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published on 14 June 2023 | Reading time approx. 11 minutes
In light of the Covid-19 pandemic and the volatile geo-political scenario, the previous FTP (2015-20) was extended till 31 March 2023. India’s new FTP 2023 was announced by the Ministry of Commerce with effect from 1 April 2023 which seeks to integrate India further into global value chains and to make India an export hub. Up until now, the FTP was introduced for a period of five years. However, in the interest of continuity, the latest edition of the FTP has been made effective for an indefinite period.
The approach of FTP 2023 is to gradually move from incentive based regime to tax remission and create an enabling ecosystem to support greater trade facilitation through technology, automation, and continuous process re-engineering; export promotion through collaboration with exporters, states and districts; focus on emerging areas like E-Commerce and streamlining India’s export control policies (SCOMET).
Frequently asked questions on Foreign Trade Policy 2023:
IEC is a 10-character alpha-numeric number issued by DGFT, to every entity who wishes to undertake export or import activities in India. At present, the IEC is same as the Permanent Account Number (PAN) which is issued to every legal entity in India for corporate income tax purposes. For export or import of goods in India, it is mandatory for every entity to obtain IEC unless the requirement is specifically exempted. For export of services or software, IEC is necessary on the date of rendering services for availing benefits under the FTP. Every person having an IEC is required to update its critical information such registered address, additional place of business, details of directors etc. on the DGFT portal on an annual basis.
There are two types of schemes under the FTP to promote export of goods from India. First, which provide upfront exemption from payment of Customs duty on imports subject to specified terms and conditions and second which provide a remission/refund of the duties paid on imports post completion of exports from India. The same are as follows:
1. Duty Exemption Schemes:
2. Duty Refund/Remission Schemes:
AA is issued to allow duty free import (both Basic Custom duty and Integrated GST) of any material in India, which is proposed to be used as an input for manufacture of a product to be exported out of India. AA can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer. AA is issued for inputs in relation to the final product either on the basis of Standard Input Output Norms (SION) notified or specifically fixed by the Government or based on self- declaration by the exporter. Import of goods under AA is subject to following basic conditions:
The objective of the EPCG Scheme is to facilitate duty free import (both Basic Customs Duty and Integrated GST) of capital goods for pre-production, production and post production of goods for exports. The benefits under the EPCG scheme would be available only subject to suitable license obtained from the DGFT authorities which shall be valid for import of capital goods for 24 months from the date of issue of license. Capital Goods shall include:
Imports under EPCG Scheme shall be subject to an export obligation (EO) equivalent to six times of duties, taxes and cess saved on import of such capital goods. The exporters of Green Technology Products as defined in FTP would be entitled to a reduced EO of 75 percent. Imported capital goods shall be subject to actual user condition till EO is complete and Export Obligation Discharge Certificate (EODC) is granted.
The objective of RoDTEP scheme is to refund duties or taxes which are a part of the cost of exported product including prior stage cumulative indirect taxes on goods and services used in the production and distribution of the exported product. The overall budget/outlay for the RoDTEP Scheme is finalized by the Ministry of Finance in consultation with Department of Commerce, taking into account all relevant factors. Under the Scheme, a rebate would be granted to eligible exporters at a notified rate, which is calculated as a percentage of FOB value on export of items based on its 8-digit HS Code. Further, it is important to note that rebate is allowed subject to the receipt of sales proceeds within the prescribed time. It is further to be noted that Duty Drawback, IGST and other GST refunds relating to exports can also be claimed along with the RoDTEP Scheme.
Factories and manufacturing units undertaking to export their entire production of goods and services may set up their business in above mentioned schemes for manufacture of goods, including repair, reconditioning, re-engineering, rendering of services, development of software, agriculture including agro-processing, aquaculture, animal husbandry, bio-technology, floriculture, horticulture, pisciculture, viticulture, poultry and sericulture. Trading units are not covered under these schemes. Projects having a minimum investment of Rs.1 Crore in plant and machinery are only considered for setting up as EOUs.
Benefits:
Limitations/Obligations:
Deemed Exports under FTP refers to a transaction where manufactured goods do not leave India and yet the same qualify as exports. Certain categories of supplies as prescribed under the FTP qualify as Deemed Exports. Benefits for Deemed Exports subject to terms and conditions are as under:
FTP 2023 envisages process simplification and reduction in processing time through automatic approval of various permissions due to technology implementation. Some of the permissions which are granted online are as follows:
The Government has discontinued the incentives provided under MEIS and SEIS in FTP 2023.
To develop India into a merchanting trade hub, FTP 2023 has introduced provisions for merchanting trade. These transactions involve shipment of goods by the supplier from one foreign country to a customer located in another foreign country without the goods coming to India. Usually, these transactions are executed through Indian intermediaries who receive orders from customers located outside India and place a back to back order for supply to another foreign vendor. As per the new provisions, such transactions are allowed subject to compliance with Reserve Bank of India (RBI) guidelines, except for goods in the CITES and SCOMET list. Thus, merchanting trade of restricted and prohibited items under the export policy would now be possible till the time they are not included in CITES or SCOMET list.
FTP 2023 has taken an effective step towards internationalizing the Indian rupee by facilitating International Trade Settlement in the said currency through special Vostro accounts, setup as per RBI regulations. Further, receipt of export proceeds against exports, if realized in rupees, would be considered under export promotion schemes notified under FTP 2023.
If an exporter fails to realize export proceeds within the time specified by RBI, they would be liable to return all benefits/incentives availed against such exports along with applicable interest, penalty, etc. in accordance with the provisions of FT (D&R) Act, Rules and the FTP 2023.
The categories of second-hand goods along with the applicable import policy and conditions are as follows:
Import/export of goods (except items in the “Prohibited” or SCOMET List) required for the temporary exhibition by foreign/Indian exhibitors at exhibitions, fair or similar shows is allowed duty free, on submission of a bond/ security to Customs or ATA Carnet and subject to condition that the goods shall be re-exported within a period of six months or such extended period as may be granted.
SCOMET is an acronym for Special Chemicals, Organisms, Materials, Equipment and Technologies. Export of dual-use items including software and technologies having potential civilian/industrial applications as well as use in weapons of mass destruction are regulated under the SCOMET List. Accordingly, the SCOMET list is National Export Control List of dual use items and is aligned to the control lists of all the multilateral export control regimes and conventions. Further, SCOMET policy also emphasizes on alignment of India’s export control with its international commitments under various export control regimes (Wassenaar arrangement, Australia group and Missile Technology Control Regime) to control trade in sensitive and dual use items including software and technology. FTP 2023 has introduced general authorizations for export of certain SCOMET items to streamline licensing of these items and make export of SCOMET items globally competitive by focusing on simplifying policies to facilitate export of dual-use high-end goods/technology such as UAV/drones, cryogenic tanks, specified chemicals etc.
Towns producing goods more than 7.5 billion Indian rupees can be recognized as TEE based on potential for growth in exports. However, for TEE in Handloom, Handicraft, Agriculture and Fisheries sector, the threshold limit is 1.5 billion Indian rupees. In addition to existing 39 towns of export excellence, four new towns of export excellence are declared in FTP 2023 which are as under:
Status Holders are entities which are leaders in international trade and have successfully contributed to country's foreign trade. Status Holders are expected not only to contribute towards India's exports but also provide guidance and handholding to new entrepreneurs. FTP 2023 has rationalized export performance threshold for recognition of exporters as Status Holders. This will enable more exporters to achieve higher status and reduced transaction cost.
Government has introduced a special one-time Amnesty Scheme for regularization of cases of EO defaults of AA and EPCG holders. Amnesty scheme is available for a limited period, up to 30 September 2023.
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