Export Assistance and measures

There are three major Incentives:

Market Based Exchange rates

Tax concessions
Facilities under EXIM policy

1. Market Based Exchange rates

For long external value of the rupee was managed by RBI by pegging the value of rupee to
basket of currencies .RBI used to keep the value of the rupee at a level which was higher than
the real value. So a new system named liberalised exchange rate management system
(LERMS) was introduced in 1992. Under this system exporter has to surrender 40 % of the
foreign exchange earnings to the banks and could sell residual 60 % at the market rate which
h was expected to be more attractive then the official rate.

2. Tax concession

In computation of total income , section 80 HHCallows a deduction of the whole of the profit
derived from the export of goods or merchandise.
Methods for calculating export profits under section 80- HHC
a) In case where the export is of goods or services manufactured by the taxpayer :
Exports profits= export turnover x total profits
Total Turnover
b) In case where the manufactured goods are not exported by the tax payer but purchased
from third party , by deducting from the sale proceeds of export the direct and indirect
costs attributable to the export.

3. Facilities under EXIM policy

Zero Duty EPCG Scheme:

Zero duty EPCG scheme allows import of capital goods for pre-production, production and
post production (including CKD/SKD thereof as well as computer software systems) at zero
Customs duty, subject to an export obligation equivalent to 6 times of duty saved on capital
goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization
issue-date.

The scheme will be available for exporters of engineering & electronic products, basic
chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied
products, leather & leather products, paper & paperboard and articles thereof, ceramic
products, refractories, glass & glassware, rubber & articles thereof, plywood and allied
products, marine products, sports goods and toys. The zero duty EPCG scheme will be in
operation till 31.3.2012.

Concessional 3% duty EPCG scheme:

Concessional 3% duty EPCG scheme allows import of capital goods for pre-production,
production and post production (including CKD/SKD thereof as well as computer software
systems) at 3% Customs duty, subject to an export obligation equivalent to 8 times of duty
saved on capital goods imported under EPCG scheme, to be fulfilled in 8 years reckoned
from Authorization issue-date.

In case of agro units, and units in cottage or tiny sector, import of capital goods at 3%
Customs duty shall be allowed subject to fulfillment of export obligation equivalent to 6
times of duty saved on capital goods imported, in 12 years from Authorization issue-date.

For SSI units, import of capital goods at 3% Customs duty shall be allowed, subject to
fulfillment of export obligation equivalent to 6 times of duty saved on capital goods, in 8
years from Authorization issue- date, provided the landed cif value of such imported capital
goods under the scheme does not exceed Rs. 50 lakhs and total investment in plant and
machinery after such imports does not exceed SSI limit.

However, in respect of EPCG Authorization with a duty saved amount of Rs. 100 crores or
more, export obligation shall be fulfilled in 12 years.

Conditions and obligations under EPCG Scheme

A. The following are the conditions and obligations;

(i) The export obligation shall be fulfilled by the export of goods manufactured or
produced by the use of the capital goods imported under the scheme;
(ii) The exports shall be direct exports in the name of the importer. However, the
importer may export through a third party provided the name of the
importer/licence holder is also indicated in the Shipping Bill. If a merchant
exporter is the importer the name of the manufacturer shall be indicated in the
Shipping Bill;
(iii) Export proceeds shall be realized in freely convertible Currency;
(iv) Exports shall be physical exports. Deemed exports shall also be taken into
consideration for fulfilment of export obligation but the licence shall not be
entitled to claim any benefit of Deemed Exports;
(v) The export obligation shall be in addition to any other export obligation
undertaken by the importer and shall be over and above the average level of
exports of the same product achieved by him in the preceding three licensing
years. If the exporter achieves an export of 75 per cent of the annual value of
the production of the relevant export product, the export obligation under this
scheme shall be subsumed under that export provided, however, that the
aggravate value of such exports during the specified period shall not be less
than the aggregate value of the export obligation fixed.
(vi) Where the manufacturer exporter has obtained licences for the manufacture of
the same export product both under this scheme and the Duty Exemption
Scheme,, the physical exports made under the Duty exemption Scheme shall
also be counted towards the discharge of th4e export obligation under this
scheme; and
(vii) In the case of export of computer software, the export obligation shall be
determined in accordance with policy but the conditions that exports hall be
 over and above the average level of exports in the preceding three licensing
years shall not apply.

Served from India

In order to create a powerful “Served from India” brand all over the world, the government
has provided different type of import incentive to the invisible export providers. Under the
Served from India Scheme, import incentive is given for import of any capital goods, spares,
office equipment and professional equipment.

Duty Exemption and Remission Schemes

Duty exemption schemes enable duty free import of inputs required for export production. An
Advance Licence is issued as a duty exemption scheme.
A Duty Remission Scheme enables post export replenishment/ remission of duty on inputs
used in the export product. Duty remission schemes consist of (a) DFRC (Duty Free
Replenishment Certificate) and (b) DEPB (Duty Entitlement Passbook Scheme). DFRC
permits duty free replenishment of inputs used in the export product. DEPB allows drawback
of import charges on inputs used in the export product.

Advance Licence
An Advance Licence is issued to allow duty free import of inputs, which are physically
incorporated in the export product (making normal allowance for wastage). In addition, fuel,
oil, energy, catalysts etc. which are consumed in the course of their use to obtain the export
product, may also be allowed under the scheme.
Duty free import of mandatory spares upto 10% of the CIF value of the licence which are
required to be exported/ supplied with the resultant product may also be allowed under
Advance Licence.
Advance Licences are issued on the basis of the inputs and export items given under SION.
However, they can also be issued on the basis of Adhoc norms or self declared norms .
Advance Licence can be issued for:

• Physical Exports
• Intermediate Supplies
• Deemed Exports
Advance Licence is issued for duty free import of inputs, subject to actual user condition.
Such licences (other than Advance Licence for deemed exports) are exempted from payment
of basic customs duty, additional customs duty, education cess, anti dumping duty and
safeguard duty, if any.

Advance Licence for deemed export shall be exempted from basic customs duty ,additional
customs duty and education cess only. However in case of supplies to EOU/SEZ/ EHTP/STP/
BTP under such licences, anti-dumping duty and safeguard duty shall also be exempted.
DUTY FREE REPLENISHMENT CERTIFICATE

• DFRC is issued to a merchant-exporter or manufacturer-exporter for the import of

inputs used in the manufacture of goods without payment of basic customs duty.
However, such inputs shall be subject to the payment of additional customs duty equal
 to the excise duty at the time of import. DFRC shall be issued on minimum value
addition of 25% except for items in gems and jewellery sector.
• Normally, the exports made under the DEPB Scheme shall not be entitled for
drawback. However, the additional customs duty/excise duty paid in cash or through
debit under DEPB shall be adjusted as CENVAT Credit or Duty Drawback as per
rules framed by the Department of Revenue. DFRC shall be issued only in respect of
products covered under the Standard Input Output Norms as notified by DGFT.
• DFRC shall be issued for import of inputs as per SION as indicated in the shipping
bills. The validity of such licences shall be 24 months. DFRC and or the material(s)
imported against it shall be freely transferable. However, DFRC with actual user
condition or the material(s) imported against it shall not be transferable.

Duty Free Replenishment Certificate (DFRC) shall be available for exports only up to
30.04.2006 and from 01.05.2006 this scheme is being replaced by the Duty Free Import
Authorization (DFIA).

Duty Free Import Authorization - DFIA

Effective from 1st May, 2006, Duty Free Import Authorization or DFIA in short is issued to
allow duty free import of inputs which are used in the manufacture of the export product
(making normal allowance for wastage), and fuel, energy, catalyst etc. which are consumed or
utilized in the course of their use to obtain the export product. Duty Free Import Authorization
is issued on the basis of inputs and export items given under Standard Input and Output Norms
(SION).

Duty Drawback Rates

Duty Drawback is the special rebate given under the Section 75 of Indian Customs Act on
exported products or materials. Duty drawback rates or concession are only applicable on
products which are used in the processing of goods manufactured in India and then exported
to foreign countries.
Duty Drawback is not given on inputs obtained without payment of customs or excise duty.
In case of re-export of goods, it should be done within 2 years from the date of payment of
duty when they were imported. 98% of the duty is allowable as drawback, only after
inspection. If the goods imported are used before its re-export, the drawback will be allowed
as at reduced per cent.

All industry drawback rates are fixed by Directorate of Drawback, Dept. of Revenue,
Ministry of Finance and Government of India and are periodically revised - normally on 1st
June every year. Section 37B of Central Excise Act allows Central Government to frame
rules for purpose of the Act. Under these powers, 'Customs and Central Excise Duties
Drawback Rules, 1995' have been framed.
DUTY ENTITLEMENT PASSBOOK SCHEME

The objective of DEPB is to neutralise the incidence of Customs duty on the import content
of the export product. The neutralisation shall be provided by way of grant of duty credit
against the export product. The DEPB scheme will continue to be operative until it is
replaced by a new scheme which will be drawn up in consultation with exporters. Under the
DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports,
made in freely convertible currency.
The credit shall be available against such export products and at such rates as may be
specified by DGFT by way of public notice issued in this behalf, for import of raw materials,
intermediates, components, parts, packaging material etc.

The holder of DEPB shall have the option to pay additional customs duty, if any, in
cash as well.

The DEPB shall be valid for a period of 24 months from the date of issue.
Marketing Development Assistance (MDA)
The Marketing Development Assistance (MDA) scheme has been formulated to stimulate and
diversify the country’s exports with the following objectives:
• Assist individual exporters for export promotion activities abroad
• Assist Export Promotion Councils (EPCs) to undertake export promotion activities for their
product(s) and commodities
• Assist approved organisations/trade bodies in undertaking limited exclusive non-recurring
innovative activities connected with export promotion efforts for their members
• Assist EPCs to contest countervailing duty/anti dumping cases initiated abroad
• Assist Focus Area export promotion programmes in specific regions abroad like Focus LAC,
Focus Africa, Focus CIS and Focus ASEAN+ 2 programmes
• Promote residual essential activities connected with marketing promotion efforts abroad

Recognised Export Promotion Councils (EPCs), on product grouping basis, are eligible for MDA
assistance for development and promotional activities. Exporters having annual export turn over up to
Rs.10 crores are eligible for assistance under the MDA scheme for bonafide overseas marketing
promotion activities for export of specific product(s) and commodities through activities like
participation in trade fairs/exhibitions/BSMs/trade delegations lead by EPCs etc.

The Focus Area programmes namely, Focus LAC, Focus Africa, Focus CIS and Focus ASEAN+2
have supported the market promotion activities in the regions through EPCs, ITPO, etc. by way of
organising fairs/exhibitions, sponsoring BSMs/trade delegations in these regions, arranging reverse
trade visits of prominent foreign buyers/delegates/journalists to India, etc.

Market Access Initiative (MAI) Scheme

The Market Access Initiative (MAI) Scheme has been launched as a plan scheme to act as a
catalyst to promote India’s exports on a sustained basis. The Scheme is based upon ‘focus
product’ and ‘focus market’ concept. Under the scheme, assistance is extended to the
Departments of Central Government and Organizations of Central/State Governments, Export
Promotion Councils, Registered Trade Promotion organizations, Commodity Boards,
Recognized Apex Trade Bodies, Recognized Industrial Clusters and Individual Exporters for
product registration and testing charges for engineering products abroad. Assistance is given
for the following components: -
 • Market Studies
• Marketing projects which may include:
a) Opening of showrooms
b) Warehousing facility
c) Display in international departmental stores
d) Publicity campaign
e) Participation in trade fairs, BSMs etc., abroad
f) Research and product development
g) Reverse visits of the prominent foreign buyers etc. from the project focus
countries
• Export potential survey of the states
• Registration charges for product registration abroad for pharmaceuticals,
biotechnology and agro-chemicals
• Testing charges for engineering products abroad
• To cottage and handicrafts units for similar activities and for developing the web site
for virtual exhibition
• Studies on WTO related matters
• To industrial clusters for marketing study, participation in trade fair etc. abroad
• To any project/study which would further the objectives of the scheme

Deemed Exports

Meaning of deemed export

‘Deemed Exports’ as defined in the Export and Import Polilcy, 1997-2002 means
those transactions in which the goods supplied do not leave the country and the
supplier in India receives the payment for the goods. It means the goods supplied
need not go out of India to treat them as ‘Deemed Export’.

Different categories of supplies regarded as ‘DEEMED EXPORTS’

The following categories of supply of goods manufactured in India shall be regarded as

“deemed Exports” under the Export and Import Policy 1997- 2002.

a). Supply of goods against licenses issued under the Duty exemption Scheme:

b) Supply of goods to Units located in Export Processing Zones (EPZs) or Software

Technology Parks (STPs) or Electronic Hardware Technology Parks (EHTPs) or
Export Oriented Units (EOUs)

c) Supply of Capital goods to holders of licenses issued under the Export Promotion
Capital Goods (EPCG) Scheme;

d) Supply of goods to Projects financed by Multilateral or Bilateral agencies/funds as

notified by the Department of Economic Affairs, Ministry of Finance under
international competitive bidding or under limited tender system in accordance with
the procedure of those agencies/funds, where the legal agreements provide for tender
evaluation without including the Customs duty

e) Supply of capital goods and spares to fertilizer plants if the supply is made under the
procedure of international competitive bidding.
 f) Supply of goods to any Project or purpose in respect of which the Ministry of Finance,
by; a notification permits the import of such goods at zero customs duty coupled with
the extension of benefits to domestic supplies;

g) Supply of goods to such projects in the Power, Oil and Gas sectors in respect of
which the Ministry of Finance, by Notification, extends the benefits to domestic
supplies.

h) Supply of Marine Freight Containers by 100% EOU (Domestic freight containers-

manufacturers) to shipping companies including Shipping Corporation of India
provided the said containers are exported out of India within 6 months or such further
period as permitted by customs.

Benefits available under ‘Deemed Exports’

Deemed Exports shall be eligible for the following benefits in respect of manufacture
and supply of goods qualifying as Deemed Exports:

a) Special Imp rest Licence/Advance Intermediate License;.

b) Deemed Exports Drawback Scheme i.e, on the Deemed Exports, Drawback at the
rate fixed by the Ministry of Finance for the DGFT or his regional Officers pay the
goods physically exported.

c) Refund of terminal excise duty ie., Central Excise duty, if paid any, on the goods
supplied under Deemed Exports is refunded by the DGFT or his regional Officers

d) ‘Special Import License’ at the rate of 6 per cent of the FOB value (excluding all
taxes and levies)

e) If the supplier has made the supplies against Advance Release Order(ARO) or
Back to Back Letter of Credit, he shall be entitled for the benefits of Deemed Exports
Drawback Scheme, Refund or terminal excise duty and Special Imprest License.

f) In respect of supply of capital goods to EPCG license holder, the supplier shall be
entitled to the benefits stated above except, however, that the benefit of Special
Imprest License or Deemed Export Drawback Scheme shall be available only in case
of supplies made to Zero duty EPCG license holder.

Procedure for claiming the benefits of ‘DEEMED EXPORTS’

The Suppliers of the goods under ‘Deemed Exports’ should make application to the
regional licensing authority concerned claiming the benefits of ‘Deemed Exports’. The
applications should be made in the forms given in Appendix 17 of ‘Hand Book of
Procedure’s of export and Import Policy, 1997-2002. along-with documents prescribed
therein.