Analysis of Major FTP 2023 / HBP 2023 Amendments

Sreeram Kaza
Indirect Tax Professional

Chapter 1 - Legal Framework and Trade Facilitation:

FTP

Foreign Trade Policy 2023 (FTP 2023) has come into force w.e.f. 01.04.2023. All exports & imports made upto
31.03.2023 shall be governed by the relevant FTP unless otherwise specified. (FTP - Para -1.01 - Duration of
FTP).

Handbook of Procedures 2023 (HBP 2023), Appendices & Aayat Niryat Forms (ANF) and Standard Input
Output Norms (SION) have also come into force w.e.f. 01.04.2023. [FTP - Para - 1.03 - Handbook of
Procedures (HBP) and Appendices & Aayat Niryat Forms (ANF)].

Threshold Limits for Status Holders have been lowered [FTP 2023 - Para - 1.26 - Status Holder Categories
(Previous FTP 2015-2020 - Para - 3.21 - Status Category)]

Status House Existing Export Performance Revised Export Performance

Category Threshold (in USD Million) Threshold (in USD Million)
One Star 3 3
Two Star 25 15
Three Star 100 50
Four Star 500 200
Five Star 2000 800
HBP

Applications can now also be authenticated & submitted through Aadhar eSign [HBP - Para - 1.05 -Use of
Digital Signature Certificates and Aadhar e-Sign (Previous FTP 2015-2020 - Para - 1.06 - Use of Digital
Signature)].

Application form changed from ANF 3C to ANF 1B. Now, EOU, SEZ need to apply to Jurisdictional RA only
(HBP - Para - 1.08 - Status Holder: Application for grant of Status Certificate).

Validity of certificate issued under FTP 2015-20 will be upto 30-9-2023. Each exporter is required to renew
and obtain new status through online Portal on or before 30th Sept 2023 (HBP - Para - 1.09 -Validity of status
certificate)

Chapter 2 - General Provisions regarding Imports and Exports :

Any change in details will have to be updated within 30 days (HBP - Para 2.14 - Modification of IEC).

Chapter 3 - Developing Districts as Export Hubs:

New chapter 3 introduced - District Export Promotion Committee will prepare District Export Action Plan.
Regional DGFT will prepare Online portal for monitoring of such plan. This will enable a person at remote
location also to have global presence and create Brand India (FTP - Para - 3.0 Objective).

HBP

Time limit has been defined for representation to be made against the decision of norms committee. Same has
to be made within the period of 12 months from the date of uploading the decision, else time limit will lapse
(HBP - Para - 4.17 Time limit for Representation).

Now within 6 months from the date of expiry of EO Application to be made online by linking shipping bill
against AA - failing which RA may issue SCN [HBP - Para - 4.43(b) - Monitoring of Export Obligation]

When EO is fulfilled in terms of quantity but there is shortfall in terms of value, then amount equal to 3% of
shortfall in FOB value to be paid earlier it was 1% [HBP - Para - 4.49(b) - Regularisation of Bonafide Default].

Example:

Particulars Amount
As per AA:
CIF Value as per AA A $ 100
Prescribed Value Addition @ 15% B $ 15
Minimum FOB Value to be Achieved C = (A + B) $ 115
FOB as per AA D $ 200

Actual Achieved:
Actual CIF Value utilised E $ 100
Actual Value Addition Achieved @ 10% F $ 10
Actual FOB Value Achieved G = (E + F) $ 110

Shortfall in Value ($) H=G-C $5

Exchange Rate (INR/$) I INR 62.20/$
Shortfall in Value (INR) J=HxI INR 311
Composition Fees @ 1% (as per Old FTP 2015-2020) K = J x 1% INR 3.11
Composition Fees @ 3% (as per New FTP 2023) L = J x 3% INR 9.33
Chapter 5 - Export Promotion Capital Goods (EPCG) Scheme :

FTP

Specific comment has been added on policy para which states that the exporter needs to maintain Average EO
for every financial year till export obligation period is over and export made over and above will only be
considered for fulfilment of export obligation under EPCG. [FTP - Para - 5.04 (c) -fulfilment of export
obligation under EPCG]. (Comments - However, the new FTP 2023 does not specify the consequences if such
Average EO is not achieved)
Specific provision has been added stating that exports made under RoSCTL and RoDTEP will be eligible for
fulfilment of export obligation under EPCG. [Para - FTP - 5.04 (e) - Fulfilment of export obligation under
EPCG] (Comments - AA, SEZ & EOU are not allowed for RoDTEP. However, Special AA are allowed RoSCTL)

Specific condition has been added in Export obligation clause so as to only consider exports made by DTA Unit
for fulfilment of export obligation. In other words, exports made by other Units of the exporter which are
either EOUs/SEZs will not be considered for fulfilment of export obligation under

EPCG [Para - FTP - Para 5.04 (g) - Fulfilment of export obligation under EPCG] (Comments - This Para is
added only to give clarity)

The authorization issued under the previous policies will be governed under respective FTP under which those
are issued. In other words, the change carried out in the current policy will not be applicable in case the
authorization issued under previous policies unless otherwise specified (FTP - Para - 5.13 - Transitional
Arrangements).

The government decided to discontinue the post export EPCG duty credit scrip under which the exporter used
to get the duty credit scrip in the proportion of export obligation fulfilled by them. Hence the entire para
related to Post export EPCG duty credit scrip has been deleted. However, the exporter who has opted this
scheme under earlier policy will continue to avail the benefit as per the earlier FTP (FTP - Para - 5.12 of
existing policy).

HBP

In case of exports through third party, the third party exporter needs to export the goods as it is (HBP - Para -
5.10 Conditions for fulfilment of Export Obligation). (Comments - This para has been added for more clarity)

Earlier the fees were 5% and 10% for extension in 1st and 2nd year extension respectively, this fee is reduced to
2%. Also, the composition fees need to be paid on proportionate duty saved amount on unfulfilled export
obligation (HBP - Para - 5.16 Extension in Export Obligation Period).

Example:

Extensions Unfulfilled Export Old HBP 2015- 0 [Para 5.17 New HBP [Para
beyond 6 Years Obligation 202 (b)] 2023 5.16(b)]
Rate of Amt. of Rate of Amt. of
Composition Composition Composition
Fees Fees Fees Composition Fees

1st Extension Rs. 50 5% Rs. 2.50 2% Re. 1

2nd Extension Rs. 25 10% Rs. 2.50 2% Rs. 0.50

Chapter 6 - Export Oriented Unit (EOU) Scheme:

FTP

Units having AEO will be entitled for exemption for furnishing the Bank Guarantee under EOU Scheme.
Earlier unless EOU completes 3 years they were not entitled for BG exemption [FTP - Para - 6.11 (e) -Other
entitlement for EOUs - Bank Guarantee exemption]

Goods or parts thereof, on being imported/indigenously procured and found defective or otherwise unfit for
use or which have been damaged or become defective subsequently, can now be returned against refund of
purchase value or against replacement or destruction. Earlier, such goods could only be destroyed or be
returned against replacement (no refund option). [FTP - Para 6.16 (c) -Replacement/Repair of
Imported/Indigenous Goods]
HBP

Captive power plants (DG Sets, Wind Power, Solar Power), including transformers and accessories. This would
be subject to the condition that no tax/duty benefits stipulated under EOU Scheme shall be available for
setting up as well as operations and maintenance of such wind and solar power plants. (HBP -Para 6.04 (b) -
Import/Domestic Procurement of Goods)

Now, for bringing back the goods taken out of EOU for sub-contracting, the Customs Authorities may grant an
extension of time beyond 90 days in deserving cases. Earlier, goods were required to be brought back within
90 days and there was no provision of its extension. (HBP - Para 6.21 (a) (i) – Sub-Contracting)

Earlier in case of new & single EOU, the DC had powers to issue IEC. Now this clause has been removed. Going
forward only DGFT can issue IEC [HBP - Para - 6.34 (n) - Power of DC]

As per earlier provision, the value of capital goods was to be added for the purpose of NFE computation. Now,
the new provision states that the DTA unit has to pay custom duties on un-fulfilled export obligation on its
EPCG before conversion [HBP - Para - 6.38 (a) - Conversion].

Other Highlights:

(a) Automatic System-Based Approvals of FTP Applications - DGFT implemented rule-based

automatic approval systems using Business Analytics Tools. It has been introduced on pilot basis for
Advance Authorization Extension/Revalidation Applications (HBP - Para - 11.10 - Time Bound
Disposal of Applications)

Type Current Processing Automatic Route Processing

Time Time
Advance Authorization issuance 3 to 7 days 1 day
EPCG issuance 3 to 7 days 1 day
Revalidation of Authorizations 3 days to 1 month 1 day
Export Obligation Extensions 3 days to 1 month 1 day
Applications

(b) Application Fees reduced for Advance Authorization (AA) and EPCG Schemes :

Application Fees is reduced to Re. 1 per Rs. 1000/- or part thereof subject to a minimum Rs. 500/-and
maximum Rs. 1 Lacs on CIF value/duty saved amount of Authorization. (Appendix 2K - Para 1 - Sr. No. 3)

Example:

CIF Value/Duty Saved Value Fee for Non-MSMEs Fee for MSMEs
(in INR) (in INR) (in INR)*

(Appendix 2K - Para 1 - Sr. No. 3)

Up to 1 Crore 1 per 1,000 100

1 Crore to 10 Crores 1 per 1,000 5,000
Above 10 Crores Cap at 1,00,000 5,000

♦ Separate Fees Structure for MSMEs is mentioned in the "FTP Highlights" presented during the
announcement of new FTP 2023. However, this separate Fees Structure for MSMEs has not yet been
notified officially.
(c) Amnesty Scheme (Public Notice No. 2/2023 dtd. 01.04.2023):
Coverage:

♦ AA & EPCCG Authorisations issued under FTP 2009-2014 till 31.03.2015

♦ AA & EPCCG Authorisations issued under FTP 2004-2009 and before, whose EO Period was valid
beyond 12.08.2013.
Payments to be made:

♦ BCD + CVD + SAD + Interest @ 15% only on BCD (maximum upto

BCD)
♦ No Refund & No ITC
(d) E-Certificate of Origin:

Revamp of the e-Certificate of Origin platform proposed - to provide for self-certification of CoOs as well as
automatic approval of CoOs, where feasible. Initiatives for electronic exchange of CoO data with partner
countries envisaged.

(e) Customs - Electronic Cash Ledger (ECL) - Not related to FTP but being a recent important
change, it is given for your information:

♦ Section 51A of Customs Act, 1962;

♦ Notif. No. 47/2022-Cus (NT) dtd. 31.05.2022;
♦ The Customs (Electronic Cash Ledger) Regulations, 2022 (ECLR) notified vide Notif. No. 20/2022-
Cus (NT.) dtd 30.03.2022, w.e.f. 01.06.2022;
♦ Notif. No. 18/2023-Cus (NT.) dtd. 30.03.2023;
♦ Notif. No. 19/2023-Cus (NT.) dtd. 30.03.2023 amending Notif. No. 19/2022-Cus (NT.) dtd.
30.03.2022;
♦ Circular No. 9/2023-Cus dtd. 30.03.2023;
♦ ICEGATE Advisory dtd. 31.03.2023.
Miscellaneous:

(a) Advance Authorisation [New HBP 2023 - Para 4.40 - Export Obligation (EO) Period and its
Extension - Public Notice No. 52/2015-2020 dtd. 18.01.2023]:

Process Re-Engineering undertaken for streamlining as well as automating processes e.g. Standardization
of Composition Fees for extension of AA. Benefit for an authorization with CIF Value of Rs. 10 Crores, with
around 50% EO completion is illustrated as under:

Type of Extension No rmal Appendix - 4J (No Two Extensions, only

One-time)
First Second
Extension Extension
Upto 2 Crores 5,000 10,000 5,000
More than 2 Crores to 10 10,000 20,000 10,000
Crores
Above 10 Crores 15,000 30,000 15,000
(b) EPCG - Increase in Validity Period for Import [FTP - Para - 5.01 (d) - Validity period of
Authorization r.w. Public Notice No. 47/2015-2020 dtd. 16.011.2018]:

The validity period for import of capital goods under EPCG has been increased from current 18 months to 24
months from the date of issue of authorization. In other words, the authorization holder can import CG under
EPCG within period of 24 months from the date of issue of authorization
(c) Revalidation of Advance Authorisation [HBP - Para - 4.39 - Validity period for import and
Revalidation of Authorisation r.w. Public Notice No. 16/2015-2020 dtd. 22.07.2021]:

Only 1 revalidation for 12 months will be allowed. No more 2 time revalidation for period of 6 months each.
This will result in ease of doing business and reduction in transaction cost of the exporter.

Chp FTP 2015-2020 Chp FTP 2023

No No
1 Legal Framework And Trade Facilitation 1 Legal Framework and Trade Facilitation
2 General Provisions Regarding Imports And 2 General Provisions Regarding Imports and
Exports Exports
3 Exports From India Schemes 3 Developing Districts as Export Hubs
4 Duty Exemption/Remission Schemes 4 Duty Exemption/Remission Schemes
5 Export Promotion Capital Goods (EPCG) 5 Export Promotion Capital Goods (EPCG)
Scheme Scheme
6 Export Oriented Units (EOUs), Electronics 6 Export Oriented Units (EOUs), Electronics
Hardware Technology Parks (EHTPs), Software Hardware Technology Parks (EHTPs),
Technology Parks (STPs) And BioTechnology Software Technology Parks (STPs) and Bio-
Parks (BTPs) Technology Parks (BTPs)
7 Deemed Exports 7 Deemed Exports
7A Transport And Marketing Assistance For -
Specified Agriculture Products
8 Quality Complaints And Trade Disputes 8 Quality Complaints and Trade Disputes
- 9 Promoting Cross Border Trade in
Digital Economy
- 10 SCOMET: Special Chemicals,
Organisms, Materials, Equipment and
Technologies
9 Definitions 11 Definitions

Hand Book of Procedures - 2023 - Changes/Addition/Deletion in Chapter

Chp HBP 2015-2020 Chp HBP 2023

No No
1 Introduction & Trade Facilitation 1 Legal Framework and Trade Facilitation
2 General Provisions Regarding Exports And 2 General Provisions Regarding Imports and
Imports Exports
3 Exports From India Schemes 3 Developing Districts as Export Hubs
4 Duty Exemption/Remission Scheme 4 Duty Exemption/Remission Schemes
5 Export Promotion Capital Goods (Epcg) Scheme 5 Export Promotion Capital Goods (EPCG)
Scheme
6 Export Oriented Units (EOUs), Electronics 6 Export Oriented Units (EOUs), Electronics
Hardware Technology Parks (EHTPs), Software Hardware Technology Parks (EHTPs),
Technology Parks (STPs) Scheme And Bio- Software Technology Parks (STPs) and Bio-
Technology Parks (BTPs) Technology Parks (BTPs)
 7 Deemed Exports 7 Deemed Exports
7A Transport And Marketing Assistance For -
Specified Agriculture Products Scheme
8 Quality Complaints And Trade Disputes 8 Quality Complaints and Trade Disputes
- 9 Promoting Cross Border Trade in
Digital Economy
- 10 SCOMET: Special Chemicals,
Organisms, Materials, Equipment and
Technologies
9 Miscellaneous Matters 11 Miscellaneous Matters

Sr. Scheme Old FTP 2015-2020 (upto 31.03.2023) New FTP-2023 (w.e.f.
No. 01.04.2023)
TARIFF:
1 EPCG (Post-Export) 17/2015-Cus dtd. 01.04.2015 -
2 AA (Physical Exports) 18/2015-Cus dtd. 01.04.2015 21/2023-Cus dtd.
01.04.2023
3 AA (Deemed 21/2015-Cus dtd. 01.04.2015 22/2023-Cus dtd.
Exports/Intermediate 01.04.2023
Supply)
4 AA (Annual 20/2015-Cus dtd. 01.04.2015 23/2023-Cus dtd.
Requirement) 01.04.2023
5 AA (Prohibited Goods) 22/2015-Cus dtd. 01.04.2015 24/2023-Cus dtd.
01.04.2023
6 DFIA 19/2015-Cus dtd. 01.04.2015 25/2023-Cus dtd.
01.04.2023
7 EPCG 16/2015-Cus dtd. 01.04.2015 26/2023-Cus dtd.
01.04.2023
8 AA (Special Advance 45/2016-Cus dtd. 13.08.2016 27/2023-Cus dtd.
Authorisation)* 01.04.2023
9 EOU 52/2003-Cus dtd. 31.03.2003 52/2003-Cus dtd. 31.03.2003
(as last amended vide Notif. No. (as last amended vide Notif. No. 37/2022-
Cus dtd. 30.06.2022) 28/2023-Cus dtd. 01.04.2023)

10 RoSCTL 13/2020-Cus dtd. 14.02.2020 -

11 RoSL (Garments) 38/2020-Cus dtd. 21.10.2020 -
NON-TARIFF:
12 RoDTEP 76/2021-Cus (NT) dtd. 23.09.2021 r.w. 75/2021- 24/2023-Cus (NT) dtd.
Cus (NT) dtd. 23.09.2021 01.04.2023
13 RoSCTL (Garments & 77/2021-Cus (NT) dtd. 24.09.2021 25/2023-Cus (NT) dtd.
Made-ups) 01.04.2023

*Special AA Scheme for Export of Articles of Apparel and Clothing Accessories (FTP - Para - 4.04A -Special
Advance Authorisation Scheme for export of Articles of Apparel and Clothing accessories)
Date: 06.04.2023

(The views expressed in this summary are strictly personal)

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