foreign buyers

• Officials DGFT works in close coordination with other related economic offices like Customs Commission rates, Central Excise authorities, DRI authorities.

• DGFT has a commitment to function as a facilitator of exports and imports.

• Their focus is on good governance, which

depends on clean, transparent and accountable delivery systems

• The office of the Director General of Foreign Trade has opened a chat window on its website for interacting with the trade and industry to reply to queries on the Foreign Trade Policy. This web based interface would be held from 3.00 pm to 5.00 pm on the second Wednesday of every month.

Government of India gives various incentives to exporters in order to improve their competitiveness in the foreign markets.

These incentives and facilities relate to export performance, promotion of exports, fiscal incentives, schemes aimed at facilitation of imports for exports and various subsidies.

Duty drawback Duty entitlement pass book scheme Status holder exporter scheme Export Promotion capital goods scheme Market access initiative Market development assistance Served from India scheme Vishesh Krishi Upaj Yojana (special

agricultural produce scheme)

Duty drawback It refers to the refund in respect of central

excise and customs duties paid in respect of raw materials and other inputs used in the manufacture of the product prior to its export.

Exporters can claim the amount of duty drawback as soon as the exports of goods take place.

Drawback rates

1. All industry rates

2. Brand rate

3. Special Brand rate

Filing Duty Drawback: The processing of drawback is done by customs authorities after the required documents are filled

Time for Claiming Drawback Claim: Within 3 months from the date of LET EXPORT ORDER.

Payment of duty drawback: within a period of one month from the date of receipt of the claim.

Duty entitlement pass book scheme The objective of the DEPB is to neutralize the

incidence of Customs duty on the import content of the export product.

Under the DEPB scheme, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency.

The Credit is granted against such export products and at such rates as may be specified by the Director General of Foreign Trade.

• Under the post-export DEPB, which is issued after exports, the exporter is given a duty entitlement Pass Book at a pre-determined credit on the FOB value.

• The claim for the import duty credit is admissible only after the realisation of the export proceeds.

• The exporter can use this credit to pay for the import duty on the imports of inputs whether required for the manufacture of the export product or not.

DEPB is valid for a period of 24 months from the date of its issuance.

Application should be within 180 days from the date of exports or within 90 days from the date of realization, whichever is later.

The DEPB and/or the items imported against it are freely transferable.

It should be noted that the imports under DEPC should be made from the same port from where the exports have been made

Export Promotion of capital goods Scheme (EPCG)

EPCG scheme was introduced in order to enable manufacturer exporter to import machinery and other capital goods for export production at concessional or no custom duties at all.

Facility is subject to export obligation i.e. the exporter is required to guarantees exports of certain minimum value.

• EPCG allows of capital goods for production at 5 % custom duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from date of issue of licence.

• However, in respect of EPCG licences with a duty saved of Rs.100 crore or more, the same export obligation shall be required to be fulfilled over a period of 12 years.

• Licences are issued, under this scheme by the director general of foreign trade or his regional officers depending upon the value of the licence

To aid technological upgradation of the export sector, EPCG Scheme at Zero Duty has been introduced in the foreign trade policy 2009-14.

Status holder exporter scheme This scheme provides for recognition of exporters as

export house, star export house, trading house, star trading house and premier trading house on the basis of their export performance in the current year plus previous 3 years.

Category Export performance ( in Rupees)

Export house 20 Crore

Star export house 100 crore

Trading house 500 Crore

Star trading house 2500 crore

Premier Trading house 10,000 Crore

Status holders shall be eligible for the following facilities:

• Licence/certificate/permissions and Customs clearances for both imports and exports on self-declaration basis.

• Exemption from compulsory negotiation of documents through banks. The remittance, however, would continue to be received through banking channels;

• 100% retention of foreign exchange in EEFC (Exchange earners foreign currency) account;

• Entitlement for consideration under the Target Plus Scheme

• Exemption from furnishing of Bank Guarantee as required in various Schemes under this Policy.

• All kinds of exporters namely, merchant exporters, manufacturer exporters, service exporters, SEZ units, 100% EOUs , Bio technology park units, etc are eligible to apply for status as export house.

• Validity Period: 3 years starting from 1st April of the licensing year during which the application is made for the grant of recognition.

• On expiry application for renewal to be made within 6 months of expiry.

Market access initiative• Financial Assistance.

• Who is eligible for assistance under the scheme ?

• A wide range of activities can be funded under the MAI scheme.

• Range of Financial assistance provided

MARKETING DEVELOPMENT ASSISTANCE

• The main thrust is to provide for development of marketing of Indian products and commodities in foreign markets by providing grants in aid for the eligible marketing activities to the eligible exporters.

• The eligible exporters can participate in these schemes either directly or through export promotion councils, India trade promotion Organisation etc.

• Eligibility of exporters:The exporter should have an annual export turnover of upto Rs 5 crores

• The grant under MDA is in the form of non-refundable financial assistance given to the exporters by way of reimbursement of the actual expenditure incurred by them subject to the scale of grants laid down under the scheme

• The application for the grant of MPA should be made to the concerned Export promotion council within 3 months of the activity

Marketing Activities and the scale of Assistance Sales cum Study Tour Abroad: Maximum 90% of the Actual Fare for SSI

exporters and 75% for other than SSI exporters subject to a limit of Rs 60,000/- for travel in economy class for all class of exporters.

Participation in fairs/Exhibitions abroad: Maximum 90% of the total expenditure incurred on

items of expenditure viz., air travel in economy class, space rent, decoration, electricity, interpreters, etc. in case of SSI Exporters and 75% of total expenditure in the case of non-SSI exporters subjected to the maximum of Rs. 90,000/- in all the cases.

Publications/Publicity (for bringing out publications for use abroad and insertion of advertisement in the foreign media to promote brand publicity: Maximum of Rs. 50,000/- in financial year or 25% of the actual cost, whichever is less.

Research and Product Development: 50% of expenditure approved for this activity by the Office of the Dy. Director (EAC), Ministry of Commerce, Udyog Bhawan, New Delhi

. Opening of Foreign Office:

For the first year, 25% of the salary of the staff (One senior and one junior) and 20% of the office rent.

Opening of warehouse: Grant at the rate of 25% for three years.

Served from India Scheme• This scheme is aimed at promoting services exports from India

by providing incentives exclusively for the exporters of services.

• All Service providers who have a total foreign exchange earning of at least Rs.10 lakhs in the preceding or current financial year shall be eligible to qualify for a duty credit entitlement.

• For individuals who are service providers, the total foreign exchange earned criteria would be Rs.5 lakhs in the preceding financial year.

• The duty credit entitlement is 5% in the case of hotels, 20% in the case of stand alone restaurants and 10% incase of service providers in the healthcare, education & other sectors.

• Duty credit entitlement may be used for import of any capital goods including spares, office equipment and professional equipment, office furniture and consumables, provided it is part of their main line of business.

• In the case of hotels and stand-alone restaurants, the duty credit entitlement may also be used for the import of food items and alcoholic beverages.

• The entitlement and the goods imported shall be non-transferable.

Vishesh Krishi Upaj Yojana

• This is an initiative for the promotion of export of agricultural products.

• The objective of the scheme is to promote export of fruits, vegetables, flowers, minor forest produce, and their value added products, by incentivising exporters of such products.

• Exporters of such products shall be entitled for duty credit scrip equivalent to 5% of the FOB value of exports.

• The scrip and the items imported against it would be freely transferable.

Industrial Raw Material Assistance centers

• IRMAC is established by the government of India as a subsidiary of STC.

• Such centers import raw material in bulk and supply them to registered exporters against valid import valid license.

• This enables exporters to get timely supply of raw material at reasonable prices.

• Back to Back letter of credit

Duty free import authorisation scheme• DFIAS is a kind of licence which allows duty

free imports for export production.

• Imports made under this authorisation scheme are exempted from basic customs duty, additional customs duty, anti-dumping duty.

• DFIAS enables exporters to import the required inputs before exports

Tax benefits• VAT paid on raw material used in manufacture

of  goods for export would be refunded by the State Government in cash adjustment. 

• The exports would become more competitive in the world market as there would be no tax henceforth on raw material used for manufacture of goods for export. 

• Tax holiday is provided for 10 years for newly established undertakings in SEZs, 100% EOUs etc.

Export Financing

Commercial banks provide loans to the exporters at the concessional rates of interest against export order both at the pre-shipment & post shipment stage.

The commercial banks are provided with the refinance facility by the RBI and EXIM bank

Period of credit Rate of interest

1) Pre- shipment credit upto 180 days

Not exceeding PLR minus 2.5% points

2) Beyond 180 days and upto 270 days

Not exceeding PLR minus 0.5% points

3) Beyond 27 days and upto 360 days

Rate of interest as may be fixed by the bank

The Export- Import Bank of India (Exim Bank) provides financial assistance to promote Indian exports through

• Direct financial assistance• Overseas investment finance• Term finance for export production and

export development,• Pre-shipping credit • Buyer's credit • export bills rediscounting• refinance to commercial bank

Facilities provided by APEDA/MPEDA• The agriculture and processed foods

export development authority provides financial assistance for the development & promotion of export of agricultural, horticultural & meat product.

• Marine products export development authority provides financial assistance to the exporters of marine products

Exchange Earner’s foreign currency account The EEFC account is a special type of current

account aimed at exporters / individual professionals who receive eligible remittances in foreign currency as per FEMA regulations.

The account is maintained in foreign currency, shielding account holders from exchange rate fluctuations.

Features of EEFCA The account can be maintained by any

exporter with any designated branch of SBI \public sector banks in India

It can be maintained in any of the permitted currencies

No credit facility is allowed against the security of funds held in the account

Funds can be freely converted into Rupees at the market determined rates.