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Foreign Trade Policy in INDIA

Foreign Trade Policy

1st September 2004-31st March 2009

 

Ministry of Commerce and Industry

Department of Commerce

Government of India

 

TO BE PUBLISHED IN THE GAZETTEE OF INDIA EXTRAORDINARY

PART-II, SECTION-3, SUB SECTION (ii)

GOVERNMENT OF INDIA

MINISTRY OF COMMERCE AND INDUSTRY

DEPARTMENT OF COMMERCE

NOTIFICATION No. 1(RE-2006)/ 2004-2009

NEW DELHI, DATED THE 7th April, 2006

In exercise of powers conferred by Section 5 of the Foreign Trade (Development &

Regulation) Act,1992 (No.22 of 1992) read with paragraph 1.2 of the Foreign Trade

Policy, 2004-2009, the Central Government hereby notifies the Foreign Trade Policy,

2004-2009 incorporating the Annual Supplement as updated on 7th April 2006 and

contained in Annexure to this notification. The policy shall come into force w.e.f.

1st April 2006.

This issues in Public interest.

( K.T. CHACKO )

Director General of Foreign Trade and

Ex Officio Additional Secretary to the Government of India

(Issued from F.No. 01/94/180/Foreign Trade Policy/AM07/PC-I)

 

CONTENTS

CHAPTER SUBJECT Page

PREAMBLE 7

1A LEGAL FRAMEWORK 9

1B SPECIAL FOCUS INITIATIVES 10

1C BOARD OF TRADE 14

2 GENERAL PROVISIONS REGARDING

IMPORTS AND EXPORTS 16

3 PROMOTIONAL MEASURES 27

4 DUTY EXEMPTION / REMISSION SCHEMES 39

5 EXPORT PROMOTION CAPITAL GOODS SCHEME 56

6 EXPORT ORIENTED UNITS (EOUs), ELECTRONICS

HARDWARE TECHNOLOGY PARKS (EHTPs),

SOFTWARE TECHNOLOGY PARKS (STPs) AND

BIO-TECHNOLOGY PARKS (BTPs) 63

7 SPECIAL ECONOMIC ZONES 76

7A FREE TRADE & WAREHOUSING ZONES 77

8 DEEMED EXPORTS 78

9 DEFINITIONS 83

 

FOREIGN TRADE POLICY

PREAMBLE

CONTEXT

For India to become a major player in world trade, an all encompassing, comprehensive view

needs to be taken for the overall development of the country’s foreign trade. While increase in

exports is of vital importance, we have also to facilitate those imports which are required to

stimulate our economy. Coherence and consistency among trade and other economic policies is

important for maximizing the contribution of such policies to development. Thus, while

incorporating the existing practice of enunciating an annual Exim Policy, it is necessary to go

much beyond and take an integrated approach to the developmental requirements of India’s

foreign trade. This is the context of the new Foreign Trade Policy.

OBJECTIVES

Trade is not an end in itself, but a means to economic growth and national development. The

primary purpose is not the mere earning of foreign exchange, but the stimulation of greater

economic activity. The Foreign Trade Policy is rooted in this belief and built around two major

objectives. These are:

(i) To double our percentage share of global merchandise trade within the next five

years; and

(ii) To act as an effective instrument of economic growth by giving a thrust to employment

generation.

STRATEGY

These objectives are proposed to be achieved by adopting, among others, the following strategies:

(i) Unshackling of controls and creating an atmosphere of trust and transparency to

unleash the innate entrepreneurship of our businessmen, industrialists and traders.

(ii) Simplifying procedures and bringing down transaction costs.

(iii) Neutralizing incidence of all levies and duties on inputs used in export products,

based on the fundamental principle that duties and levies should not be exported.

(iv) Facilitating development of India as a global hub for manufacturing, trading and

services.

(v) Identifying and nurturing special focus areas which would generate additional

 

employment opportunities, particularly in semi-urban and rural areas, and developing

a series of ‘Initiatives’ for each of these.

(vi) Facilitating technological and infrastructural upgradation of all the sectors of the

Indian economy, especially through import of capital goods and equipment, thereby

increasing value addition and productivity, while attaining internationally accepted

standards of quality.

(vii) Avoiding inverted duty structures and ensuring that our domestic sectors are not

disadvantaged in the Free Trade Agreements/Regional Trade Agreements/Preferential

Trade Agreements that we enter into in order to enhance our exports.

(viii) Upgrading our infrastructural network, both physical and virtual, related to the entire

Foreign Trade chain, to international standards.

(ix) Revitalising the Board of Trade by redefining its role, giving it due recognition and

inducting experts on Trade Policy.

(x) Activating our Embassies as key players in our export strategy and linking our

Commercial Wings abroad through an electronic platform for real time trade

intelligence and enquiry dissemination.

PARTNERSHIP :

The new Policy envisages merchant exporters and manufacturer exporters, business and industry

as partners of Government in the achievement of its stated objectives and goals. Prolonged and

unnecessary litigation vitiates the premise of partnership. In order to obviate the need for litigation

and nurture a constructive and conducive atmosphere, a suitable Grievance Redressal Mechanism

will be established which, it is hoped, would substantially reduce litigation and further a

relationship of partnership.

The dynamics of a liberalized trading system sometimes results in injury caused to domestic

industry on account of dumping. When this happens, effective measures to redress such injury

will be taken.

ROADMAP:

This Policy is essentially a roadmap for the development of India’s foreign trade. It contains the

basic principles and points the direction in which we propose to go. By virtue of its very dynamics,

a trade policy cannot be fully comprehensive in all its details. It would naturally require

modification from time to time. We propose to do this through continuous updation, based on

the inevitable changing dynamics of international trade. It is in partnership with business and

industry that we propose to erect milestones on this roadmap.

(KAMAL NATH)

MINISTER FOR COMMERCE & INDUSTRY

GOVERNMENT OF INDIA

NEW DELHI

31ST AUGUST, 2004

 

CHAPTER 1A

LEGAL FRAMEWORK

Preamble 1.1 The Preamble spells out the broad framework and is an integral

part of the Foreign Trade Policy.

Duration 1.2 In exercise of the powers conferred under Section 5 of The

Foreign Trade (Development and Regulation Act), 1992 (No.

22 of 1992), the Central Government hereby notifies the

Foreign Trade Policy for the period 2004-2009 incorporating

the Export and Import Policy for the period 2002-2007, as

modified. This Policy shall come into force with effect from

1st September 2004 and shall remain in force upto 31st March,

2009 unless as otherwise specified.

Amendments 1.3 The Central Government reserves the right in public interest

to make any amendments to this Policy in exercise of the

powers conferred by Section-5 of the Act. Such amendment

shall be made by means of a Notification published in the

Gazette of India.

Transitional 1.4 Any Notifications made or Public Notices issued or anything

Arrangements done under the previous Export/ Import policies, and in force

immediately before the commencement of this Policy shall,

in so far as they are not inconsistent with the provisions of

this Policy, continue to be in force and shall be deemed to

have been made, issued or done under this Policy.

Authorisations, certificates and permissions issued before the

commencement of this Policy shall continue to be valid for

the purpose and duration for which such Authorisation,

certificate or permission was issued, unless otherwise

stipulated.

1.5 In case an export or import that is permitted freely under this

Policy is subsequently subjected to any restriction or

regulation, such export or import will ordinarily be permitted

notwithstanding such restriction or regulation, unless

otherwise stipulated, provided that the shipment of the export

or import is made within the original validity of an irrevocable

letter of credit established before the date of imposition of

such restriction.

 

CHAPTER 1B

SPECIAL FOCUS INITIATIVES

Special Focus 1B.1 With a view to doubling our percentage share of global

Initiatives trade within 5 years and expanding employment opportunities,

especially in semi urban and rural areas, certain special

focus initiatives have been identified for the agriculture,

handlooms, handicraft, gems & jewellery, leather and Marine

sectors.

Government of India shall make concerted efforts to promote

exports in these sectors by specific sectoral strategies that shall

be notified from time to time.

New Sectoral Initiatives Further Sectoral Initiatives in other sectors will also be

to be announced announced from time to time.

For the present, the thrust sectors indicated below shall be

extended the following facilities:

(i) Agriculture and Village Industry

(a) A new scheme called the Vishesh Krishi and Gram

Udyog Yojana (Special Agricultural and Village

Industry Scheme) for promoting export of fruits,

Vegetables, Flowers, Minor Forest produce, Dairy,

Poultry and their value added products and Gram

Udyog products has been introduced (Para 3.8).

(b) Funds shall be earmarked under ASIDE for

development of Agri Export Zones (AEZ)

(c) Deleted.

(d) Deleted.

(e) Capital goods imported under EPCG shall be

permitted to be installed anywhere in the AEZ.

(f) Import of restricted items, such as panels, shall be

allowed under the various export promotion

schemes.

(g) Import of inputs such as pesticides shall be

permitted under the Advance Authorisation for agro

exports.

(h) New towns of export excellence with a threshold

limit of Rs 250 crore shall be notified.

 

(ii) Handlooms :

(a) Specific funds would be earmarked under MAI/

MDA Scheme for promoting handloom exports.

(b) Duty free import entitlement of specified trimmings

and embellishments shall be 5% of FOB value of

exports during the previous financial year.

(c) Duty free import entitlement of hand knotted carpet

samples shall be 1% of FOB value of exports during

the previous financial year.

(d) Duty free import of old pieces of hand knotted

carpets on consignment basis for re-export after

repair shall be permitted.

(e) New towns of export excellence with a threshold

limit of Rs 250 crore shall be notified.

(f) Government has decided to develop a trade mark

for Handloom on lines similar to ‘Woolmark’ and

‘Silkmark’. This will enable handloom products to

develop a niche market with a distinct identity.

(iii) Handicrafts:

(a) New Handicraft SEZs shall be established which

would procure products from the cottage sector and

do the finishing for exports.

(b) Duty free import entitlement of trimmings and

embellishments shall be 5% of the FOB value of

exports during the previous financial year. The

entitlement is broad banded, and shall extend also

to merchant exporters tied up with supporting

manufacturers.

(c) The Handicraft Export Promotion Council shall be

authorized to import trimmings, embellishments

and consumables on behalf of those exporters for

whom directly importing may not be viable.

(d) Specific funds would be earmarked under MAI &

MDA Schemes for promoting Handicraft exports.

(e) CVD is exempted on duty free import of trimmings,

embellishments and consumables.

(f) New towns of export excellence with a reduced

threshold limit of Rs 250 crore shall be notified.

 

(iv) Gems & Jewellery

(a) Import of gold of 8k and above shall be allowed

under the replenishment scheme subject to the

import being accompanied by an Assay Certificate

specifying the purity, weight and alloy content.

(b) Duty free import entitlement of consumables for

metals other than Gold, Platinum shall be 2% of

FOB value of exports during the previous financial

year.

(c) Duty free import entitlement of commercial samples

shall be Rs 300,000.

(d) Duty free re-import entitlement for rejected

jewellery shall be 2% of the FOB value of exports

(e) Cutting and polishing of gems and jewellery, shall

be treated as manufacturing for the purposes of

exemption under Section 10A of the Income Tax

Act

(v) Leather and Footwear

(a) Duty free import entitlement of specified items shall

be 5% of FOB value of exports during the preceding

financial year.

(b) The duty free entitlement for the import of

trimmings, embellishments and footwear

components for footwear (leather as well as

synthetic), gloves, travel bags and handbags shall

be 3% of FOB value of exports of the previous

financial year. The entitlement shall also cover

packing material, such as printed and non printed

shoeboxes, small cartons made of wood, tin or

plastic materials for packing footwear.

(c) Machinery and equipment for Effluent Treatment

Plants shall be exempt from basic customs duty.

(d) Re-export of unsuitable imported materials such as

raw hides & skins and wet blue leathers is permitted.

(e) CVD is exempted on lining and interlining material

notified at S.No 168 of Customs Notification No

21/2002 dated 01.03.2002.

(f) CVD is exempted on raw, tanned and dressed fur

skins falling under Chapter 43 of ITC (HS).

 

Package for Marine (vi) (a) Duty free import of specified specialised inputs /

Sector chemicals and flavouring oils etc. to be allowed to

the extent of 1% of FOB value of preceding

financial years export.

(b) To allow import of monofilament long line system

for tuna fishing at a concessional rate of duty.

(c) A self removal procedure for clearance of seafood

waste to be applicable subject to prescribed wastage

norms.

Optimum Development 1B.2 In order to showcase our industrial and trade prowess to its

programme for best advantage and leverage existing facilities to enhance the

Pragati Maidan quantity of space and service, Pragati Maidan will be

transformed into a world-class complex with visitor

friendliness ingress and egress system. The complex utilisation

will be improved, increased and diversified. There shall be

brand new, state-of-the-art, environmentally- controlled, airconditioned

exhibition areas, and Permanent Exhibition Marts.

In addition, a large Convention Centre to accommodate ten

thousand delegates will be developed, with multiple and

flexible hall spaces, auditoria and meeting rooms with hi-tech

equipment. A year-round Food and Beverage destination will

be developed, with a large number of outlets covering all

cuisines and pricing levels. There will be a multi- level park

to accommodate over nine thousand vehicles within the

envelope of Pragati Maidan.

 

CHAPTER-1C

Board of Trade

Board of Trade 1C.1 The Board of Trade has been revamped and given a clear and

dynamic role in advising government on relevant issues

connected with Foreign Trade Policy. There would be a process

of continuous interaction between the Board of Trade and

Government in order to achieve the desired objective of

boosting India’s exports.

Terms of Reference 1C.2 The Board of Trade would have the following terms of

reference:

I To advise the Government on Policy measures for

preparation and implementation of both short and

long term plans for increasing exports in the light

of emerging national and international economic

scenarios;

II To review export performance of various sectors,

identify constraints and suggest industry specific

measures to optimize export earnings;

III To examine the existing institutional framework for

imports & exports and suggest practical measures

for further streamlining to achieve the desired

objectives;

IV To review the policy instruments and procedures

for imports & exports and suggest steps to

rationalize and channelise such schemes for

optimum use;

V To examine issues which are considered relevant

for promotion of India’s foreign trade, and to

strengthen the international competitiveness of

Indian goods and services; and

VI To commission studies for furtherance of the above

objectives.

Composition 1C.3 Government shall nominate an eminent person or expert on

trade policy to be Chairman of the Board of Trade.

Government shall also nominate 25 persons, of whom at least

10 will be experts in trade policy. In addition, Chairmen of

recognized Export Promotion Councils and President or

Secretary-Generals of National Chambers of Commerce will

be ex-officio members.

 

Meetings 1C.4 The Board will meet at least once every quarter and make

recommendations to Government on issues pertaining to its

terms of reference.

Sub- committee 1C.5 The Board of Trade will have the power to set up subcommittees

and to co-opt experts to these, to make

recommendations on specific sectors and objectives.

Secretariat and 1C.6 The Board of Trade will have a Secretariat and Budget Head

Budget Head and shall be serviced by the Department of Commerce.

 

CHAPTER-2

GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS

Exports and Imports 2.1 Exports and Imports shall be free, except in cases where they

free unless regulated are regulated by the provisions of this Policy or any other law

for the time being in force. The item wise export and import

policy shall be, as specified in ITC(HS) published and notified

by Director General of Foreign Trade, as amended from time

to time.

Compliance with Laws 2.2 Every exporter or importer shall comply with the provisions

of the Foreign Trade (Development and Regulation) Act, 1992,

the Rules and Orders made thereunder, the provisions of this

Policy and the terms and conditions of any Licence/certificate/

permission/Authorisation granted to him, as well as provisions

of any other law for the time being in force. All imported

goods shall also be subject to domestic Laws, Rules, Orders,

Regulations, technical specifications, environmental and

safety norms as applicable to domestically produced goods.

No import or export of rough diamonds shall be permitted

unless the shipment parcel is accompanied by Kimberley

Process (KP) Certificate required under the procedure

specified by the Gem & Jewellery Export Promotion Council

(GJEPC).

Interpretation of Policy 2.3 If any question or doubt arises in respect of the interpretation

of any provision contained in this Policy, or regarding the

classification of any item in the ITC(HS) or Handbook (Vol.1)

or Handbook (Vol.2), or Schedule Of DEPB Rate the said

question or doubt shall be referred to the Director General of

Foreign Trade whose decision thereon shall be final and

binding.

If any question or doubt arises whether a licence/ certificate/

permission has been issued in accordance with this Policy or

if any question or doubt arises touching upon the scope and

content of such documents, the same shall be referred to the

Director General of Foreign Trade whose decision thereon

shall be final and binding.

Procedure 2.4 The Director General of Foreign Trade may, in any case or

class of cases, specify the procedure to be followed by an

exporter or importer or by any licensing or any other competent

authority for the purpose of implementing the provisions of

the Act, the Rules and the Orders made thereunder and this

Policy. Such procedures shall be included in the Handbook

(Vol.1), Handbook (Vol.2), Schedule of DEPB Rate and in

ITC(HS) and published by means of a Public Notice. Such

 

procedures may, in like manner, be amended from time to

time.

The Handbook (Vol.1) is a supplement to the Foreign Trade

Policy and contains relevant procedures and other details. The

procedure of availing benefits under various schemes of the

Policy are given in the Handbook (Vol.1).

Exemption from Policy/ 2.5 Any request for relaxation of the provisions of this Policy or

Procedure of any procedure, on the ground that there is genuine hardship

to the applicant or that a strict application of the Policy or the

procedure is likely to have an adverse impact on trade, may

be made to the Director General of Foreign Trade for such

relief as may be necessary. The Director General of Foreign

Trade may pass such orders or grant such relaxation or relief,

as he may deem fit and proper.

The Director General of Foreign Trade may, in public interest,

exempt any person or class or category of persons from any

provision of this Policy or any procedure and may, while

granting such exemption, impose such conditions as he may

deem fit. Such request may be considered only after consulting

Norms Committee (NC) if the request is in respect of a

provision of Chapter-4 (excluding any provision relating to

Gem & Jewellery sector) and EPCG Committee if the request

is in respect of a provision of Chapter-5 of the Policy/

Procedure. However, any such request in respect of a provision

other than Chapter-4, Chapter-5 and Gem & Jewellery sector

as given above may be considered only after consulting Policy

Relaxation Committee.

Principles of Restriction 2.6 DGFT may, through a notification, adopt and enforce any

measure necessary for:-

i Protection of public morals.

ii Protection of human, animal or plant life or health.

iii Protection of patents, trademarks and copyrights and

the prevention of deceptive practices.

iv Prevention of use of prison labour.

v Protection of national treasures of artistic, historic

or archaeological value.

vi Conservation of exhaustible natural resources.

vii Protection of trade of fissionable material or

material from which they are derived; and

 

viii Prevention of traffic in arms, ammunition and

implements of war.

Restricted Goods 2.7 Any goods, the export or import of which is restricted under

ITC(HS) may be exported or imported only in accordance

with a licence/ certificate/ permission or a public notice issued

in this behalf.

Terms and Conditions 2.8 Every Licence/certificate/permission/Authorisation shall be

of a licence/ Certificate/ valid for the period of validity specified in the Licence/

Permission certificate/ permission and shall contain such terms and

conditions as may be specified by the licensing authority which

may include:

(a) The quantity, description and value of the goods;

(b) Actual User condition;

(c) Export obligation;

(d) The value addition to be achieved; and

(e) The minimum export price.

Authorisation/Licence/ 2.9 No person may claim a licence/certificate/ permission as a

Certificate/Permission right and the Director General of Foreign Trade or the regional

not a Right authority shall have the power to refuse to grant or renew a

Licence/certificate/permission/Authorisation in accordance

with the provisions of the Act and the Rules made there

under.

Penalty 2.10 If a Licence/certificate/permission/Authorisation holder

violates any condition of the Licence/certificate/ permission

or fails to fulfill the export obligation, he shall be liable for

action in accordance with the Act, the Rules and Orders made

there under, the Policy and any other law for the time being in

force.

State Trading 2.11 Any goods, the import or export of which is governed through

exclusive or special privileges granted to State Trading

Enterprise(s), may be imported or exported by the State

Trading Enterprise(s) as specified in the ITC(HS) Book subject

to the conditions specified therein. The Director General of

Foreign Trade may, however, grant a Licence/certificate/

permission/Authorisation to any other person to import or

export any of these goods.

In respect of goods the import or export of which is governed

through exclusive or special privileges granted to State Trading

Enterprise(s), the State Trading Enterprise(s) shall make any

 

such purchases or sales involving imports or exports solely in

accordance with commercial considerations, including price,

quality, availability, marketability, transportation and other

conditions of purchase or sale. These enterprises shall act in a

non discriminatory manner and shall afford the enterprises of

other countries adequate opportunity, in accordance with

customary business practices, to compete for participation in

such purchases or sales.

Importer-Exporterr 2.12 No export or import shall be made by any person without an

Code Numbe Importer-Exporter Code (IEC) number unless specifically

exempted. An Importer-Exporter Code (IEC) number shall

be granted on application by the competent authority in

accordance with the procedure specified in the Handbook

(Vol.1).

Trade with 2.13 The Director General of Foreign Trade may issue, from time

Neighbouring Countries to time, such instructions or frame such schemes as may be

required to promote trade and strengthen economic ties with

neighbouring countries.

Transit Facility 2.14 Transit of goods through India from or to countries adjacent

to India shall be regulated in accordance with the bilateral

treaties between India and those countries and will be subject

to such restrictions as may be specified by DGFT in accordance

with International Conventions.

Trade with Russia under 2.15 In the case of trade with Russia under the Debt Repayment

Debt-Repayment Agreement, the Director General of Foreign Trade may issue,

Agreement from time to time, such instructions or frame such schemes

as may be required, and anything contained in this Policy, in

so far as it is inconsistent with such instructions or schemes,

shall not apply.

Actual User Condition 2.16 Capital goods, raw materials, intermediates, components,

consumables, spares, parts, accessories, instruments and other

goods, which are importable without any restriction, may be

imported by any person.

However, if such imports require a licence/ certificate/

permission, the actual user alone may import such goods

unless the actual user condition is specifically dispensed with

by the licensing authority.

Second Hand Goods 2.17 All second hand goods, except second hand capital goods,

shall be restricted for imports and may be imported only in

accordance with the provisions of this Policy, ITC(HS),

Handbook (Vol.1), Public Notice or a Licence/certificate/

permission/Authorisation issued in this behalf.

 

Import of second hand capital goods, including

refurbished/ re-conditioned spares shall be allowed freely.

However, second hand personal computers/laptops,

photocopier machines, air conditioners, diesel generating sets

will only be allowed against a license issued in this behalf.

Import of re-manufactured goods shall be allowed only against

a licence issued in this behalf.

Import of samples 2.18 Import of samples shall be governed by the provisions given

in Handbook (Vol.1).

Import of Gifts 2.19 Import of gifts shall be permitted where such goods are

otherwise freely importable under this Policy. In other cases,

a Customs Clearance Permit (CCP) shall be required from

the DGFT.

Passenger Baggage 2.20 Bonafide household goods and personal effects may be

imported as part of passenger baggage as per the limits, terms

and conditions thereof in the Baggage Rules notified by the

Ministry of Finance.

Samples of such items that are otherwise freely importable

under this Policy may also be imported as part of passenger

baggage without a Licence/certificate/permission/

Authorisation.

Exporters coming from abroad are also allowed to import

drawings, patterns, labels, price tags, buttons, belts, trimming

and embellishments required for export, as part of their

passenger baggage without a Licence/certificate/permission/

Authorisation.

Import on Export basis 2.21 New or second hand capital goods, equipments, components,

parts and accessories, containers meant for packing of goods

for exports, jigs, fixtures, dies and moulds may be imported

for export without a Licence/certificate/permission/

Authorisation on execution of Legal Undertaking/Bank

Guarantee with the Customs Authorities provided that the item

is freely exportable without any conditionality/requirement

of Licence/ permission as may be required under ITC(HS)

Schedule II.

Re-import of goods 2.22 Capital goods, equipments, components, parts and accessories,

repaired abroad whether imported or indigenous, except those restricted under

ITC (HS) may be sent abroad for repairs, testing, quality

improvement or upgradation or standardization of technology

and re-imported without a Licence/certificate/permission/

Authorisation.

 

Import of goods used 2.23 After completion of the projects abroad, project contractors

in projects abroad may import, without a licence/ certificate/ permission, used

goods including capital goods provided they have been used

for at least one year.

Sale on High Seas 2.24 Sale of goods on high seas for import into India may be made

subject to this Policy or any other law for the time being in

force.

Import under Lease 2.25 Permission of licensing authority is not required for import

Financing of new capital goods under lease financing.

Clearance of Goods 2.26 The goods already imported/shipped/arrived, in advance, but

from Customs not cleared from Customs may also be cleared against the

Licence/ certificate/ permission issued subsequently.

Execution of BG/ LUT 2.27 Wherever any duty free import is allowed or where

otherwise specifically stated, the importer shall execute

a Legal Undertaking (LUT)/Bank Guarantee (BG)/ Bond

with the Customs Authority before clearance of goods

through the Customs, in the manner as may be

prescribed. In case of indigenous sourcing, the Licence/

certificate/ permission holder shall furnish LUT / BG /

Bond to the licensing authority before sourcing the

material from the indigenous supplier/nominated

agency.

Exemption from Bank 2.27.1 All the exporters who have an export turnover of at least

Guarantee Rupees 5 crore in the current or preceding licencing year

and have a good track record of three years of exports

will be exempted from furnishing a BG for any of

the schemes under this Policy and may furnish a LUT in

lieu of BG.

Private/ Public Bonded 2.28 Private/Public bonded warehouses may be set up

Warehouses for Imports in the Domestic Tariff Area as per the terms and

conditions of notification issued by Department of

Revenue.

Any person may import goods except prohibited items,

arms and ammunition, hazardous waste and chemicals

and warehouse them in such private/public bonded

warehouses.

Such goods may be cleared for home consumption in

accordance with the provisions of this Policy and against

Licence/certificate/ permission, wherever required. Customs

duty as applicable shall be paid at the time of clearance of

such goods.

 

If such goods are not cleared for home consumption within a

period of one year or such extended period as the custom

authorities may permit, the importer of such goods shall reexport

the goods.

Free Exports 2.29 All goods may be exported without any restriction except to

the extent such exports are regulated by ITC(HS) or any other

provision of this Policy or any other law for the time being in

force.

The Director General of Foreign Trade may, however, specify

through a public notice such terms and conditions according

to which any goods, not included in the ITC(HS), may be

exported without a licence/ certificate/ permission.

Export of Samples 2.30 Export of samples and Free of charge goods shall be governed

by the provisions given in Handbook (Vol.1).

Export of Passenger 2.31 Bonafide personal baggage may be exported either along with

Baggage the passenger or, if unaccompanied, within one year before or

after the passenger’s departure from India. However, items

mentioned as Restricted in ITC(HS) shall require a Licence/

certificate/permission/Authorisation.

Export of Gifts 2.32 Goods, including edible items, of value not exceeding

Rs.5,00,000/- in a licensing year, may be exported as a gift.

However, items mentioned as restricted for exports in ITC(HS)

shall not be exported as a gift, without a Licence/certificate/

permission/Authorisation.

Export of Spares 2.33 Warranty spares, whether indigenous or imported, of plant,

equipment, machinery, automobiles or any other goods, except

those restricted under ITC (HS), may be exported along with

the main equipment or subsequently but within the contracted

warranty period of such goods subject to approval of RBI.

Third Party Exports 2.34 Third party exports, as defined in Chapter 9 shall be allowed

under the Policy.

Export of Imported 2.35 Goods imported, in accordance with this Policy, may be

Goods exported in the same or substantially the same form without a

Licence/certificate/permission/Authorisation provided that the

item to be imported or exported is not mentioned as restricted

for import or export in the ITC(HS).

Exports of such goods imported against payment in freely

convertible currency would be permitted against payment in

freely convertible currency.

 

2.36 Goods, including those mentioned as restricted item for import

(except prohibited items) may be imported under Customs

Bond for export in freely convertible currency without a

licence/ certificate/ permission provided that the item is

freely exportable without any conditionality/ requirement of

Licence/permission as may be required under ITC (HS)

Schedule II.

Export of Replacement 2.37 Goods or parts thereof on being exported and found defective

Goods damaged or otherwise unfit for use may be replaced free of

charge by the exporter and such goods shall be allowed

clearance by the customs authorities provided that the

replacement goods are not mentioned as restricted items for

exports in ITC(HS).

Export of Repaired 2.38 Goods or parts, except restricted under ITC (HS), thereof on

Goods being exported and found defective, damaged or otherwise

unfit for use may be imported for repair and subsequent reexport.

Such goods shall be allowed clearance without a licence/

certificate/permission and in accordance with customs

notification issued in this behalf.

Private Bonded 2.39 Private bonded warehouses exclusively for exports may be

Warehouses for set up in DTA as per the terms and conditions of the

Exports notifications issued by Department of Revenue.

Such warehouses shall be entitled to procure the goods from

domestic manufacturers without payment of duty. The supplies

made by a domestic supplier to the notified warehouses shall

be treated as physical exports provided the payments for the

same are made in free foreign exchange.

Denomination of 2.40 All export contracts and invoices shall be denominated either

Export Contracts in freely convertible currency or Indian rupees but the export

proceeds shall be realised in freely convertible currency.

However export proceeds against specific exports may also

be realized in rupees provided it is through a freely convertible

Vostro account of a non resident bank situated in any country

other than a member country of ACU or Nepal or Bhutan.

Additionally, the rupee payment through the Vostro account

must be against payment in free foreign currency by the buyer

in his non resident bank account. The free foreign exchange

remitted by the buyer to his non resident bank (after deducting

the bank service charges) on account of this transaction would

be taken as the export realization under the export promotion

schemes of this Policy.

 

Contracts for which payments are received through the Asian

Clearing Union (ACU) shall be denominated in ACU Dollar.

The Central Government may relax the provisions of this

paragraph in appropriate cases. Export contracts and Invoices

can be denominated in Indian rupees against EXIM Bank/

Government of India line of credit.

Realisation of 2.41 If an exporter fails to realise the export proceeds within the

Export Proceeds time specified by the Reserve Bank of India, he shall, without

prejudice to any liability or penalty under any law for the time

being in force, be liable to action in accordance with the

provisions of the Act, the Rules and Orders made there under

and the provisions of this Policy.

Free movement of 2.42 Consignments of items meant for exports shall not be

export goods withheld/delayed for any reason by any agency of the

Central/State Government. In case of any doubt,

the authorities concerned may ask for an undertaking

from the exporter.

No seizure of Stock 2.42.1 No seizure of stock shall be made by any agency so

as to disrupt the manufacturing activity and delivery schedule

of export goods. In exceptional cases, the concerned agency

may seize the stock on the basis of prima facie evidence.

However, such seizure should be lifted within 7 days.

Export Promotion 2.43 The basic objective of Export Promotion Councils is to

Councils promote and develop the exports of the country. Each

Council is responsible for the promotion of a particular

group of products, projects and services. The list of the

councils, and their main functions are given in Handbook

(Vol.1).

Registration -cum- 2.44 Any person, applying for (i) a licence/ authorisation/

Membership Certificate certificate/ permission to import/ export, [except items listed

as restricted items in ITC(HS)] or (ii) any other benefit or

concession under this policy shall be required to furnish

Registration-cum-Membership Certificate (RCMC) granted

by the competent authority in accordance with the procedure

specified in the Handbook (Vol.1) unless specifically exempted

under the Policy.

2.45 Deleted

Trade Facilitation 2.45.1 It is endeavor of the Government to work towards greater

through EDI Initiatives simplification, standardization and harmonization of trade

documents using international best practices. As a step in this

direction DGFT shall move towards an automated

environment for electronic filing, retrieval and authentication

 

of documents based on agreed protocols and message

exchange with other community partners including Customs

and Banks.

DGCI&S Commercial 2.45.2 To enable the users to make commercial decisions in a more

Trade Data professional manner, DGCI&S trade data shall be made

available with a minimum time lag in a query based structured

format on a commercial criteria.

Fiscal Incentives to 2.45.3 With a view to promote the use of Information Technology,

promote EDI DGFT will provide fiscal incentives to the user

Initiatives adoption community. The details are enumerated in the Handbook

(Vol.I).

Regularization of EO 2.46 With a view to providing assistance to firms who have

default and settlement defaulted under the Foreign Trade Policy for reasons beyond

of customs duty and their control as also facilitating the merger, acquisition and

interest through rehabilitation of sick units, it has been decided to empower

Settlement Commission the Settlement Commission in the Central Board of Excise

and Customs to decide such cases also with effect from

01.04.2005.

Easing Of 2.47 Pending the finalisation of Single Common Document

Documentation (SCD)for international trade, the Government Departments

Requirement dealing with exports and imports will honour the permission

license/certificate issued by the other Government departments

based on the verification of the export documents Like

shipping bill, bank realization certificate, Packing list, bill of

lading etc .and will not insist upon fresh submission of these

documents.

Remission of Service 2.48.1 For all goods and services which are exported from units in

Tax in DTA Domestic Tariff Area (DTA) and units in EOU/EHTP/STP/

BTP remission of service tax levied shall be allowed.

Exemption from 2.48.2 Units in SEZ shall be exempted from service tax.

Service Tax in SEZ

GRIEVANCE REDRESSAL

DGFT as a facilitator 2.49 DGFT has a commitment to function as a facilitator of

of exports/ imports exports and imports. Our focus is on good governance, which

depends on clean, transparent and accountable delivery

systems.

Citizen’s Charter 2.49.1 DGFT has in place a Citizen’s Charter which lays down its

commitment to serve importers and exporters. It also gives

time schedules for providing services to clients, and details

of grievance committees at different levels.

 

Grievance Redressal 2.49.2 In order to facilitate speedy redressal of grievances of trade

Mechanism and industry, a new grievance redressal mechanism has been

put in place by a Government Resolution.

The Government is committed to resolving all outstanding

problems and disputes pertaining to the past policy periods

through the Grievance Redressal Committee set up on

27.10.2004, for condoning delays, regularizing breaches by

exporters in bonafide cases, resolving disputes over

entitlements, granting extensions for utilization of Licences

etc.

2.49.3 Deleted

 

CHAPTER-3

PROMOTIONAL MEASURES

Assistance to 3.1 The State Governments shall be encouraged to participate in

States for promoting exports from their respective States. For this

Infrastructure purpose, Department of Commerce has formulated a scheme

Development of called ASIDE.

Exports (ASIDE)

Suitable provision has been made in the Annual Plan of the

Department of Commerce for allocation of funds to the States

on the twin criteria of gross exports and the rate of growth of

exports.

The States shall utilise this amount for developing

infrastructure such as roads connecting production centers with

the ports, setting up of Inland Container Depots and Container

Freight Stations, creation of new State level export promotion

industrial parks/zones, augmenting common facilities in the

existing zones, equity participation in infrastructure projects,

development of minor ports and jetties, assistance in setting

up of common effluent treatment facilities, stabilizing power

supply and any other activity as may be notified by Department

of Commerce from time to time.

Market Access 3.2 The Market Access Initiative (MAI) scheme is intended

Initiative (MAI) to provide financial assistance for medium term

export promotion efforts with a sharp focus on a country and

product.

The financial assistance is available for Export Promotion

Councils, Industry and Trade Associations, Agencies of State

Governments, Indian Commercial Missions abroad and other

eligible entities as may be notified from time to time.

A whole range of activities can be funded under the MAI

scheme. These include market studies, setting up of

showroom/ warehouse, sales promotion campaigns,

international departmental stores, publicity campaigns,

participation in international trade fairs, brand promotion,

registration charges for pharmaceuticals and testing charges

for engineering products etc. Each of these export promotion

activities can receive financial assistance from the Government

ranging from 25% to 100% of the total cost depending upon

the activity and the implementing agency, as indicated in the

detailed guidelines. The full text of the guidelines can be seen

at http://commerce.nic.in.

 

Marketing 3.2.1 The Marketing Development Assistance (MDA) Scheme is

Development intended to provide financial assistance for a range of export

Assistance (MDA) promotion activities implemented by export promotion

councils, industry and trade associations on a regular basis

every year.

As per the revised MDA guidelines, assistance under MDA is

available for exporters with annual export turnover upto

Rs 10 crores.

These include participation in Trade Fairs and Buyer Seller

meets abroad or in India, export promotion seminars etc.

Further, assistance for participation in Trade Fairs abroad and

travel grant is available to such exporters if they travel to

countries in one of the four Focus Areas, such as, Latin

America, Africa, CIS Region, ASEAN countries, Australia

and New Zealand.

For participation in trade fairs etc., in other areas financial

assistance without travel grant is available.

Meeting Legal 3.2.1.1 Financial assistance would be provided to deserving exporters

expenses for on the recommendation of Export Promotion Councils for

Trade related meeting the cost of legal expenses relating to trade related

matters matters.

Towns of Export 3.3 A number of towns in specific geographical locations have

Excellence emerged as dynamic industrial clusters contributing

handsomely to India’s exports. It is necessary to grant

recognition to these industrial clusters with a view to

maximizing their potential and enabling them to move higher

in the value chain and tap new markets.

Selected towns producing goods of Rs. 1000 crore or more

will be notified as Towns of Exports Excellence on the basis

of potential for growth in exports. However for the Towns of

Export Excellence in the Handloom, Handicraft, Agriculture

and Fisheries sector, the threshold limit would be Rs 250

crores.

Common service providers in these areas shall be entitled for

the facility of the EPCG scheme.

The recognized associations of units will be able to access

the funds under the Market Access Initiative scheme for

creating focused technological services.

Further such areas will receive priority for assistance for

 

rectifying identified critical infrastructure gaps from the

ASIDE scheme.

The notified towns of export excellence are listed in Appendix 7.

Brand Promotion 3.4.1 The Central Government aims to encourage manufacturers and

and Quality exporters to attain internationally accepted standards of quality

for their products. The Central Government will extend

support and assistance to Trade and Industry to launch a

nationwide programme on quality awareness and to promote

the concept of total quality management.

Test Houses 3.4.2 The Central Government will assist in the modernisation and

upgradation of test houses and laboratories in order to bring

them at par with international standards.

Quality Complaints/ 3.4.3 The Regional Sub-Committee on Quality Complaints

Disputes (RSCQC) set up at the Regional Offices of the Directorate

General of Foreign Trade shall investigate quality complaints

received from foreign buyers. The guidelines for settlement

of quality complaints, in particular, and such other complaints,

in general, are given in Appendix-16 of Handbook of

Procedures (Vol. I).

Trade disputes 3.4.4 If it comes to the notice of the Director General of Foreign

affecting trade relations Trade or he has reason to believe that an export or import has

been made in a manner that

(i) is gravely prejudicial to the trade relations of India

with any other country; and/or

(ii) is gravely prejudicial to the interest of other persons

engaged in exports or imports; and/or

(iii) has brought disrepute to the country;

The Director General Foreign Trade may take action against

the exporter or importer concerned in accordance with the

provisions of the Act, the Rules and Orders made thereunder

and this Policy.

3.5 STAR EXPORT HOUSES

Star Export House 3.5.1 Merchant as well as Manufacturer Exporters, Service

Providers, Export Oriented Units (EOUs) and Units located

in Special Economic Zones (SEZs), Agri Export Zone

(AEZ’s), Electronic Hardware Technology Parks (EHTPs),

Software Technology Parks (STPs) and Bio Technology Parks

(BTPs) shall be eligible for applying for status as Star Export

Houses.

 

Status Category 3.5.2 The applicant shall be categorized depending on his total FOB

(FOR - for deemed exports) export performance during the

current plus the previous three years:

Category Performance

(Rupees in Crores)

One Star Export House 15

Two Star Export House 100

Three Star Export House 500

Four Star Export House 1500

Five Star Export House 5000

Note 1. Exporters in the Small Scale Industry/Tiny Sector/

Cottage Sector, Units registered with KVICs/

KVIBs, Units located in North Eastern States,

Sikkim and J&K, Units exporting handloom/

handicrafts/hand knotted or silk carpets, exporters

exporting to countries in Latin America/CIS/sub-

Saharan Africa as listed in Appendix-9, Units having

ISO 9000 (series)/ ISO 14000 (series) /WHOGMP/

HACCP/SEI CMM level-II and above status

granted by agencies listed in Appendix-6, exports

of services and exports of agro products shall be

entitled for double weightage on exports made for

grant of Star Export House status. The Double

Weightage shall be admissible to Merchant as well

as Manufacturer Exporters. However, a shipment

can get double weightage only once in any one of

the above categories.

1(a) Transfer of export performance from one to

another is not permitted. Therefore disclaimer

system shall not be allowed for counting of export

turnover.

2. Exports made on re-export basis shall not be

counted for the purpose of recognition.

3. Exports made by a subsidiary of a limited company

shall be counted towards export performance of the

limited company for the purpose of recognition only

if the limited company has a majority share holding

in the subsidiary company.

4. Recognition of One Star Export House status shall

31

be considered only in case the exporter has

minimum export performance of Rs. 15 Crores or

more during any two years out of the current and

preceding three years.

Privileges 3.5.2.1 A Star Export House shall be eligible for the following

facilities:

i) Authorisation/Licence/certificate/permissions and

Customs clearances for both imports and exports

on self-declaration basis;

ii) Fixation of Input-Output norms on priority within

60 days;

iii) Exemption from compulsory negotiation of

documents through banks. The remittance, however,

would continue to be received through banking

channels;

iv) 100% retention of foreign exchange in EEFC

account;

v) Enhancement in normal repatriation period from

180 days to 360 days;

vi) Deleted

vii) Exemption from furnishing of Bank Guarantee in

Schemes under this Policy.

viii) Two Star Export Houses and above shall be

permitted to establish Export Warehouses, as per

the guidelines issued by Department of Revenue in

this regard.

Validity Period 3.5.3 All status certificates issued or renewed on or after 01.09.2004

shall be valid from 1st April of the licensing year during which

the application for the grant of such recognition is made upto

31st March, 2009, unless otherwise specified.

On the expiry of status certificate, application for grant of

status shall be required to be made within a period as

prescribed in the Handbook of Procedures (Vol. I), as a fresh

application for continued recognition. During the intervening

period, the star export house shall be eligible to claim the

usual privileges under Para 3.5.2.1 above, subject to furnishing

of an undertaking by the applicant at the time of claiming

such facilities and benefits that they are eligible for continued

recognition as per current policy.

 

3.6 SERVICES EXPORTS

Services Exports 3.6.1 Services include all the 161 tradable services covered under

the General Agreement on Trade in Services where payment

for such services is received in free foreign exchange or in

Indian Rupees which are otherwise considered as having been

paid for in free foreign exchange by RBI. A list of services is

given in Appendix-10 of Handbook of Procedures (Vol. I).

All provisions of this Policy shall apply mutatis mutandis to

export of services as they apply to goods, unless otherwise

specified.

Export Promotion 3.6.2 Service exporters are required to register themselves with the

Council for Services Federation of Indian Exporters Organisation. However,

software exporters shall register themselves with Electronic

and Software Export Promotion Council.

In order to give proper direction, guidance and encouragement

to the Services Sector, an exclusive Export Promotion Council

for Services shall be set up.

The Services Export Promotion Council shall:

(i) Map opportunities for key services in key markets

and develop strategic market access programmes

for each component of the matrix.

(ii) Co-ordinate with sectoral players in undertaking

intensive brand building and marketing programmes

in target markets.

(iii) Make necessary interventions with regard to

policies, procedures and bilateral/ multilateral

issues, in co-ordination with recognised nodal

bodies of the services industry.

Common Facility 3.6.3 Government shall promote the establishment of Common

Centres Facility Centres for use by home-based service providers,

particularly in areas like Engineering & Architectural

design, Multi-media operations, Software developers etc.,

in State and District-level towns, to draw in a vast

multitude of home-based professionals into the services export

arena.

3.6.4 SERVED FROM INDIA SCHEME

Objective 3.6.4.1 The objective is to accelerate the growth in export of services

so as to create a powerful and unique ‘Served From India’

brand, instantly recognized and respected world over.

 

Eligibility 3.6.4.2 All Service providers of services listed in Appendix-10 of

Handbook of Procedures (Vol. I) who have a total foreign

exchange earning or earning in Indian Rupees which are

otherwise considered as having been paid for in free foreign

exchange by RBI, of at least Rs.10 lakhs in the preceding or

current financial year shall be eligible to qualify for a duty

credit scrip.

For individuals who are service providers of services listed in

Appendix-10 of Handbook of Procedures (Vol. I), the total

foreign exchange earned or earning in Indian Rupees which

are otherwise considered as having been paid for in free foreign

exchange by RBI criteria would be Rs.5 lakhs in the preceding

financial year.

Entitlement 3.6.4.3 All Service providers; including Healthcare and Educational

Service providers as well as Engineering Process Outsourcing

(EPO) and Knowledge Process Outsourcing (KPO) service

providers; of services listed in Appendix-10 of Handbook of

Procedures (Vol. I) (other than service providers covered by

Para 3.6.4.4) shall be entitled to duty credit scrip equivalent

to 10% of the foreign exchange earned by them in the

preceding financial year. However services or service

providers as listed in Para 3.18.1 of Handbook of Procedures

(Vol. I) shall not be entitled for benefits under the scheme.

Remittances 3.6.4.3.1 The foreign exchange earned through International Credit

Cards and other instruments as permitted by RBI for rendering

of service by the service providers shall also be taken into

account for the purposes of computation of duty credit

entitlement under the scheme.

Hotels & Restaurants 3.6.4.4 Hotels of one-star and above (including managed hotels and

heritage hotels) approved by the Department of Tourism and

other Service providers in the tourism sector registered with

the Department of Tourism shall be entitled to duty credit

equivalent to 5% of the foreign exchange earned by them in

the preceding financial year.

Stand-alone restaurants will be entitled to duty credit

equivalent to 10% of the foreign exchange earned by them in

the preceding financial year.

Imports allowed 3.6.4.5 Duty credit scrip may be used for import of any capital goods

including spares, office equipment and professional

equipment, office furniture and consumables; that are

otherwise freely importable under ITC (HS) Classification of

Export and Import items. The imports shall relate to any

service sector business of the applicant.

 

Utilization of duty credit earned under the scheme shall

not be permitted for payment of duty in case of import of

vehicles, even if such vehicles are freely importable under

ITC (HS).

In the case of hotels, golf resorts and stand-alone restaurants

having catering facilities, the duty credit entitlement may also

be used for the import of consumables including food items

and alcoholic beverages.

Non Transferability 3.6.4.6 The entitlement and the goods imported shall be nontransferable.

However, transfer of duty credit scrips / goods imported under

the scheme shall be allowed within the service providers of

the Group Company as defined in chapter 9 and managed

hotels, with actual user condition.

Healthcare & Education 3.6.4.7 deleted

Special provisions 3.6.4.8 Government reserves the right in public interest to specify

from time to time the category or type of service exports which

shall not be eligible for calculation of either eligibility or of

entitlement.

Similarly, Government may from time to time also notify the

goods, which shall not be allowed for import under the duty

free entitlement certificate issued under the scheme.

Import under Lease 3.6.4.9 Utilization of duty free credit scrip earned under the scheme

financing shall be permitted for payment of duty in case of import of

capital goods under lease financing in terms of provision in

Para 2.25 of this Policy.

3.7 Deleted

3.8 VISHESH KRISHI AND GRAM UDYOG YOJANA

(SPECIAL AGRICULTURE AND VILLAGE INDUSTRY

SCHEME)

Objective 3.8.1 The objective of Vishesh Krishi and Gram Udyog Yojana

(Erstwhile Vishesh Krishi Upaj Yojana) is to promote export

of Fruits, Vegetables, Flowers, Minor Forest produce, Dairy,

Poultry and their value added products, and Gram Udyog

products by incentivising exporters of such products.

Entitlement 3.8.2 Exports of Fruits, Vegetables, Flowers, Minor Forest Produce,

Dairy, Poultry and their value added products shall be entitled

for duty credit scrip equivalent to 5% of the FOB value of

35

exports. A detailed list of these agricultural products and the

period of exports for which this entitlement is to be granted

is given in Appendix 37A of the Handbook of Procedures

(Vol. I).

Gram Udyog products as listed in Appendix 37A of the

Handbook of Procedures (Vol. I) shall be entitled for duty

credit scrip equivalent to 5% of the FOB value of exports in

respect of the exports made on or after 1st April 2006.

However, the duty credit scrip shall be granted only at a

reduced rate of 3.5% of the FOB value of exports in such

cases where the exporter has availed the benefits under Chapter

4 of this Policy for import of Agriculture Inputs (other than

catalysts, consumables and packing materials) relating to

export item under this scheme.

The scrip and the items imported against it shall be freely

transferable.

3.8.2.1 Under the Scheme, exports of all eligible items (including

the value added variants) are eligible for benefits as per Para

3.8.2 above provided they are specifically listed in Appendix-

37A of Handbook of Procedures (Vol. I). Items which are

restricted or prohibited for export under Schedule-2 of the

Export Policy in the ITC (HS) Classification of Export and

Import items shall not be eligible for any benefits under

Para 3.8.2.

3.8.2.2 Following exports shall not be taken into account for duty

credit entitlement under the scheme:

(a) Export of imported goods covered under Para 2.35

of the Foreign Trade Policy or exports made through

transshipment.

(b) Deemed Exports.

(c) Exports made by SEZs units and EOUs units.

Imports allowed 3.8.3 The Duty Credit may be used for import of inputs or goods,

which are otherwise freely importable under ITC (HS)

Classifications of Export and Import Items,

Imports from a port other than the port of export shall be

allowed under TRA facility as per the terms and conditions of

the notification issued by Department of Revenue.

3.8.3.1 Items listed in Appendix-37B of Handbook of Procedures

(Vol. I) shall not be allowed to be imported under the scheme.

36

Cenvat/ Drawback 3.8.4 Additional customs duty/excise duty paid in cash or through

debit under Vishesh Krishi and Gram Udyog Yojana shall be

adjusted as CENVAT Credit or Duty Drawback as per rules

framed by the Department of Revenue.

Special Provision 3.8.5 Government reserves the right in public interest, to specify

from time to time the export products, which shall not be

eligible for calculation of entitlement.

3.9 FOCUS MARKET SCHEME

Objective 3.9.1 The objective is to offset the high freight cost and other

disabilities to select international markets with a view to

enhance our export competitiveness to these countries.

Eligibility 3.9.2 Exports of all products to the notified countries shall be entitled

for duty credit scrip equivalent to 2.5% of the FOB value of

exports for each licensing year commencing from 1st April,

2006. The scrip and the items imported against it would be

freely transferable.

3.9.2.1 Under the Scheme, export to all countries as given in

Appendix-37- C of Handbook of Procedures (Vol. I) shall

qualify for export benefits as per Para 3.9.2 above. Items which

are restricted or prohibited for export under Schedule-2 of

the Export Policy in the ITC (HS) Classification of Export

and Import items shall not be eligible for any benefits under

Para 3.9.2.

3.9.2.2 The following exports shall not be taken into account for

calculation of export performance or for computation of

entitlement under the scheme:

a. Export of imported goods covered under Para 2.35

of the Foreign Trade Policy or exports made through

transshipment.

b. Export turnover of units operating under SEZ/EOU/

EHTP/STPI/ BTP Schemes or supplies made to

such units or products manufactured by them and

exported through DTA units.

c. Deemed Exports.

d. Service Exports.

e. Diamonds and other precious, semi precious stones.

f. Gold, silver, platinum and other precious metals in

any form, including plain and studded Jewellery.

g. Ores and Concentrates, of all types and in all forms.

 

h. Cereals, of all types.

i. Sugar, of all types and in all forms.

j. Crude / Petroleum Oil & Crude / Petroleum based

Products covered under ITC HS codes 2709 to 2715,

of all types and in all forms.

3.9.2.3 Exporters shall have the option to apply for benefit either under

the Focus Market Scheme or under the Focus Product Scheme

or under Vishesh Krishi and Gram Udyog Yojana in respect

of the same exported product/s.

Imports allowed 3.9.3 The Duty Credit may be used for import of inputs or goods

including capital goods, provided the same is freely importable

under ITC (HS).

Imports from a port other than the port of export shall be

allowed under TRA facility as per the terms and conditions of

the notification issued by Department of Revenue.

Cenvat /Drawback 3.9.4 Additional customs duty/excise duty paid in cash or through

debit under this scrip shall be adjusted as CENVAT Credit or

Duty Drawback as per rules framed by the Department of

Revenue.

Special provisions 3.9.5 Government reserves the right in public interest, to specify

from time to time the export products or exports to such

countries, which shall not be eligible for calculation of

entitlement.

3.10 FOCUS PRODUCT SCHEME

Objective 3.10.1 The objective is to incentivise export of such products

which have high employment intensity in rural and semi urban

areas so as to offset the inherent infrastructure inefficiencies

and other associated costs involved in marketing of these

products.

Eligibility 3.10.2 Exports of notified products to all countries shall be entitled

for duty credit scrip equivalent to 2.5% of the FOB value of

exports for each licensing year commencing from 1st April,

2006. However only 50% of the export turnover of such

products shall be counted for benefits under the Scheme. The

scrip and the items imported against it would be freely

transferable.

3.10.2.1 Under the Scheme, export of such products as given in

Appendix-37-D of Handbook of Procedures (Vol. I) shall

qualify for export benefits as per Para 3.10.2 above.

 

3.10.2.2 The following exports shall not be taken into account for

calculation of export performance or for computation of

entitlement under the scheme:

a. Export of imported goods covered under Para 2.35

of the Foreign Trade Policy or exports made through

transshipment.

b. Exports turnover of units operating under SEZ

Scheme and 100% EOU Scheme or products

manufactured by them and exported through DTA

units.

c. Deemed Exports.

3.10.2.3 Exporters shall have the option to apply for benefit either under

the Focus Market Scheme or under the Focus Product Scheme

or under Vishesh Krishi and Gram Udyog Yojana in respect

of the same exported product/s.

Imports allowed 3.10.3 The Duty Credit may be used for import of inputs or goods

including capital goods, provided the same is freely importable

under ITC(HS).

Imports from a port other than the port of export shall be

allowed under TRA facility as per the terms and conditions of

the notification issued by Department of Revenue.

Cenvat /Drawback 3.10.4 Additional customs duty/excise duty paid in cash or through

debit under this scrip shall be adjusted as CENVAT Credit or

Duty Drawback as per rules framed by the Department of

Revenue.

Special provisions 3.10.5 Government reserves the right in public interest, to specify

from time to time the export products or exports to such

countries, which shall not be eligible for calculation of

entitlement.

 

CHAPTER-4

DUTY EXEMPTION & REMISSION SCHEMES

Duty Exemption 4.1 Duty exemption schemes enable duty free import of inputs

and Remission Schemes required for export production. Duty Exemption Scheme

consists of (a) Advance Authorisation Scheme and (b) Duty

Free Import Authorisation Scheme (DFIA). 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),

(b) DEPB (Duty Entitlement Passbook Scheme) and (c) DBK

(Duty Drawback Scheme).

Re-import of exported 4.1.1 Goods exported under Advance Authorisation/DFIA / DFRC/

goods DEPB may be re-imported in the same or substantially the

under Duty Exemption/ same form subject to such conditions as may be specified by

Remission Scheme the Department of Revenue from time to time.

Value Addition 4.1.2 The value addition for the purposes of this chapter (Except

for the Gems and Jewellery) shall be:-

A - B

V.A= _____________ x 100, where

B

V.A. Value Addition

A FOB value of the export realised / FOR

value of supply received.

B CIF value of the imported inputs covered

by the authorisation, plus any other

imported materials used on which

the benefit of duty drawback is being

claimed.

ADVANCE AUTHORISATION SCHEME

(ERSTWHILE ADVANCE LICENCE SCHEME)

Advance Authorisation 4.1.3 An Advance Authorisation 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/utilised in

the course of their use to obtain the export product, may also

be allowed under the scheme. However, the Director General

of Foreign Trade, by means of Public Notice, may in public

interest exclude any product(s) from the purview of advance

Authorisation.

 

Duty free import of mandatory spares upto 10% of the CIF

value of the Authorisation which are required to be exported/

supplied with the resultant product may also be allowed under

Advance Authorisation.

Advance Authorisations 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 as per para 4.7 of Handbook of Procedures (Vol. I).

Advance Authorisation can be issued either to a manufacturer

exporter or merchant exporter tied to supporting

manufacturer(s):

i) for Physical exports (including exports to SEZ);

and/ or

ii) for Intermediate supplies; and /or

iii) to the main contractor for supply of goods to the

categories mentioned in paragraph 8.2 (b), (c), (d),

(e), (f), (g), (i) and (j) of the Policy;

iv) supply of stores on board of the foreign going vessel/

aircraft subject to the condition that there is specific

SION in respect of the item(s) supplied.

for import of inputs required in the manufacture of goods. In

addition, in respect of supply of goods to specified projects

mentioned in paragraph 8.2 (d), (e), (f), (g) and (j) of the Policy,

an Advance Authorisation can also be availed by the subcontractor

of the main contractor to such project provided the

name of the sub contractor(s) appears in the main contract.

Such Authorisation can also be issued for supplies made to

United Nations Organisations or under the Aid Programme

of the United Nations or other multilateral agencies and paid

for in free foreign exchange.

4.1.4 Advance Authorisation is issued for duty free import of inputs,

as defined in paragraph 4.1.3 subject to actual user condition.

Such Authorisations are exempted from payment of basic

customs duty, additional customs duty, education cess, anti

dumping duty and safeguard duty, if any. However, the imports

for supplies covered under paragraph 8.2 (i) & (j) will not be

exempted from the payment of applicable anti-dumping and

safeguard duty, if any.

4.1.5 Advance Authorisation and/or materials imported thereunder

shall not be transferable even after completion of export

 

obligation. However, the Authorisation holder will have the

option to dispose off the product manufactured out of the duty

free inputs once the export obligation is completed.

4.1.6 Advance Authorisations shall be issued with a positive value

addition.

However, for physical exports for which payments are not

received in freely convertible currency, the same shall be

subject to value addition as specified in Appendix-11 of

Handbook of Procedures (Vol.1). In case of supplies to

SEZ Units, irrespective of the currency of realization,

Advance Authorisation shall be issued with a positive value

addition.

In case of Tea, the minimum value addition under advance

Authorisation shall be 100%.

In case of spices (covered by Chapter 9 of the ITC(HS)

Classification of Export & Import Items, 2004-09), the

minimum value addition under advance Authorisation shall

be 15%.

4.1.7 Advance Authorisation shall be issued in accordance with the

Policy and procedure in force on the date of issue of

Authorisation.

The validity period of advance Authorisation for import shall

be as prescribed in the Handbook of Procedures (Vol.1).

4.1.8 The facility of Advance Authorisation shall also be available

where some or all of the inputs are supplied free of cost to the

exporter.

In such cases, for calculation of value addition, the notional

value of free of cost inputs along with value of other dutyfree

inputs shall be taken into consideration. However, if all

the inputs are supplied free of cost, the exporter shall also

have the option to follow the provision prescribed in paragraph

4.2.7 of the Policy.

Export Obligation 4.1.9 The period for fulfilment of the export obligation under

Advance Authorisation shall be as prescribed in the Handbook

of Procedures (Vol.1).

Provision for BIFR 4.1.9 A Any firm/company registered with BIFR or any firm/ company

units acquiring a unit, which is under BIFR shall be allowed EOP

extension as per the rehabilitation package prepared by the

operating agency subject to subsequent approval of BIFR.

 

However, in cases where the rehabilitation package does not

specify the EOP extension period, a time period upto 5 years

reckoned from the date of issue of authorisation would be

permitted on merits of the case for fulfillment of export

obligation.

Similarly, SSI units shall also be entitled for similar facility

as per the rehabilitation scheme of the concerned State

government. However, in cases where the State rehabilitation

scheme does not specify the export obligation extension

period, a time period upto 5 years reckoned from the date of

issue of authorisation would be permitted on merits of the

case for fulfillment of export obligation.

Export Obligation Period Extension, as mentioned above,

shall be without the payment of composition fee for

cases where rehabilitation package has been announced/

approved.

Advance Authorisation 4.1.10 Advance Authorisation can also be issued on the basis of

for Annual Requirement annual requirement for physical exports, intermediate supplies

and / or deemed exports.

One to Five Star Export House shall be entitled for the

Advance Authorisation for annual requirement. All other

categories of exporters having past export performance (in

the preceding two years) shall also be entitled for the Advance

Authorisation for annual requirement.

In addition, a merchant exporter shall also be issued the

Advance Authorisation for Annual Requirement provided they

agree to the endorsement of the name(s) of the supporting

manufacturer(s) on the relevant Authorisation.

The entitlement in terms of CIF value of imports under this

scheme shall be upto 300% of the FOB value of physical

export and / or FOR value of deemed export in the preceding

licensing year or Rs 1 crore, whichever is higher. Such

Authorisation shall have value addition as specified in para

4.1.6 of the Foreign Trade Policy.

Advance Release Orders 4.1.11 An Advance Authorisation holder, holder of advance

Authorisation for annual requirement, holder of Diamond

Imprest Authorisation, holder of DFIA and holder of DFRC

intending to source the inputs from indigenous sources/State

Trading Enterprises/ EOU/SEZ/ EHTP/STP/BTP units in lieu

of direct import has the option to source them against Advance

Release Orders denominated in free foreign exchange/ Indian

rupees.

 

The transferee of a DFIA or a DFRC shall also be eligible for

ARO facility. However, supplies may be obtained against the

Authorisation from EOU/EHTP/BTP/STP/ SEZ units, without

conversion into ARO.

The validity period of ARO shall be as prescribed in the

Handbook of Procedures (Vol.1).

Back-to-Back 4.1.12 An Advance Authorisation holder, holder of advance

Inland Letter of Credit Authorisation for annual requirement, holder of DFIA, holder

of Diamond Imprest Authorisation and holder of DFRC may,

instead of applying for an Advance Release Order, avail of

the facility of Back-to-Back Inland Letter of Credit in

accordance with the procedure specified in Handbook of

Procedures (Vol.1).

Prohibited Items 4.1.13 Prohibited items of imports mentioned in ITC(HS) shall not

be imported under the Advance Authorisation/DFIA/DFRC.

Further the items reserved for imports by State Trading

Enterprises cannot be imported against advance Authorisation/

DFIA/DFRC. However those items can be procured from State

Trading Enterprises against ARO or Invalidation letter issued

to the holder of advance Authorisation/DFIA/DFRC.

The State Trading Enterprises are also allowed to sell the goods

on High Sea Sale basis to the holders of Advance

Authorisation/DFIA/DFRC.

In addition, the State Trading Enterprises are permitted to issue

“No Objection Certificate (NOC)’ if they so desire, for import

by holder of advance Authorisation. DFIA holders would also

be eligible to import such items based on No Objection

Certificate (NOC) from the STEs for only such products as

notified by DGFT. However, the Authorisation Holder would

be required to file Quarterly Returns of the imports effected

against such ‘No Objection Certificate’ to the concerned State

Trading Enterprises (STEs) and the STEs, in turn, would

submit Half-yearly import figures of such imports to the

concerned administrative Department for monitoring with a

copy endorsed to the Department of Commerce.

Similarly prohibited items of exports mentioned in the

ITC(HS) shall not be exported under the Authorisation issued

under the Advance Authorisation/DFIA/DFRC scheme.

Further, export of restricted items shall be subject to

all conditionalities or requirements of export Authorisation

or permission, as may be required, under Schedule II of ITC

(HS).

 

Admissibility of Drawback 4.1.14 In the case of an Advance Authorisation, the drawback shall

be available in respect of any of the duty paid materials,

whether imported or indigenous, used in the goods exported,

as per the drawback rate fixed by Ministry of Finance

(Directorate of Drawback). The Drawback shall however be

restricted to the duty paid materials as mentioned in the

application.

DUTY FREE REPLENISHMENT CERTIFICATE

Duty Free 4.2 DFRC is issued to a merchant exporter or manufacturer

Replenishment exporter for the import of inputs used in the manufacture of

Certificate (DFRC) 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.

4.2.1 DFRC shall be issued on minimum value addition of 25%

except for items in gems and jewellery sector for which value

addition as given in paragraph 4A.2.1 of the Handbook of

Procedures (Vol.1) and items for which higher value addition

is prescribed under Advance Authorisation Scheme shall be

applicable.

4.2.2 DFRC may be issued for physical exports against freely

convertible currency / physical exports to SEZ whether against

freely convertible currency or non-convertible currency/

supplies effected under paragraph 8.2 of the Policy (except

for supplies made to DFRC holder).

DFRC may also be issued in respect of physical exports (other

than supplies to SEZ) for which payments are received in nonconvertible

currency. Such exports shall, however, be subject

to value addition and conditions as specified in Appendix-11

of Handbook of Procedures (Vol.1).

4.2.3 DFRC shall be issued only in respect of products covered

under the Standard Input Output Norms as notified by DGFT.

However, in respect of Standard Input Output Norms which

are subject to “actual user” condition or where the export

proceeds have not been realised at the time of filing application

or for import of fuel under the general norms, DFRC shall be

issued with actual user condition for these inputs.

However, for fuel, the import entitlement may be transferred

only to the companies which have been granted Authorisation

to market fuel by the Ministry of Petroleum & Natural Gas.

 

In cases where Standard Input Output Norms allow import of

Acetic Anhydride, Ephedrine and Pseudo Ephedrine, DFRC

shall be issued provided these items are specifically deleted

from the list of import items.

DFRC will not be issued against SION which prescribe a prior

import condition for inputs.

Provisions of paragraph 4.1.13 of FTP shall be applicable for

the DFRC holder.

4.2.4 DFRC shall be issued for import of inputs as per SION as

indicated in the shipping bills. The validity of such

Authorisations will be governed by the provision stipulated

in the Handbook of Procedures (Vol. I). 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.

4.2.5 The export products, which are eligible for modified VAT,

shall be eligible for CENVAT credit/ service tax credit.

However, non excisable, non dutiable or non CENVAT

products, shall be eligible for drawback at the time of exports

in lieu of additional customs duty to be paid at the time of

imports under the scheme.

4.2.6 The exporter shall be entitled for drawback benefits in

respect of any of the duty paid materials, whether imported or

indigenous, used in the export product as per the

drawback rate fixed by Directorate of Drawback (Ministry of

Finance).

The drawback shall however be restricted to the duty paid

materials not covered under SION.

Jobbing, repairing etc. 4.2.7 Import of goods, including those mentioned as restricted in

for re-export ITC(HS) but excluding prohibited items, supplied free of cost,

may be permitted for the purpose of jobbing without a

Authorisation/certificate/ permission as per the terms of

notification issued by Department of Revenue from time to

time.

Similarly, import of goods for carrying out repairs, reconditioning,

re-engineering, testing etc. shall be allowed as

per the terms and conditions of the Customs notification even

though the goods may be restricted for imports under the

Foreign Trade Policy/ITC(HS) Classification of Imports and

Exports Book.

 

The above provisions shall, however, be subject to all

conditionality or requirement of Authorisation or permission,

as may be required, under Schedule II of ITC (HS).

Termination of the Scheme 4.2.8 DFRC Scheme shall be available for exports effected upto

30.4.2006.

DUTY ENTITLEMENT PASSBOOK (DEPB) SCHEME

Duty Entitlement 4.3 The objective of DEPB is to neutralise the incidence of

Passbook Scheme (DEPB) 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.

4.3.1 Under the DEPB scheme, an exporter may apply for credit, as

a specified percentage of FOB value of exports, made in freely

convertible currency or the payment made from the Foreign

Currency Account of the SEZ unit in case of supply by DTA

to SEZ unit.

The credit shall be available against such export products and

at such rates as may be specified by the Director General of

Foreign Trade by way of public notice issued in this behalf,

for import of raw materials, intermediates, components, parts,

packaging material etc. The credit may also be utilized for

payment of Customs Duty on any item which is freely

importable.

4.3.2 The holder of DEPB shall have the option to pay additional

customs duty, if any, in cash as well.

Validity 4.3.3 The validity period of DEPB for import shall be as prescribed

in the Handbook of Procedures (Vol.1).

Transferability 4.3.4 The DEPB and/or the items imported against it are freely

transferable. The transfer of DEPB shall however be for import

at the port specified in the DEPB, which shall be the port

from where exports have been made.

Imports from a port other than the port of export shall be

allowed under TRA facility as per the terms and conditions of

the notification issued by Department of Revenue.

Applicability of 4.3.5 Normally, the exports made under the DEPB Scheme shall

Drawback 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.

DUTY FREE IMPORT AUTHORISATION

Scheme 4.4.1 A Duty Free Import Authorisation 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 utilised in

the course of their use to obtain the export product. However,

the Director General of Foreign Trade, by means of Public

Notice, may in public interest, exclude any product(s) from

the purview of this scheme. This scheme will come into force

from 1st May, 2006.

Entitlement 4.4.2 The Authorisation shall be issued on the basis of inputs and

export items given under Standard Input and Output Norms

(SION). The import entitlement shall be limited to the quantity

mentioned in SION.

Duty Free import of mandatory spares upto 10% of the CIF

value of Authorisation which are required to be exported/

supplied with the resultant product may also be allowed under

the scheme.

Such Authorisation can be issued either to a manufacturer

exporter or merchant exporter tied to supporting

manufacturer(s):

i) for Physical exports (including exports to SEZ);

and/ or

ii) for Intermediate supplies; and /or

iii) to the main contractor for supply of goods to the

categories mentioned in paragraph 8.2 (b), (c), (d),

(e), (f), (g), (i) and (j) of the Policy;

for import of inputs required in the manufacture of goods. In

addition, in respect of supply of goods to specified projects

mentioned in paragraph 8.2 (d), (e), (f), (g) and (j) of the Policy,

a DFIA can also be availed by the sub-contractor of the main

contractor to such project provided the name of the sub

contractor(s) appears in the main contract.

Such Authorisation can also be issued for supplies made to

United Nations Organisations or under the Aid Programme

of the United Nations or other multilateral agencies and paid

for in free foreign exchange.

 

A manufacturer exporter or a merchant exporter tied up with

the supporting manufacturer can apply for the Authorisation

under the Scheme. Before affecting exports under scheme,

an applicant is required to file an application to the Regional

Authority.

Such Authorisation shall be initially issued with actual user

condition and shall be exempted from payment of basic custom

duty, additional customs duty, education cess, anti-dumping

duty and safeguard duty, if any.

Import items 4.4.3 Prohibited items of imports mentioned in ITC(HS) shall

not be imported under the Authorisation issued under the

Scheme.

Duty Free procurement from domestic market will be available

as in case of advance Authorisation scheme against ARO/

invalidation letter/back to back inland letter of credit etc.

Provisions of paragraph 4.1.13 of FTP shall be applicable for

the DFIA holder.

Value Addition 4.4.4 A minimum 20% value addition shall be required for issuance

of such Authorisation except for items in gems and jewellery

sector for which value addition as given in paragraph 4A.2.1

of the Handbook of Procedures (Vol.1) and items for which

higher value addition is prescribed under Advance

Authorisation Scheme shall be applicable.

Export Obligation 4.4.5 Procedure related to fulfillment of Export Obligation under

the scheme and the time period allowed to fulfil it has been

laid down in chapter 4 of Handbook of Procedure, Vol. I

Transferability 4.4.6 Once export obligation has been fulfilled, request for

transferability of the Authorisation or the inputs imported

against it may be made before the Regional Authority. Once,

transferability is endorsed, the Authorisation holder will be at

liberty to transfer the duty free inputs, other than fuel and any

other item(s) notified by DGFT for this purpose.

However, in respect of Standard Input Output Norms, which

are subject to “actual user” condition or for import of fuel

under the general norms or where Standard Input Output

Norms allow import of Acetic Anhydride, Ephedrine and

Pseudo Ephedrine, DFIA shall be issued with actual user

condition for these inputs and no transferability shall be

allowed for these inputs even after fulfillment of the export

obligation. Transfer of items that are restricted for

imports or the DFIA for such items shall be allowed under

 

the DFIA scheme only against a specific import licence for

that item.

However, for fuel, the import entitlement may be transferred

only to the companies which have been granted Authorisation

to market fuel by the Ministry of Petroleum & Natural Gas.

CENVAT Facility 4.4.7 No CENVAT credit facility shall be available for inputs either

imported or procured indigenously against the Authorisation.

Drawback Facility 4.4.8 The drawback shall be available in respect of any of the duty

paid material, whether imported or indigenous, used in the

goods exported, as per the drawback rate fixed by Ministry of

Finance. The drawback shall, however, be restricted to the

duty paid materials mentioned in the application.

GEMS AND JEWELLERY

Scheme for Gems and 4A Exporters of gems and Jewellery can import/procure duty

Jewellery free inputs required for manufacture of gems and jewellery

items.

Replenishment 4A.1 Exporters of gems and jewellery are eligible to import their

Authorisation inputs duty free by obtaining Replenishment (REP)

Authorisations from the licensing authorities in accordance

with the procedure specified in this regard in the Handbook

of Procedures of Procedure (Vol.1).

4A.1.1 The exporters of gems and jewellery products listed in

Appendix-12A of the Handbook of Procedures (Vol.1) shall

be eligible for grant of Replenishment Authorisations at the

rate and for the items mentioned in the said Appendix to import

and replenish their inputs.

Replenishment authorisation may also be issued for import

of consumables as per the details given in paragraph 4A.28

of Handbook of Procedures (Vol.1).

Export of Cut & 4A.2 Gem and Jewellery exporters may be permitted to send cut &

Polished Diamonds for polished diamonds each weighing 0.25 of a carat and above

Certification/ Grading for certification/grading to Indian Diamond Institute, Surat,

Gujarat. In addition, Gem and Jewellery exporters with a track

record of at least three years and having an annual average

turnover of Rs.5 crores and above during the preceding three

licensing years or the authorized offices /agencies in India of

Gemological Institute of America (GIA), The Robert

Mouawad Campus, International Gemological Institute (IGI)

and European Gemological Laboratory (EGL) in USA, Hoge

 

Road Voor Diamond, Antwerp, (HRD), World Diamond

Centre of Diamonds High Council, Antwerp, Belgium, Central

Gem Laboratory, Miyagi Building, 5-15-14 Ueno Taito-Ku,

Tokyo, Japan, American Gem Society Laboratories (AGS

Laboratories), 8917 West Sahara Avenue, Las Vegas, Nevada

89117 and Diamond Trading Company, Maidenhead, U.K.

may also be permitted to export cut & polished diamonds

each weighing 0.25 of a carat and above to the said

laboratories/agencies for the purpose of certification/grading

reports by them with a condition that the same should be reimported

with the certificate/grading reports issued by them

without any import duty at the time of re-import.

4A.2.1 At the time of export of cut and polished diamonds for

certification/grading, exporter should give an undertaking to

the customs that the cut and polished diamonds will be reimported

within three months of exports for certification/

grading.

The export invoice should clearly indicate the estimated value,

height, circumference, weight of each diamond to be exported

for certification/ grading so that at the time of their import,

the above specification could be compared with the original

ones to establish their identity. Subsequently these cut and

polished diamonds would be exported as per the provisions

of the Policy.

Schemes for Gold/ 4A.3 Exporters of gold/silver/platinum jewellery and articles thereof

Silver/ Platinum Jewellery may import their essential inputs such as gold, silver,

platinum, mountings, findings, rough gems, precious and

semi-precious stones, synthetic stones and unprocessed

pearls etc. in accordance with the procedure specified in this

behalf.

Nominated Agencies 4A.4 Exporters (excepting units operating under EOU/SEZ

schemes) availing the schemes of gold/ silver/platinum

jewellery and articles thereof may obtain gold/silver/platinum

from the nominated agencies. The nominated agencies are

MMTC Ltd, Handicraft and Handloom Export Corporation

(HHEC), State Trading Corporation (STC), the Project and

Equipment Corporation of India Ltd (PEC) , Five Star Export

House under Paragraph 3.5.2 of the Policy and any other

agency authorised by Reserve Bank of India (RBI).

A bank authorised by RBI is allowed export of gold scrap for

refining and import in the form of standard gold bars. The

detailed procedure for the import of gold will be as per the

guidelines notified by RBI separately.

 

Items of Export 4A.5 The following items, if exported, would be eligible for the

facilities under the schemes stipulated in paragraph 4A of the

Foreign Trade Policy:

(a) Gold jewellery, including partly processed jewellery

and any articles including medallions and coins

(excluding the coins of the nature of legal tender),

whether plain or studded, containing gold of 8 carats

and above;

(b) Silver jewellery including partly processed

jewellery, silverware, silver strips and any articles

including medallions and coins (excluding the coins

of the nature of legal tender and any engineering

goods) containing more than 50% silver by weight;

(c) Platinum jewellery including partly processed

jewellery and any articles including medallions and

coins (excluding the coins of the nature of legal

tender and any engineering goods) containing more

than 50% platinum by weight.

Value Addition 4A.6 The value addition for the purpose of gems and jewellery

sector shall be as per paragraph 4A.2.1 of Handbook of

Procedures (Vol.1).

A – B

V.A. = ————— x 100, where

B

V.A. — Value Addition,

A — FOB value of the export realised / FOR

value of supply received.

B — The Value of inputs such as gold / silver /

platinum content in the export product plus

the admissible wastage along with the

value of the other items such as gemstone

etc. ‘Value’ for this purpose includes both

imported as well as domestically procured

inputs. Wherever gold has been obtained

on loan basis, the value shall also include

interest paid in free foreign exchange to

the foreign supplier.

Wastage Norms 4A.7 Under the schemes for gold/silver/platinum jewellery, the

wastage or manufacturing loss shall be admissible as per

paragraph 4A.2 of the Handbook of Procedures (Vol.1).

 

Export against Supply 4A.8 Where export orders are placed on the nominated agencies/

by Foreign Buyer status holder/ exporters of three years standing having an

annual average turnover of Rs. Five Crore during the preceding

three licensing years, the foreign buyer may supply to the

nominated agencies/status holder/exporter, in advance and free

of charge, gold/ silver/ platinum, alloys, findings and

mountings of gold/ silver/ platinum for manufacture and

export.

The exports may be made by the nominated agencies directly

or through their associates or by the status holder/exporter as

the case may be. The import and export of findings shall be

on net to net basis. The foreign buyer may also supply to the

nominated agencies/status holder/ exporter in advance and

free of charge plain, semi finished gold/silver/platinum

jewellery including findings/ mountings/ components for

repairs/re-make and export subject to minimum value addition

of 10%. However, if the so imported semi finished gold/silver

/platinum jewellery is exported as studded jewellery, value

addition of 15% shall be achieved. In such cases of export,

wastage of 2% may be permitted.

The procedures in this regard shall be as prescribed in the

Handbook of Procedures (Vol.1).

Export Against 4A.9 The exporter may obtain the gold/silver/platinum as an input

Supply by Nominated for export products from nominated agencies in advance or

Agencies as replenishment after exports in accordance with the

procedure specified in this behalf.

Export Against 4A.10 An Advance Authorisation may be granted for the duty free

Advance Authorisation import of:

(a) Gold of fineness not less than 0.995 and mountings,

sockets, frames and findings of 8 carats and

above;

(b) Silver of fineness not less than 0.995 and mountings,

sockets, frames and findings containing more than

50% silver by weight;

(c) Platinum of fineness not less than 0.900 and

mountings, sockets, frames and findings containing

more than 50% platinum by weight.

4A.11 Such authorisations shall carry an export obligation which

will be required to be fulfilled in accordance with the

procedure specified in paragraph 4A of the Handbook of

Procedures (Vol.I).

 

The Advance Authorisation holder may obtain gold/silver/

platinum from the nominated agencies in lieu of direct import

in accordance with the procedure specified in this behalf.

Gem Replenishment 4A.12 Gem Replenishment (Gem & Jewellery REP) Authorisation

Authorisation may be issued under the schemes for export of gold/ silver/

platinum jewellery and articles thereof as given in paragraph

4A.8, 4A.9 and 4A.10 of the Policy. In the case of plain gold/

silver/platinum jewellery and articles, the value of such

Authorisations shall be determined with reference to the

realisation in excess of the prescribed minimum value

addition.

In the case of studded gold/silver/platinum jewellery and

articles thereof, the value of Gem Replenishment

Authorisation shall be determined by taking into account the

value of studdings used in items exported, after accounting

for the value addition on gold/ silver/ platinum including

admissible wastage.

Such Gem REP Authorisations shall be freely transferable.

Gem REP Rate and Item 4A.13 The scale of replenishment and the item of import will be as

prescribed in Appendix 12B of Handbook of Procedures

(Vol.1).

Diamond Imprest 4A.14 Diamond Imprest Authorisation for import of cut & polished

Authorisation diamonds including semi processed diamonds, half cut

diamonds, broken in any form, for mixing with cut & polished

diamonds or for export as it is, may be issued for export of

cut & polished diamonds.

Such Authorisations shall carry an export obligation, which

has to be discharged in accordance with the procedure

specified in this behalf.

Eligibility 4A.14.1 An exporter of cut & polished diamonds who is status holder

may be issued a Authorisation for import of cut & polished

diamonds upto 5% of the export performance of the preceding

year of cut & polished diamonds.

Export Obligation 4A.14.2 The export obligation under the scheme will be governed by

the provisions of paragraph 4A of chapter 4 of the Handbook

of Procedures (vol.I).

Export Promotion 4A.15 The nominated agencies and their associates, with the approval

Tours/ Export of of Department of Commerce, and others, with the approval

Branded Jewellery of Gem & Jewellery Export Promotion Council (GJEPC), may

export gold/ silver/platinum jewellery and articles thereof for

holding/participating in exhibitions abroad.

 

Personal carriage of gold/ silver/platinum jewellery, precious,

semi-precious stones, beads and articles and export of

branded jewellery is also permitted. These exports shall be

subject to the conditions as given in the Handbook of

Procedures (Vol.1).

Personal Carriage of 4A.16 Personal carriage of gems and jewellery export parcels by

Export/ Import Parcels foreign bound passengers and personal carriage of gems &

jewellery import parcels by an Indian importer/foreign national

may be permitted as per the conditions given in Handbook of

Procedures (Vol.1).

Export by Post 4A.17 In case of exports through Foreign Post Office which

may include export via Speed Post through Foreign

Post Office, the value of the jewellery parcels shall not exceed

US$50000 and 20 kg. by weight. The detailed procedure

is laid down in chapter 4 of the Handbook of Procedures

(vol.1).

Private/ Public Bonded 4A.18 Private/Public Bonded Warehouses may be set up in SEZ/

Warehouse DTA for import and re-export of cut & Polished

diamonds, cut & polished coloured gemstones, uncut & unset

precious & semi-precious stones. Import & re-export of cut

& polished diamonds & cut & polished coloured gemstones

will be subject to achievement of minimum value addition

of 5%.

Diamond & Jewellery 4A.19 Firms and companies dealing in the purchase/sale of rough or

Dollar Accounts cut and polished diamonds/ precious metal jewellery plain,

minakari and/or studded with/without diamond and/or

other stones with a track record of at least 3 years in

import or export of diamonds/ coloured gemstones/ diamond

and coloured gemstones studded jewellery/ plain gold

jewellery and having an average annual turnover of Rs. 5 crore

or above during preceding three licensing years may also carry

out their business through designated Diamond Dollar

Accounts.

The Diamond Dollar Account Scheme shall operate under the

current licensing scheme of this chapter. This scheme shall

be optional and those importers/exporters who wish to

continue to use Rupee Accounts shall be allowed to do so

under the existing policies.

Dollars in such accounts available from bank finance and/or

export proceeds shall be used only for

(i) Import/purchase of rough diamonds from overseas/

local sources,

 

(ii) Purchase of cut and polished diamonds, coloured

gemstones and plain gold jewellery from local

sources,

(iii) Import/purchase of gold from overseas/ nominated

agencies and repayment of dollar loans from the

bank; and

(iv) Transfer to the Rupee Account of the exporter.

Details of this Diamond Dollar Accounts Scheme

(DDAS) are given in the Handbook of Procedures

(Vol.1). The procedure outlined in the Handbook

of Procedures (Vol.1) shall also apply to diamond

studded jewellery.

A non DDA holder is also permitted to supply cut and polished

diamonds to DDA holder, receive payment in dollars and

convert same into rupees within the period of 7 days and cut

and polished diamonds and coloured gemstones so supplied

by non-DDA holder will also be counted towards the discharge

of his export obligation and/or entitle him to replenishment

Authorisation as the case may be.

Export of cut & 4A.20.1 Gems & Jewellery exporters shall be allowed to export cut

Polished precious and and polished precious and semi-precious stones for the

semi-precious stones for treatment and re-import as per customs rules and

treatment and re-import regulations.

Import of precious 4A.21 Import of precious metal scrap/used jewellery shall be allowed

metal scrap/used for melting, refining and re-export of jewellery as per the

jewellery for melting and procedure laid down in the Handbook of Procedures, Vol. I.

re-export of jewellery. However, such import shall not be allowed through hand

baggage.

Re-import of rejected 4A.22 Gems & Jewellery exporters shall be allowed to re-import

jewellery the rejected precious metal jewellery as per the procedure laid

down in para 4A.32 and 4A.32.1 of Handbook of Procedure,

Vol. I.

Export of Jewellery on 4A.23 Gems & Jewellery exporters shall be allowed to export

consignment basis jewellery on consignment basis as per the procedure given in

chapter 4 of the Handbook of Procedures, Vol. I and as per

the Customs rules and regulations in this behalf.

 

CHAPTER-5

EXPORT PROMOTION CAPITAL GOODS SCHEME

EPCG Scheme 5.1 The scheme allows import of capital goods for pre production,

production and post production (including CKD/SKD thereof

as well as computer software systems) at 5% Customs 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 the date of

issuance of Authorisation.

In the case of agro units, import of capital goods at 5%

Customs duty shall be allowed subject to a fulfillment of an

export obligation equivalent to 6 times the duty saved (on

capital goods imported under the Scheme) over a period of

12 years from the date of issue of Authorisation.

However for SSI units, import of capital goods at 5% Customs

duty shall be allowed subject to a fulfillment of an export

obligation equivalent to 6 times the duty saved (on capital

goods imported under the Scheme) over a period of 8 years

from the date of issue of Authorisation provided the landed

CIF value of such imported Capital Goods under the Scheme

does not exceed Rs Twenty Five Lakhs and the total investment

in plant and machinery after such imports does not exceed

the SSI limit.

However, in respect of EPCG Authorisations with a duty saved

of Rs.100 crore or more, the same export obligation, as the

case may be shall be required to be fulfilled over a period of

12 years.

In case CVD is paid in cash on imports under EPCG, the

incidence of CVD would not be taken for computation of net

duty saved provided the same is not Cenvated.

The capital goods shall include spares (including refurbished/

reconditioned spares), tools, jigs, fixtures, dies and moulds.

EPCG Authorisation may also be issued for import of

components of such capital goods required for assembly or

manufacturer of capital goods by the Authorisation holder.

Second hand capital goods without any restriction on age may

also be imported under the EPCG scheme.

However, import of motor cars, sports utility vehicles/all

purpose vehicles shall be allowed only to hotels, travel agents,

tour operators or tour transport operators and companies

 

owning/operating golf resorts whose total foreign exchange

earning from the hotel, travel & tourism and golf tourism

sectors in the current and preceding three licensing years

is Rs 1.5 crores or more. The ‘duty saved’ amount on all

EPCG Authorisations issued in a licensing year for import

of motor cars, sports utility vehicles/all purpose vehicles

shall not exceed 50% of the average foreign exchange

earnings from the hotel, travel & tourism and golf tourism

sectors in the preceding three licensing years. However,

the parts of motor cars, sports utility vehicles/ all purpose

vehicles such as chassis etc. cannot be imported under the

EPCG Scheme.

Import of Restricted items of imports mentioned under

ITC(HS) shall only be allowed to be imported under the

Scheme after approval from the Import Licensing

Committee.

5.1A Spares (including refurbished/ reconditioned spares), tools,

spare refractories, catalyst & consumable for the existing plant

and machinery imported/to be imported under the Scheme

shall also be allowed subject to an export obligation equivalent

to 8 times of duty saved to be fulfilled over a period of 8 years

reckoned from the date of issuance of Authorisation.

EPCG for Projects 5.1B An EPCG Authorisation can also be issued for import of

capital goods under the Scheme for Project Imports notified

by the Central Board of Excise and Customs under S.No 441

of Customs Exemption Notification No 21/2002 dated

01.03.2002 wherein the basic customs duty on imports is 10%

with a CVD of 16%.

The export obligation for such EPCG Authorisations would

be eight times the duty saved. The duty saved would be the

difference between the effective duty under the aforesaid

Customs Notification and the concessional duty under the

EPCG Scheme.

EPCG for Retail Sector 5.1 C To create modern infrastructure in the retail sector,

concessional duty benefits under EPCG scheme shall be

extended for import of capital goods required by retailers

having minimum area of 1000 sq meters. The retailer shall

fulfil the export obligation i.e. 8 times the duty saved in 8

years.

Eligibility 5.2 The scheme covers manufacturer exporters with or

without supporting manufacturer(s)/ vendor(s), merchant

exporters tied to supporting manufacturer(s) and service

providers.

 

Conditions for import 5.3 Import of capital goods shall be subject to Actual User

of Capital Goods condition till the export obligation is completed.

Export obligation 5.4 The following conditions shall apply to the fulfillment of the

export obligation:-

(i) The export obligation shall be fulfilled by the export

of goods capable of being manufactured or produced

by the use of the capital goods imported under the

scheme.

The export obligation may also be fulfilled by the

export of same goods, for which EPCG

Authorisation has been obtained, manufactured or

produced in different manufacturing units of the

Authorisation holder/specified supporting

manufacturer (s).

When Capital Goods are imported for pre/

post- production or license is taken for import

of spares, the license holder shall fulfill the

export obligation by export of products

manufactured from the plant / project to which the

pre/ post- production capital goods/ spares are

related.

The export obligation under the scheme shall be,

over and above, the average level of exports

achieved by him in the preceding three licensing

years for same and similar products within the

overall export obligation period including extended

period, if any except for categories mentioned in

Handbook (Vol.1).

Alternatively, export obligation may also be fulfilled

by exports of other good(s) manufactured or

service(s) provided by the same firm/company or

group company/ managed hotel which has the

EPCG Authorisation.

However, in such cases, the additional export

obligation imposed under EPCG scheme shall be

over and above the average exports achieved by the

unit/company/group company/ managed hotel in

preceding three years for both the original and the

substitute product(s) /service (s) even in cases where

the average is exempt for the substitute product (s)/

service (s) as given in para 5.7.6 of the Handbook

(Vol 1).

 

The incremental exports to be fulfilled by the

Authorisation holder for fulfilling the remaining

export obligation can include any combination

of exports of the original product/ service and

the substitute product (s)/ service (s). The

exporter of goods can opt to get the export

obligation refixed for the export of services and vice

versa.

The Authorisation holder can also opt for the refixation

of the balance export obligation based on

8 times of the duty saved amount for the CIF value

in proportion to the balance Export obligation under

the scheme. The guidelines for the re-fixation of

export obligation is given in para 5.19 of the

Handbook (Vol 1).

The aforesaid facilities shall only be available to

manufacturer exporters/ service provider on all the

Authorisations where export obligation period

including extended export obligation period is valid

on the date of application. In this regard, exports

made only on or after submission of application for

alternate item and/ or re-fixation of the

export obligation based on duty saved amount will

be taken into account for fulfillment of export

obligation.

(ii) The export obligation under the scheme shall be, in

addition to any other export obligation undertaken

by the importer, except the export obligation for

the same product under Advance Authorisation,

DFRC, DEPB or Drawback scheme.

(iii) The export obligation can also be fulfilled by the

supply of ITA-1 items to the DTA provided the

realization is in free foreign exchange.

(iv) Exports shall be physical exports. However, deemed

exports as specified in paragraph 8.2 (a), (b), (d),

(f), (g) & (j) of Policy shall also be counted towards

fulfilment of export obligation alongwith the

usual benefits available under paragraph 8.3 of the

Policy.

Royalty payments received in freely convertible

currency and foreign exchange received for R& D

services shall also be counted for discharge under

the EPCG scheme. Payment received in rupee terms

 

for the port handling services, in terms of

Chapter 9 of the Foreign Trade Policy shall also be

counted for export obligation discharge under the

Scheme.

Payments received against ‘Counter Sales’ in free

foreign exchange through banking channels as per

the RBI guidelines shall be counted for fulfillment

of export obligation under Para 5.1 C.

Provision for BIFR 5.5.1 Any firm/company registered with BIFR or any firm/

units companyacquiring a unit, which is under BIFR shall be

allowed EO extension as per the rehabilitation package

prepared by the operating agency subject to subsequent

approval of BIFR.

However, in cases where the rehabilitation package does not

specify the EO extension period, a time period upto 12 years

reckoned from the date of issue of Authorisation would be

permitted on merits of the case for fulfillment of export

obligation.

Similarly, small-scale SSI units shall also be entitled for similar

facility as per the rehabilitation scheme of the concerned State

government. However, in cases where the State rehabilitation

scheme does not specify the export obligation extension

period, a time period upto 12 years reckoned from the date of

issue of Authorisation would be permitted on merits of the

case for fulfillment of export obligation

EPCG for agro units 5.5.2 In the case of EPCG Authorisations issued to agro units in the

agri export zones, a period of 12 years reckoned from the

date of issue of the Authorisation would be permitted for the

fulfillment of export obligation.

The agro units in the agri export zones would also have the

facility of moving the capital good (s) imported under the

EPCG within the agri export zone.

An LUT/ Bond or a 15% BG (as the case may be) may be

given for EPCG Authorisation granted to units in the Agri

Export Zones provided the EPCG Authorisation is taken for

export of the primary agricultural product (s) notified in

Appendix 8 or their value added variants.

Indigenous Sourcing of 5.6 A person holding an EPCG Authorisation may source

Capital Goods and the capital goods from a domestic manufacturer instead

benefits to Domestic of importing them. The domestic manufacturer supplying

Supplier capital goods to EPCG Authorisation holders shall be

 

eligible for deemed export benefit under paragraph 8.3 of the

Policy.

Benefits to 5.7 In the event of a firm contract between the EPCG Authorisation

Domestic Supplier holder and domestic manufacturer for such sourcing, the

domestic manufacturer may apply for the issuance of Advance

Authorisation for the import of inputs including components

required for the manufacturer of said capital goods.

The domestic manufacturer may also replenish the inputs

including components after supply of capital goods to the

EPCG Authorisation holders.

Fixation of Export 5.7A In case of direct imports, the export obligation relating to the

Obligation EPCG Authorisation shall be reckoned with reference to the

duty saved value on the CIF value of capital goods (including

spares, jigs, fixtures, dies and moulds) actually imported. In

case of domestic sourcing, the export obligation relating to

EPCG shall be reckoned with reference to the notional

Customs duties saved on the FOR of capital goods (including

spares, jigs, fixtures, dies and moulds).

5.8 Service provider in Agri export zone shall have the facility to

move or shift the capital goods within the zone provided he

maintains accurate record of such movements. However, such

equipments shall not be sold or leased by the Authorisation

holder.

Maintenance of 5.9 As per the provisions of para 5.4(i), the EPCG Authorisation

Average exports under holder would have to maintain the average level of exports

EPCG equivalent to the average of the exports in the preceding three

licencing years for the same and similar products except for

exempted categories given in Handbook (Vol 1) during the

entire period of export obligation.

Notwithstanding the above, the Authorisation holder shall

maintain the average exports in any particular year (s) provided

the same is offset by excess exports to fulfil the average in

other year (s).

Technological 5.10 EPCG Authorisation holders can opt for Technological

Upgradation of existing Upgradation of the existing capital good imported under the

EPCG machinery EPCG Authorisation.

The conditions governing the Technological Upgradation of

the existing capital goods are as under:

(i) The minimum time period for applying for

Technological Upgradation of the existing capital

 

goods imported under EPCG is 5 years from the

date of issuance of the Authorisation.

(ii) The minimum exports made under the old capital

goods must be 40% of the total export obligation

imposed on the first EPCG Authorisation.

(iii) The export obligation would be refixed such that

the total export obligation mandated for both the

capital goods would be the sum total of 6 times the

duty saved on both the capital goods.

(iv) The procedure governing the replacement of capital

goods is given in para 5.20 of the Handbook (Vol1).

(v) The facility for technological upgradation shall be

available only once and the minimum imports to

be made shall be at least 10% of the existing

investment in plant and machinery by the applicant

firm.

Incentives for 5.11 To incentivise fast track companies with a view to accelerate

Fast Track Companies exports under the Scheme, in cases where the Authorisation

holder has fulfilled 75% or more of the export obligation under

the Scheme (including average level of exports) in half or

less than half the original export obligation period specified

in the Authorisation, the remaining export obligation shall be

condoned and the Authorisation redeemed by the licensing

authority concerned.

However no benefits under Para 5.12 of Handbook (Vol.I)

shall be available in such cases.

 

CHAPTER- 6

EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE

TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS

(STPs) AND BIO-TECHNOLOGY PARKS (BTPs)

Eligibility 6.1 Units undertaking to export their entire production of goods

and services (except permissible sales in the DTA), may be

set up under the Export Oriented Unit (EOU) Scheme,

Electronic Hardware Technology Park (EHTP) Scheme,

Software Technology Park (STP) Scheme or Bio-Technology

Park (BTP) scheme for manufacture of goods, including repair,

re-making, reconditioning, re-engineering and rendering of

services. Trading units, however, are not covered under these

schemes.

Export and Import of 6.2 (a) An EOU/EHTP/STP/BTP unit may export all kinds

Goods of goods and services except items that are

prohibited in the ITC (HS). Export of Special

Chemicals, Organisms, Materials, Equipment and

Technologies (SCOMET) shall be subject to

fulfillment of the conditions indicated in the ITC

(HS).

Procurement and supply of export promotion

material like brochure / literature, pamphlets,

hoardings, catalogues, posters etc. upto a maximum

value limit of 1.5% of FOB value of previous years

exports shall also be allowed.

(b) An EOU/EHTP/STP/BTP unit may import and/

or procure from DTA or bonded warehouses in

DTA / international exhibition held in India

without payment of duty all types of goods,

including capital goods, required for its activities,

provided they are not prohibited items of import

in the ITC (HS). Any permission required for

import under any other law shall be applicable.

The units shall also be permitted to import goods

including capital goods required for the approved

activity, free of cost or on loan/lease from clients.

The import of capital goods will be on a self

certification basis. Goods imported by a unit shall

be with actual user condition and shall be utilized

for export production.

(c) State Trading regime shall not apply to EOU

manufacturing units.

 

(d) EOU/EHTP/STP/BTP units may import/procure

from DTA without payment of duty certain specified

goods for creating a central facility which will be

used by software units. These software units can be

EOU/ DTA units who will use the facility for export

of software.

(e) An EOU engaged in agriculture, animal husbandry,

aquaculture, floriculture, horticulture, pisciculture,

viticulture, poultry or sericulture may be permitted

to remove specified goods in connection with its

activities for use outside the bonded area.

(f) Gems and jewellery EOUs may source gold /silver/

platinum through the nominated agencies on loan/

outright purchase basis. The units obtaining gold/

silver /platinum from the nominated agencies, either

on loan basis or outright purchase basis shall export

gold/silver/platinum within 90 days from the date

of release.

(g) EOU/EHTP/STP/BTP units, other than service

units, may export to Russian Federation in Indian

Rupees against repayment of State Credit/Escrow

Rupee Account of the buyer subject to RBI

clearance, if any.

(h) Procurement and export of spares/components upto

1.5% of the FOB value of exports may be allowed

to the same consignee/buyer of the export article

within the warranty period.

Second Hand Capital 6.3 Second hand capital goods, without any age limit, may also

Goods be imported duty free.

Leasing of Capital 6.4 An EOU/EHTP/STP/BTP unit may, on the basis of a firm

Goods contract between the parties, source the capital goods from a

domestic/foreign leasing company without payment of

customs/excise duty. In such a case, the EOU/EHTP/STP/BTP

unit and the domestic/foreign leasing company shall jointly

file the documents to enable import/procurement of the capital

goods without payment of duty.

Net Foreign Exchange 6.5 EOU/EHTP/STP/BTP unit shall be a positive net foreign

Earnings (NFE) exchange earner except for sector specific provision of

Appendix 14-I-C of Handbook, where a higher value addition

shall be required. Net Foreign Exchange Earnings (NFE) shall

be calculated cumulatively in blocks of five years, starting

from the commencement of production.

65

Letter of Permission/ 6.6 (a) On approval, a Letter of Permission (LOP) /Letter

Letter of Intent and of Intent (LOI) shall be issued by the Development

Legal Undertaking Commissioner/designated officer to EOU/EHTP/

STP/BTP unit. The LOP/LOI shall have an initial

validity of 3 years by which time the unit should

have commenced production. Its validity may be

extended further up to 3 years by the competent

authority. However, proposals for extension beyond

six years shall be considered in exceptional

circumstances, on a case-to-case basis by the BOA.

Once the unit commences production, LOP/LOI

issued shall be valid for a period of 5 years for its

activities. This period may be extended further by

the Development Commissioner for a period of 5

years at a time.

(b) LOP/LOI issued to EOU/EHTP/STP/BTP units by

the concerned authority subject to compliance of

provision in para 6.2 above, would be construed as

an Authorisation for all purposes.

(c) The unit shall execute a legal undertaking with the

Development Commissioner concerned. Failure to

ensure positive NFE or to abide by any of the terms

and conditions of the LOP/LOI/IL/LUT shall render

the unit liable to penal action under the provisions

of the Foreign Trade (Development & Regulation)

Act, 1992 and the Rules and Orders made

thereunder without prejudice to action under any

other law/rules and cancellation or revocation of

LOP/LOI/IL.

Investment Criteria (d) Only projects having a minimum investment of Rs.

1 Crore in Plant & Machinery shall be considered

for establishment as EOUs under the scheme. This

shall, however, not apply to existing units and units

in EHTP/STP/BTP, Handicrafts/ Agriculture/

Floriculture/ Aquaculture/ Animal Husbandry /

Information Technology, Services, Brass Hardware

and Handmade jewellery sectors. The Board of

Approval (BOA) may also allow establishment of

EOUs with a lower investment criteria

Application & Approvals 6.7 (a) Applications for setting up of units under EOU

scheme other than proposals for setting up of units

in the services sector (except R&D , software and

IT enabled services, or any other service activity as

may be delegated by the BOA), shall be approved

or rejected by the Units Approval Committee within

 

15 days as per the criteria indicated in Handbook

(Vol-I).

(b) In other cases, approval may be granted by the Board

of Approval (BOA) set up for this purpose as

indicated in the Handbook (Vol-I)

(c) Proposals for setting up EOU requiring industrial

licence may be granted approval by the

Development Commissioner after clearance of the

proposal by the Board of Approval and Department

of Industrial Policy and Promotion within 45 days.

DTA Sale of Finished 6.8 The entire production of EOU/EHTP/STP/BTP units shall be

Products/ Rejects/ exported subject to the following:

Waste/ Scrap/ Remnants

and By-products

(a) Units, other than gems and jewellery units, may sell

goods upto 50% of FOB value of exports subject to

fulfilment of positive NFE on payment of

concessional duties. Within the entitlement of DTA

sale, the unit may sell in DTA its products similar

to the goods, which are exported or expected to be

exported from the units. No DTA sale at

concessional duty shall be permissible in respect

of motor cars, alcoholic liquors, books, tea (except

instant tea), pepper & pepper products, marble and

such other items as may be notified from time to

time. Such DTA sale shall also not be permissible

to units engaged in the activities of packaging /

labeling / segregation / refrigeration /compacting/

micronisation/pulverization/granulation/conversion

of monohydrate form of chemical to anhydrous form

or vice-versa.

Sales made to a unit in SEZ shall also be taken into

account for the purpose of arriving at FOB value of

export by EOU provided payment for such sales

are made from Foreign Exchange Account of SEZ

unit. Sale to DTA would also be subject to

mandatory requirement of registration of

pharmaceutical products (including bulk drugs).

(b) For services, including software units, sale in the

DTA in any mode, including on line data

communication shall also be permissible up to 50%

of FOB value of exports and /or 50% of foreign

exchange earned, where payment of such services

is received in foreign exchange.

 

(c) Gems and jewellery units may sell upto 10% of FOB

value of exports of the preceding year in DTA

subject to fulfillment of positive NFE. In respect of

sale of plain jewellery, the recipient shall pay

concessional rate of duty as applicable to sale from

nominated agencies. In respect of studded jewellery,

duty shall be payable as applicable.

(d) Unless specifically prohibited in the LOP, rejects

within an overall limit of 50% may be sold in the

Domestic Tariff Area (DTA) on payment of duties

as applicable to sale under paragraph 6.8(a) on prior

intimation to the Customs authorities. Such sales

shall be counted against DTA sale entitlement. Sale

of rejects upto 5% of FOB value of exports shall

not be subject to achievement of NFE.

(e) Scrap/ waste/ remnants arising out of production

process or in connection therewith may be sold in

the DTA as per the Standard Input-Output norms

notified under the Duty Exemption Scheme on

payment of concessional duties as applicable within

the overall ceiling of 50% of FOB value of exports.

Such sales shall not, however, be subject to

achievement of positive NFE. In respect of items

not covered by the norms, the Development

Commissioner may fix ad-hoc norms on the basis

of data for a period of six months and within this

period, he shall get the norms fixed by the BOA.

Sale of waste/scrap/remnants by units not entitled

to DTA sale or sales beyond the DTA sale

entitlement, shall be on payment of full duties. The

scrap/waste/remnants may also be exported.

(f) There shall be no duties/taxes on scrap/waste/

remnants in case the same are destroyed with the

permission of Customs authorities.

(g) By-products included in the LOP may also be sold

in the DTA subject to achievement of positive NFE

on payment of applicable duties within the overall

entitlement of paragraph 6.8(a). Sale of by-products

by units not entitled to DTA sales or beyond the

entitlements of paragraph 6.8 (a) shall also be

permissible on payment of full duties.

(h) EOU/ EHTP/ STP/BTP units may sell finished

products, except pepper and pepper products and

marble which are freely importable under the Policy

68

in the DTA under intimation to the Development

Commissioner against payment of full duties

provided they have achieved the positive NFE.

(i) In the case of units manufacturing electronics

hardware and software, the NFE and DTA sale

entitlement shall be reckoned separately for

hardware and software.

(j) In case of DTA sale of goods manufactured by EOU/

EHTP/STP/BTP, where basic duty and CVD is nil,

such goods may be considered as non-excisable for

the purpose of payment of duty.

(k) In case of new EOUs, advance DTA sale will be

allowed not exceeding 50% of its estimated exports

for the first year except the pharmaceutical units

where this will be based on its estimated exports

for the first two years.

Other Supplies in DTA 6.9 Following supplies effected from EOU/EHTP/STP/BTP units

to DTA will be counted for the purpose of fulfilment of positive

NFE:

(a) Supplies effected in DTA to holders of advance

Authorisation/advance Authorisation for annual

requirement/DFRC under the duty exemption /

remission scheme /EPCG scheme.

(b) Deleted

( c) Supplies to other EOU/EHTP/STP//BTP/SEZ units

provided that such goods are permissible for

procurement in terms of paragraph 6.2 of the Policy.

(d) Supplies made to bonded warehouses set up under

the policy and/ or under section 65 of the customs

act and free trade and warehousing zones, where

payment is received in foreign exchange.

(e) Supplies of goods and services to such organizations

which are entitled for duty free import of such items

in terms of general exemption notification issued

by the Ministry of Finance.

(f) Supply of services (by services units) relating to

exports paid for in free foreign exchange or for such

services rendered in Indian Rupees which are

otherwise considered as having been paid for in free

foreign exchange by RBI.

 

(g) Supplies of Information Technology Agreement

(ITA -1) items and notified zero duty telecom/

electronic items.

Export through others 6.10 An EOU/EHTP/STP/BTP unit may export goods

manufactured/software developed by it through another

exporter or any other EOU/EHTP/STP/SEZ unit subject to

the conditions mentioned in para 6.19 of Handbook.

Entitlement for 6.11 (a) Supplies from the DTA to EOU/EHTP/STP/BTP

supplies from the DTA units will be regarded as “deemed exports” and the

DTA supplier shall be eligible for the relevant

entitlements under chapter 8 of the Policy besides

discharge of export obligation, if any, on the

supplier. Notwithstanding the above, EOU/ EHTP/

STP/BTP units shall, on production of a suitable

disclaimer from the DTA supplier, be eligible for

obtaining the entitlements specified in chapter 8 of

the Policy. For the purpose of claiming deemed

export duty drawback, they shall get Brand Rates

fixed by the Development Commissioner. wherever

All Industry Rates of Drawback are not available.

(b) Suppliers of precious and semi-precious stones,

synthetic stones and processed pearls from DTA to

EOU shall be eligible for grant of Replenishment

Licenses at the rates and for the items mentioned in

the Handbook (Vol.1).

( c) In addition, the EOU/EHTP/STP/BTP units shall

be entitled to the following:-

i. Reimbursement of Central Sales Tax on goods

manufactured in India.

ii. Exemption from payment of Central Excise

Duty on goods procured from DTA on goods

manufactured in India.

iii. deleted

iv. Reimbursement of Duty paid on fuels procured

from domestic oil companies as per the rate of

Drawback notified by the DGFT from time to

time.

v. CENVAT Credit on service tax paid.

Other Entitlements 6.12 Other entitlements of EOU/EHTP/STP/BTP units are as

under:

 

(a) Exemption from payment of Income Tax as per the

provisions of Section 10A and 10B of Income Tax

Act.

(b) Exemption from industrial licensing for

manufacture of items reserved for SSI sector.

( c) deleted

(d) Export proceeds will be realized within 12 Months.

(e) Will be allowed to retain 100% of its export earning

in the EEFC account.

(f) The Units will not be required to furnish bank

guarantee at the time of import or going for job work

in DTA, where the unit has (i) a turnover of Rupees

5 crores or above, (ii) the unit is in existence for at

least three years and (iii) unit having an unblemished

track record.

(g) 100% FDI investment permitted through Automatic

Route similar to SEZ units.

Inter Unit Transfer 6.13 (a) Transfer of manufactured goods from one EOU/

EHTP/STP/BTP unit to another EOU/EHTP/STP/

BTP unit is allowed with prior intimation to the

concerned Development Commissioner and

Customs authorities following the procedure of inbond

movement of goods.

(b) Capital goods may be transferred or given on loan

to other EOU/EHTP/STP/BTP/SEZ units with prior

intimation to the concerned Development

Commissioner and Customs authorities.

(c) Goods supplied by one unit of EOU/EHTP/STP/

BTP to another unit shall be treated as imported

goods for the second unit for the purpose of payment

of duty, on DTA sale by the second unit.

Sub-Contracting 6.14 (a)(i) EOU/EHTP/STP/BTP units, including gem and

jewellery units, may on the basis of annual

permission from the Customs authorities,

subcontract production processes to DTA through

job work which may also involve change of form

or nature of goods, through job work by units in

the DTA.

(ii) These units may also subcontract upto 50% of the

 

overall production of the previous year in value

terms for job work in DTA with the permission of

the Customs Authorities.

(b)(i) EOU may, on the basis of annual permission from

the Customs authorities, undertake job work for

export, on behalf of DTA exporter, provided that

the goods are exported directly from EOU and

export document shall jointly be in the name of

DTA/EOU. For such exports, the DTA units will

be entitled for refund of duty paid on the inputs by

way of Brand Rate of duty drawback.

(ii) Duty free import of goods for execution of export

order placed on EOU by Foreign Supplier on job

work basis would be allowed subject to

the condition that no DTA clearance shall be

allowed.

(iii) Subcontracting of both production and production

processes may also be undertaken without any limit

through other EOU/EHTP/ STP/SEZ/BTP units on

the basis of records maintained in the unit.

(iv) Subcontracting of part of production process may

also be permitted abroad with the approval of the

Development Commissioner.

(c) Scrap/waste/remnants generated through job work

may either be cleared from the job worker’s

premises on payment of applicable duty on

transaction value or destroyed in the presence of

Customs/ Excise authorities or returned to the unit.

Destruction shall not apply to gold, silver, platinum,

diamond, precious and semi precious stones.

(d) Sub-contracting/exchange by gems and jewellery

EOUs through other EOUs or SEZ units or units in

DTA shall be as per procedure indicated in

Handbook (Vol-I).

Sale of Un-utilised 6.15 (a) In case an EOU/EHTP/STP/BTP unit is unable to

Material utilize the goods and services, imported or procured

from DTA, it may be (i) transferred to another EOU/

SEZ/EHTP/STP/BTP unit or (ii) disposed off in the

DTA with the approval of the Customs authorities

on payment of applicable duties and submission of

import Authorisation, if required, or (iii)exported.

Such transfer from EOU/EHTP/STP/BTP unit to

 

another such unit would be treated as import for

the receiving unit.

(b) Capital goods and spares that have become obsolete/

surplus, may either be exported, transferred to

another EOU/EHTP/STP/BTP/SEZ or disposed of

in the DTA on payment of applicable duties. The

benefit of depreciation, as applicable, will be

available in case of disposal in DTA. No duty shall

be payable in case capital goods, raw material,

consumables, spares, goods manufactured,

processed or packaged, and scrap/ waste/ remnants/

rejects are destroyed within the Unit after intimation

to the Custom authorities or destroyed outside the

Unit with the permission of Custom authorities.

Destruction as stated above shall not apply to gold,

silver, platinum, diamond, precious and semi

precious stones.

(c ) In the case of textile sector, disposal of left over

material /fabrics upto 2% of cif value or quantity

of import, whichever is lower, on payment of duty

on transaction value may be allowed, subject to

certification of central excise/custom officers that

these are leftover items.

(d) Disposal of used packing material will be allowed

on payment of duty on transaction value.

Reconditioning/Repair 6.16 EOU/EHTP/STP/BTP units may be set up with the approval

and Re-engineering of BOA to carry out reconditioning, repair, remaking, testing,

calibration, quality improvement, up-gradation of technology

and re-engineering activities for export in foreign currency.

The provisions of paragraphs 6.8, 6.9,6.10, 6.13, 6.14 of policy

and para 6.29 of Handbook shall not, however, apply to such

activities.

Replacement/ Repair of 6.17 (a) The general provisions of the Policy relating to

imported/ Indigenous export / import of replacement / repair of goods

Goods would also apply equally to EOU/EHTP/STP/BTP

units. Cases not covered by these provisions shall

be considered on merits by the Development

Commissioner.

(b) The goods sold in the DTA and not accepted

for any reasons may be brought back for

repair/ replacement, under intimation to

the concerned jurisdictional Customs/Excise

authorities.

 

(c) 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 may be returned

and replacement obtained or destroyed. In the event

of replacement, the goods may be brought back from

the foreign suppliers or their authorized agents in

India or indigenous suppliers. However destruction

shall not apply to precious and semi precious stones

and precious metals.

Exit from EOU Scheme 6.18 (a) With the approval of the Development

Commissioner, EOU units may opt out of the

scheme. Such exit from the scheme shall be

subject to payment of Excise and Customs duties

and the industrial policy in force at the time of

exit.

(b) If the unit has not achieved the obligations under

the scheme, it shall also be liable to penalty at the

time of exit.

(c) In the event of a gem and jewellery unit ceasing its

operation, gold and other precious metals, alloys,

gem and other materials available for manufacture

of jewellery, shall be handed over to an agency

nominated by the Ministry of Commerce and

Industry (Department of Commerce) at the price to

be determined by that agency.

(d) An EOU//EHTP/STP/BTP unit may also be

permitted by the Development Commissioner, to

exit from the scheme on payment of duty on capital

goods under the prevailing EPCG Scheme as a one

time option. This will be subject to fulfilment of

the eligibility criteria under that Scheme and

standard conditions indicated in Handbook

(Vol-I).

(e) The unit proposing to exit out of the EOU scheme

shall intimate the Development Commissioner and

Customs and Central Excise authorities in

writing. The unit shall assess the duty liability

arising out of debonding and submit the details

of such assessment to customs and Central Excise

authorities. The Customs and Central Excise

authorities shall confirm the duty liabilities on

priority basis. After payment of duty and

 

clearance of all dues the unit shall obtain “No

Dues Certificate” from the Customs and Central

Excise authorities. On the basis of No dues

certificate so issued by the Customs and Central

Excise authorities, the unit shall apply to the

Development Commissioner for final debonding.

In case there is no proceeding pending

under FT(DR) Act 1992, the Development

commissioner shall issue final debonding order

within a period of 7 working days. During the

period between “No dues certificate” issued by

the Customs and Central Excise authorities and

the final debonding order by the Development

Commissioner, the unit shall not be entitled to

claim any exemption for procurement of capital

goods or input. The unit can however, claim

Advance License/ DEPB / Duty Drawback.

(f) In cases where a unit is initially established as DTA

unit with machine procured from abroad after

payment of applicable import duty or from domestic

market after payment of excise duty and the unit is

subsequently converted to EOU, in such cases

removal of such capital goods to DTA after debonding

would be without payment of duty.

Similarly, in cases where a DTA unit imported

capital goods under the EPCG Scheme and after

completely fulfilling the export obligation under the

EPCG scheme gets converted into EOU, the unit

would not be charged customs duty on capital goods

at the time of removal of such capital goods in DTA

at the time of debonding.

Conversion 6.19 (a) Existing DTA units, may also apply for conversion

into an EOU/EHTP/STP/BTP unit, and Income Tax

benefits under Section 10-A & 10-B will be

available under the scheme for plant, machinery and

equipment already installed.

(b) The existing EHTP/STP units may also apply for

conversion/merger to EOU unit and vice-versa. In

such cases, the units will remain in bond and avail

the exemptions in duties and taxes as applicable

under the relevant scheme.

Monitoring of NFE 6.20 The performance of EOU/EHTP/STP/BTP units shall be

monitored by the Units Approval Committee as per the

guidelines given in Handbook (Vol-I).

 

Export through 6.21 EOU/EHTP/STP/BTP are permitted to :

Exhibitions/Export (i) Export goods for holding/ participating in

Promotion Tours / exhibitions abroad with the permission of

Export through Development Commissioner.

showrooms abroad/

Duty Free Shops. (ii) Personal carriage of gold/ silver/ platinum jewellery,

precious, semi-precious stones, beads and articles.

(iii) Export goods for display/sale in the permitted shops

set up abroad.

(iv) Display/sell in the permitted shops set up abroad or

in the show rooms of their distributors/agents.

(v) Set up show rooms/retail outlets at the International

Airports.

Personal Carriage Of 6.22 Import/ export through personal carriage of gem and jewellery

Import / Export items may be under-taken as per the procedure prescribed by

Parcels Including Customs. The export proceeds shall, however, be realized

through Foreign through normal banking channel. Import/export through

bound Passengers personal carriage by units, other than gem and jewellery units,

shall be allowed provided the goods are not in commercial

quantity.

Export /Import by 6.23 Goods including free samples, may be exported/imported by

Post /Courier airfreight or through Foreign Post Office or through courier,

subject to the procedure prescribed by Customs.

Administration of 6.24 Details of administration of EOUs and Power of Development

EOUs/Power of Commissioner are given in Handbook (Vol.1).

Development Commissioner

Revival of Sick units 6.25 Subject to a unit being declared sick by the appropriate

authority, proposals for revival of the unit or its take over

may be considered by the Board of Approval.

Approval for EHTP/STP 6.26 In the case of units under EHTP/STP Schemes, necessary

approval / permission under relevant paragraphs of this

Chapter shall be granted by the officer designated by the

Ministry of Communication and Information Technology,

Department of Information Technology for the purpose instead

of the Development Commissioner and by the Inter-Ministerial

Standing Committee (IMSC) instead of BOA.

Approval of BTP 6.27 Bio-Technology Parks (BTP) would be notified by the DGFT

on the recommendations of Department of Biotechnology. In

the case of units in the BTP, necessary approval/permission

under relevant provisions of this chapter will be granted by

designated officer of the Department of Biotechnology.

 

CHAPTER-7

SPECIAL ECONOMIC ZONES

The policy relating to Special Economic Zones is governed by SEZ Act 2005, and

the Rules framed thereunder.

 

CHAPTER 7A

FREE TRADE & WAREHOUSING ZONES

The policy relating to Free Trade and Warehousing Zones is governed by SEZ Act

2005, and the Rules framed thereunder.

 

CHAPTER-8

DEEMED EXPORTS

Deemed Exports 8.1 “Deemed Exports” refers to those transactions in which the

goods supplied do not leave the country and the payment for

such supplies is received either in Indian rupees or in free

foreign exchange.

Categories of Supply 8.2 The following categories of supply of goods by the main/ subcontractors

shall be regarded as “Deemed Exports” under this

Policy, provided the goods are manufactured in India:

(a) Supply of goods against Advance Authorisation /

Advance Authorisation for annual requirement;

(b) Supply of goods to Export Oriented Units (EOUs)

or Software Technology Parks (STPs) or Electronic

Hardware Technology Parks (EHTPs) or Bio

Technology Parks (BTP);

(c) Supply of capital goods to holders of Authorisations

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

in accordance with the procedures of those

agencies/ funds, where the legal agreements provide

for tender evaluation without including the customs

duty;

Supply and installation of goods and equipment

(single responsibility of turnkey contracts) to

projects financed by multilateral or bilateral

agencies/funds as notified by Department of

Economic Affairs, Ministry of Finance under

International Competitive Bidding in accordance

with the procedures of those agencies/funds, which

the bids may have been invited and evaluated on

the basis of Delivered Duty Paid (DDP) prices for

the goods manufactured abroad.

(e) Supply of capital goods, including in unassembled/

disassembled condition as well as plants, machinery,

accessories, tools, dies and such goods which are

used for installation purposes till the stage of

 

commercial production and spares to the extent of

10% of the FOR value to fertilizer plants;

(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;

(g) Supply of goods to the power projects and refineries

not covered in (f) above;

(h) Supply of marine freight containers by 100% EOU

(Domestic freight containers-manufacturers)

provided the said containers are exported out of

India within 6 months or such further period as

permitted by the customs;

(i) Supply to projects funded by UN agencies; and

(j) Supply of goods to nuclear power projects through

competitive bidding as opposed to International

Competitive Bidding.

The benefits of deemed exports shall be available under

paragraph (d), (e), (f) and (g) only if the supply is made under

the procedure of International Competitive Bidding (ICB).

Benefits for Deemed 8.3 Deemed exports shall be eligible for any/all of the following

Exports benefits in respect of manufacture and supply of goods

qualifying as deemed exports subject to the terms and

conditions as given in Handbook (Vol.1):-

(a) Advance Authorisation

(b) Deemed Export Drawback.

(c) Exemption from terminal excise duty where

supplies are made against International Competitive

Bidding. In other cases, refund of terminal excise

duty will be given.

Benefits to the Supplier 8.4.1 (i) In respect of supplies made against Advance

Authorisation in terms of paragraphs 8.2(a) of the

Policy, the supplier shall be entitled to Advance

Authorisation for intermediate supplies.

(ii) If the supplies are made against Advance Release

Order (ARO) or Back to Back Letter of Credit issued

against Advance Authorisation in terms of

paragraphs 4.1.11 and 4.1.12 of the Policy, supplier

 

shall be entitled to the benefits listed in paragraphs

8.3(b) and (c) of the Policy, whichever is applicable.

(iii) If the supplies are made against Advance Release

Order (ARO) or Back to Back Letter of Credit issued

against DFRC, the supplier shall be entitled to the

benefit listed in paragraph 8.3(b) of the Policy.

8.4.2 In respect of supply of goods to EOU/ EHTP/ STP/BTP in

terms of paragraphs 8.2 (b) of the Policy, the supplier shall be

entitled to the benefits listed in paragraph 8.3(a),(b)and (c) of

the Policy, whichever is applicable.

8.4.3 In respect of supplies made under paragraph 8.2(c) of the

Policy, the supplier shall be entitled to the benefits listed in

paragraph 8.3(a), (b) and (c), of the Policy, whichever is

applicable.

8.4.4 (i) In respect of supplies made under paragraphs 8.2

(d), (f) and (g) of the Policy, the supplier shall be

entitled to the benefits listed in paragraphs 8.3(a),

(b) and (c),whichever is applicable.

(ii) In respect of supplies mentioned in paragraph

8.2(d), supplies to the projects funded by such

agencies alone, as may be notified by Department

of Economic Affairs, Ministry of Finance, shall be

eligible for deemed export benefits. A list of such

agencies/ funds is given in Appendix-13 of

Handbook (Vol.I).

(iii) The benefits of deemed exports under para 8.2(f)

of the Policy shall be applicable in respect of items,

import of which is allowed by the Department of

Revenue at zero customs duty subject to fulfillment

of conditions specified under Notification No.21/

2002-Customs dated 1.3.2002, as amended from

time to time.

iv) Supply of Capital goods and spares upto 10% of

the FOR value of the capital goods to the power

projects in terms of paragraphs 8.2(g) shall be

entitled for deemed export benefits provided the

International Competitive Bidding procedures have

been followed at Independent Power Producer

(IPP)/Engineering and Procurement Contract(EPC)

stage. The benefit of deemed exports shall also be

available for renovation/ modernization of power

plants. The supplier shall be eligible for benefits

 

listed in paragraph 8.3(a) and (b) of the Policy,

whichever is applicable. However , supply of goods

required for setting up of any mega power projects

as specified in S.No. 400 of Department of Revenue

Notification No.21/2002-Customs dated 1.3.2002,

as amended, shall be eligible for deemed exports

benefits as mentioned in paragraph 8.3(a), (b) and

(c) of the Policy, whichever is applicable, if such

mega power project is –

(a) an inter state thermal power plant of capacity of

1000 MW or more; or

(b) an inter state Hydel power plant of capacity of 500

MW or more.

(v) Supplies under paragraph 8.2(g) of the Policy to

the new refineries being set up during the Ninth

plan period and spilled over to the Tenth plan period

shall be entitled for deemed export benefits in

respect of goods mentioned in list 17 specified in

S.No.228 of Notification No.21/2002-Customs

dated 1.3.2002, as amended from time to time. The

supplier shall be eligible for benefits listed in

paragraphs 8.3(a) and (b) of the Policy, whichever

is applicable.

8.4.5 In respect of supplies made under paragraph 8.2(e) of the

Policy, the supplier shall be eligible for the benefits listed in

paragraph 8.3(a) and (b) of the Policy, whichever is applicable.

The benefit of deemed exports shall be available in respect of

supplies of capital goods and spares to fertilizer plants which

are set up or expanded/ revamped/ retrofitted/modernized

during the Ninth Plan period. The benefit of deemed exports

shall also be available on supplies made to Fertilizer plants,

which have started in the 8th /9th Plan periods and spilled

over to the 10th Plan period.

8.4.6 The supplies of goods to projects funded by UN agencies

covered under Para 8.2(i) of the Policy are eligible for benefits

listed in paragraph 8.3(a) and (b) of the Policy, whichever is

applicable

8.4.7 In respect of supplies made to nuclear Power Projects under

para 8.2(j) of the policy, the supplier would be eligible for

benefits given in para 8.3 (a), (b) and (c) of the Policy,

whichever is applicable. Supply of only those goods required

for setting up any nuclear power project specified in list 43 at

S.No.401 of Notification No.21/2002-Customs dated

 

1.3.2002,as amended from time to time having a capacity of

440 MW or more as certified by an officer not below the rank

of Joint Secretary to the Government of India in the

Department of Atomic Energy shall be entitled for deemed

exports benefits in cases where the procedure of competitive

bidding (and not international competitive bidding) has been

followed.

Eligibility for refund 8.5 Supply of goods will be eligible for refund of Terminal Excise

of terminal excise duty/ Duty in terms of para 8.3 (c) of Policy provided the recipient

drawback of the goods does not avail CENVAT credit /rebate on such

goods. Similarly, supplies will be eligible for deemed export

drawback in terms of para 8.3(b) of Policy on the Central

Excise paid on inputs /components, provided CENVAT credit

facility/rebate has not been availed by the applicant. Such

supplies will however be eligible for deemed export drawback

on the customs duty paid on the inputs/components.

Supplies to be made by 8.6.1 In all cases of deemed exports, supplies shall be made directly

the main/sub-contractor to the designated Projects/ Agencies/ Units/ Advance

Authorisation / EPCG Authorisation holders. The subcontractor

may, however, make the supplies to the main

contractor as per paragraph 8.4 of Handbook instead of

designated projects/ agencies.

8.6.2 Supplies made by an Indian sub-contractor of an Indian or

foreign main contractor, shall also be eligible for deemed

export benefits provided the name of the sub-contractor is

indicated either originally or subsequently in the contract, and

payment certificate is issued by the project authority in the

name of the sub-contractor in the form given in Appendix

22C of Handbook (Vol.I).

 

CHAPTER-9

DEFINITIONS

9.1 For the purpose of this Policy, unless the context otherwise

requires, the following words and expressions shall have the

following meanings attached to them.

9.2 “Accessory” or “Attachment” means a part, sub-assembly

or assembly that contributes to the efficiency or effectiveness

of a piece of equipment without changing its basic

functions.

9.3 “Act” means the Foreign Trade (Development and Regulation)

Act, 1992 (No.22 of 1992).

9.4 “Actual User” means an actual user who may be either

industrial or non-industrial.

9.5 “Actual User (Industrial)” means a person who utilises the

imported goods for manufacturing in his own industrial unit

or manufacturing for his own use in another unit including a

jobbing unit.

9.6 “Actual User (Non-Industrial)” means a person who utilises

the imported goods for his own use in

(i) any commercial establishment carrying on any

business, trade or profession; or

(ii) any laboratory, Scientific or Research and

Development (R&D) institution, university or other

educational institution or hospital; or

(iii) any service industry.

9.7 “AEZ” means Agricultural Export Zones notified by DGFT

in Appendix 8 of Handbook (Vol 1).

9.8 Deleted

9.9 “Applicant” means the person on whose behalf the application

is made and shall, wherever the context so requires, include

the person signing the application.

9.9.1 “Authorisation” means a permission as included in Section

2 (g) of The Foreign Trade (Development and Regulation)

Act, 1992 (No.22 of 1992) to import or export as per

provisions of this policy.

 

9.10 “BOA” means the Board of Approval as notified by the

Department of Commerce.

9.11 “BTP” means Biotechnology Park as notified by Director

General of Foreign Trade on the recommendation of the

Department of Biotechnology.

9.12 “Capital Goods” means any plant, machinery, equipment or

accessories required for manufacture or production, either

directly or indirectly, of goods or for rendering services,

including those required for replacement, modernisation,

technological upgradation or expansion. Capital goods also

include packaging machinery and equipment, refractories for

initial lining, refrigeration equipment, power generating sets,

machine tools, catalysts for initial charge, equipment and

instruments for testing, research and development, quality and

pollution control. Capital goods may be for use in

manufacturing, mining, agriculture, aquaculture, animal

husbandry, floriculture, horticulture, pisciculture, poultry,

sericulture and viticulture as well as for use in the services

sector.

9.13 “Competent Authority” means an authority competent to

exercise any power or to discharge any duty or function under

the Act or the Rules and Orders made thereunder or under

this Policy.

9.14 “Component” means one of the parts of a sub-assembly or

assembly of which a manufactured product is made up and

into which it may be resolved. A component includes an

accessory or attachment to the component.

9.15 “Consumables” means any item, which participates in or is

required for a manufacturing process, but does not necessarily

form part of the end-product. Items, which are substantially

or totally consumed during a manufacturing process will be

deemed to be consumables.

9.16 “Consumer Goods” means any consumption goods, which

can directly satisfy human needs without further processing

and includes consumer durables and accessories thereof.

9.17 “Counter Trade” means any arrangement under which exports/

imports from/to India are balanced either by direct imports/

exports from the importing/exporting country or through a

third country under a Trade Agreement or otherwise. Exports/

Imports under Counter Trade may be carried out through

Escrow Account, Buy Back arrangements, Barter trade or any

similar arrangement. The balancing of exports and imports

could wholly or partly be in cash, goods and/or services.

 

9.18 “Developer” means a person or body of persons, company,

firm and such other private or government undertaking, who

develops, builds, designs , organises, promotes, finances,

operates, maintain or manages a part or whole of the

infrastructure and other facilities in the Special Economic

Zones as approved by the Central Government.

9.19 “Development Commissioner” means the Development

Commissioner of the Special Economic Zone.

9.20 “DFRC” means Duty Free Replenishment Certificate.

9.21 “Domestic Tariff Area” means area within India which is

outside the Special Economic Zones and EOU/ EHTP/ STP/

BTP.

9.22 “Drawback, “ in relation to any goods manufactured in India

and exported, means the rebate of duty chargeable on any

imported material or excisable material used in the

manufacture of such goods in India. The goods include

imported spares, if supplied with capital goods manufactured

in India.

9.23 “EHTP “ means Electronic Hardware Technology Park.

9.24 “EOU” means Export Oriented Unit for which an LOP has

been issued by the Development Commissioner.

9.25 “Excisable goods” means any goods produced or

manufactured in India and subject to a duty of excise under

the Central Excise and Salt Act 1944 (1 of 1944).

9.26 “Exporter” means a person who exports or intends to export

and holds an Importer-Exporter Code number unless otherwise

specifically exempted.

9.27 “Export Obligation” means the obligation to export the product

or products covered by the Authorisation or permission in

terms of quantity, value or both, as may be prescribed or

specified by the licensing or competent authority.

9.28 Group Company” means two or more enterprises which,

directly or indirectly, are in a position to —

(i) exercise twenty-six per cent. or more of the voting

rights in the other enterprise; or

(ii) appoint more than fifty percent, of the members of

the board of directors in the other enterprise.

 

For the group companies to claim benefits or have their exports

counted for benefits to be claimed by another member of the

group, the group company should have been in existence

atleast 2 years prior to the date of application under any of the

export promotion schemes notified in the Policy.

9.29 “Handbook (Vol.1)”means the Handbook of Procedures

(Vol.1) and “Handbook (Vol.2)” means Handbook of

Procedures (Vol.2) published under the provisions of

paragraph 2.4 of the Policy.

9.30 “Importer” means a person who imports or intends to import

and holds an Importer-Exporter Code number unless otherwise

specifically exempted.

9.31 “Infrastructure facilities” means industrial, commercial and

social infrastructure or any other facility for the development

of the Special Economic Zone as notified.

9.32 “ITC(HS)” means ITC(HS) Classifications of Export and

Import Items Book.

9.33 “Jobbing” means processing or working upon of raw materials

or semi-finished goods supplied to the job worker so as to

complete a part of the process resulting in the manufacture or

finishing of an article or any operation which is essential for

the aforesaid process.

9.34 “Licensing Authority” means the authority competent to grant

an Authorisation under the Act/Order.

9.35 “Licensing Year” means the period beginning on the 1st April

of a year and ending on the 31st March of the following year.

9.36 “Managed Hotel” means hotels managed by a three star or

above hotel/ hotel chain under an operating management

contract for a duration of atleast three years between the

operating hotel/ hotel chain and the hotel being managed. The

management contract must necessarily cover the entire gamut

of operations/ management of the managed hotel.

9.37 “Manufacture” means to make, produce, fabricate,

assemble, process or bring into existence, by hand or by

machine, a new product having a distinctive name,

character or use and shall include processes such as

refrigeration, re-packing, polishing, labelling. Reconditioning

repair, remaking, refurbishing, testing,

calibration, re-engineering. Manufacture, for the purpose

of this Policy, shall also include agriculture, aquaculture,

animal husbandry, floriculture, horticulture, pisciculture,

poultry, sericulture, viticulture and mining.

87

9.38 “Manufacturer Exporter” means a person who export goods

manufactured by him or intends to export such goods.

9.39 “MAI” means Market Access Initiative Scheme notified by

the Department of Commerce

9.40 “Merchant Exporter” means a person engaged in trading

activity and exporting or intending to export goods.

9.40.1 “NC” means the Norms Committee in the Directorate General

of Foreign Trade for recommending grant of Authorisations

under Duty Exemption Scheme and for recommending Input

Output norms and value addition norms to be notified by

Director General of Foreign Trade.

9.41 “NFE” means Net Foreign Exchange Earning.

9.42 “Notification” means a notification published in the Official

Gazette.

9.43 “Order” means an Order made by the Central Government

under the Act.

9.44 “Part” means an element of a sub-assembly or assembly not

normally useful by itself and not amenable to further

disassembly for maintenance purposes. A part may be a

component, spare or an accessory.

9.45 “Person” includes an individual, firm, society, company,

corporation or any other legal person.

9.46 “Policy” means the Foreign Trade Policy 2004-2009 as

amended from time to time.

9.47 “Prescribed” means prescribed under the Foreign Trade

(Development and Regulation) Act, 1992 (No. 22 of 1992) or

the Rules or Orders made thereunder or under this Policy.

9.48 “Public Notice” means a notice published under the provisions

of paragraph 2.4 of the Policy.

9.49 “Raw material” means:

(i) basic materials which are needed for the

manufacture of goods, but which are still in a raw,

natural, unrefined or unmanufactured state; and

(ii) for a manufacturer, any materials or goods which

are required for his manufacturing process, whether

they have actually been previously manufactured

or are processed or are still in a raw or natural state.

 

9.50 “Registration-Cum-Membership Certificate” (RCMC) means

the certificate of registration and membership granted by an

Export Promotion Council/ Commodity Board/ Development

Authority or other competent authority as prescribed in the

Policy or Handbook (Vol.1).

9.51 “Rules” means Rules made by the Central Government under

Section 19 of the Act.

9.52 “Services” include all the tradable services covered under

General Agreement on Trade in Services and earning free

foreign exchange.

9.53 “Service Provider” means a person providing

(i) Supply of a ‘service’ from India to any other

country;

(ii) Supply of a ‘service’ from India to the service

consumer of any other country in India; and

(iii) Supply of a ‘service’ from India through commercial

or physical presence in the territory of any other

country.

(iv) Supply of a ‘service’ in India relating to exports

paid in free foreign exchange or in Indian Rupees

which are otherwise considered as having being paid

for in free foreign exchange by RBI.

9.54 “SEZ” means Special Economic Zone notified by the Ministry

of Commerce & Industry, Department of Commerce.

9.55 “Ships” mean all types of vessels used for sea borne trade or

coastal trade and shall include second hand vessels.

9.56 “SION” means Standard Input Output Norms notified by

DGFT in the Handbook (Vol.2), 2002-07/approved by Board

of Approval.

9.57 “Spares” means a part or a sub-assembly or assembly for

substitution, that is ready to replace an identical or similar

part or sub-assembly or assembly. Spares include a component

or an accessory.

9.58 “Specified” means specified by or under the provisions of

this Policy.

9.59 “Status holder” means an exporter recognized as One to Five

Star Export House by DGFT/ Development Commissioner.

 

9.60 “STP” means Software Technology Park

9.61 “Supporting Manufacturer” means any person who

manufactures any product or part/ accessories/ components

of that product. The name of the supporting manufacturer as

well as the exporter must be endorsed on the export

documents.

9.62 “Third-party exports” means exports made by an exporter or

manufacturer on behalf of another exporter(s). In such cases,

export documents such as shipping bills etc shall indicate the

name of both the manufacturing exporter/manufacturer and

third party exporter(s). The BRC, GR declaration, export order

and the invoice should be in the name of the third party

exporter.

9.63 “Transaction Value” as defined in the Customs Valuation Rules

of the Department of Revenue.

9.64 “Unit Approval Committee” means the Committee notified

for Special Economic Zones to consider proposals on matters

relating to Special Economic Zone unit under its jurisdiction.

9.65 “Wild Animal” means any wild animal as defined in Section

2(36) of the Wildlife (Protection) Act, 1972.

 

 

 

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