FOREIGN TRADE POLICY 2015-2020

Export promotion being a constant endeavour of the government, export performance is constantly monitored and export strategy and export policies are formulated. In the Foreign Trade Policy for the years 2015-20 announced in April 2015, the Government spelt out a framework for increasing exports of goods and services as well as generation of employment and increasing value addition in the country, in line with the ‘Make in India’ and “Digital India” program.

The policy seeks to make India a bigger player in global trade by doubling the overseas sales to $900 billion by 2019-20, while integrating the foreign trade with “Make in India” and “Digital India Programme”.

Five existing schemes to promote merchandize exports have been merged into a single Merchandise Exports from India Scheme (MEIS). In this scheme, the incentives are to be provided in the form of duty scrips as % of FOB {free on board} value of exports. One scheme for services exports called Served from India Scheme (SFIS) have been replaced in one scheme called Service Exports from India Scheme (SEIS). The benefits of this scheme will be only for India based service providers and will be based on net foreign exchange earned. The benefits of MEIS and SEIS have been extended to the SEZ units also.

Earlier there were 5 different schemes ( Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agri. Infrastructure Incentive Scrip, VKGUY) for rewarding merchandise exports with different kinds of duty scrips with varying conditions (secr specific or actual user only) attached to their use. Now all these have been merged into a single scheme, namely Merchandise Export from India Scheme (MEIS) and there would be no conditionality attached to the scrips issued under the scheme.

Rewards for export of notified goods to notified markets under ‘Merchandise Exports from India Scheme (MEIS) shall be payable as percentage of realized FOB value (in free foreign exchange). The debits towards basic customs duty in the transferable reward duty credit scrips would also be allowed adjustment as duty drawback. At present, only the additional duty of customs / excise duty / service tax is allowed adjustment as CENVAT credit or drawback, as per Department of Revenue rules.

Category A: Traditional Markets (30) -European Union (28), USA, Canada.

Category B: Emerging & Focus Markets (139), Africa (55), Latin America and Mexico (45), CIS countries (12), Turkey and West Asian countries (13), ASEAN countries (10), Japan, South Korea, China, Taiwan

Category C: Other Markets (70).

Level of Support: Higher rewards have been granted for the following category of products:

Support to 852 Tariff lines that fit in the product criteria but not provided support in the earlier FTP. Includes lines from Fruit Vegetables, Dairy products, Oils meals, Ayush & Herbal Products, Paper, Paper Board Products.

Women workers constitute 52% of plantation workers-203 lines of Tea Coffee, Spices, Cashew.

69% of the aggregate female employment is concentrated in the following sectors:

(i) Manufacture of other food products – Jelly Confectionery, tomato ketchup, cooked stuffed pasta, pawa, mudi and the like, gingerbread , papad, pastries and cakes.

(ii) Manufacture of wearing apparel-396 lines of Readymade Garments

Sectors that have a significant proportion of female employment (more than 25%):

(i) Agricultural and animal husband service activities, except veterinary activities– 263 lines of basic Agriculture products.

(ii) Manufacture of footwear – 28 Footwear and Leather products.

(iii) Consumer Electronics and Electronic Components, watches and clocks -483 lines.

Served From India Scheme (SFIS) has been replaced with Service Exports from India Scheme (SEIS). SEIS shall apply to ‘Service Providers located in India’ instead of ‘Indian Service Providers’. Thus SEIS provides for rewards to all Service providers of notified services, who are providing services from India, regardless of the constitution or profile of the service provider.

The rate of reward under SEIS would b based on net foreign exchange earned. The reward issued as duty credit scrip, would no longer be with actual user condition and will no longer be restricted to usage for specifie types of goods but be freely transferable and usable for all types of goods and service tax debits on procurement of services / goods. Debits would be eligible for CENVAT credit or drawback.

The present rates of reward are 3% and 5%. The list of services and the rates of rewards would be reviewed after 30.9.2015.

Note:

(1) Under education services, SEIS shall not be available on Capitation fee.

(2) *Operations from India by Indian Flag Carriers only is allowed under Maritime transport services.

A scrip literally means a “chit” and refers to a form of credit. The Duty free scrips are provided to the exporters under various export promotion schemes of the government s. Under these schemes, the exporters get incentives at a certain percentage of the export value and these incentives can also be used to reimburse duties on imported inputs. The scrips may be transferable or non-transferable. If they are transferable the holder of these scrips can sell them in market at discount. If the scrips are non-transferable, they come with actual user condition and the holder can use it to import inputs or capital goods duty free. The foreign Trade Policy 2015 makes all duty free scrips freely transferable. These scrips can be used for payment of custom duty, excise duty and service tax also.

Merchant as well as Manufacturer Exporters, Service Providers, Export Oriented Units (EOUs) and Units located in Special Economic Zones (SEZs), Agri. Export Zones (AEZs), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs) are recognized as various status holders as follows:

A status holder is eligible for many benefits such as self declaration during custom clearances; exception from some documents and receipts various incentives. In the foreign Trade Policy 2015-20, the government says promises to reduce transaction costs of the status holders.

To integrate the FTP with Make in India, the government has reduced export obligation for capital goods purchased from Indian suppliers under the EPCG {Export Promotion of Capital Goods} scheme. The exporters who export with high level of domestic content get higher level rewards.

The policy calls for online filing of documents/ applications and paperless trade in 24×7 environments; online inter-ministerial consultations and simplification of procedures/processes, digitisation and e-governance. Henceforth, hardcopies of applications an specified documents would not be required to be submitted to RA, saving paper as well as cost and time for the exporters. To start with, applications under Chapter 3 & 4 of FTP are being covered (which account for nearly 70% of total applications in DGFT). Applications under Chapter-5 would be taken up in the next phase. As a measure of ease of doing business, landing documents of export consignment as proofs for notified market can be digitally uploaded in the following manner:-

It is proposed to have Online inter-ministerial consultations for approval of export of SCOMET items, Norms fixation, Import Authorisations, Export Authorisation, in a phased manner, with the objective to reduce time for approval. As a result, there would not be any need to submit hard copies of documents for these purposes by the exporters.

Under EPCG scheme, obtaining and submitting a certificate from an independent Chartered Engineer, confirming the use of spares, tools, refractory and catalysts imported for final redemption of EPCG authorizations has been dispensed with.

Certain information, like mobile number, e-mail address etc. has been added a mandatory fields, in IEC data base. This information once provided by exporters, would help in better communication with . SMS/ email would be sent to exporters to inform them about issuance of authorisations or status of their applications.

It has been decided to have on line message exchange with CBDT fr PAN data and with Ministry of Corporate Affairs for CIN and DIN data. This integration would obviate the need seeking information from IEC holders for subsequent amendments/ updation of data in IEC data base.

EOUs, EHTPs, STPs have been allowed to share infrastructural facilitie among themselves. This will enable units to utilize their infrastructural facilities in an optimum way and avoid duplication of efforts and cost to create separate infrastructural facilities in different units.

Inter unit transfer of goods and services have been allowed among EOUs, EHTPs, STPs, and BTPs. This will facilitate group of those units which source inputs centrally in order to obtain bulk discount. This will reduce cost of transportation, other logistic costs and result in maintaining effective supply chain.

EOUs have been allowed facility to set up Warehouses near the port of export. This will help in reducing the time for delivery of goods and will also address the issue of unpredictability of supply orders.

STP units, EHTP units, software EOUs hav been allowed the facility to use all duty free equipment/goods for training purposes. This will help these units in developing skills of their employees. 100% EOU units have been allowed facility supply of spares/ components up to 2% of

the value of the manufactured articles to a buyer in domestic market for the purpose of after sale services.

At present, in a period of 5 years EOU units have to achieve Positive Net Foreign Exchange Earning (NEE) cumulatively. Because of adverse market condition or any ground of genuine hardship, then such period of 5 years for NFE completion can be extended by one year.

Time period for validity of Letter of Permission (LOP) for EOUs/EHTP/ STPI/BTP Units has been revised for faster implementation and monitoring of projects. Now, LOP will have an initial validity of 2 years to enable the unit to construct the plant and install the machinery. Further extension can be granted by the Development Commissioner up to one year. Extension beyond 3 years of the validity of LOP, can be granted, in case unit has completed 2/3rd of activities, including the construction activities.

At present, EOUs/EHTP/STPI units are permitted to transfer capital goods to other EOUs, EHTPs, STPs, SEZ units. Now a facility has been provided that if such transferred capital goods are rejected by the recipient, then the same can be returned to the supplying unit, without payment of duty. A simplified procedure will be provided to fast track the de-bonding / exit of the STP/ EHTP units. This will save time for these units and help in reduction of transaction cost.

EOUs having physical export turnover of Rs.10 crore and above, have been allowed the facility of fast track clearances of import and domestic procurement. They will be allowed fast tract clearances of goods, for export production, on the basis of pre-authenticated procurement certificate, issued by customs / central excise authorities. They will not have to seek procurement permission for every import consignment.

Scheme The six different schemes of the earlier FTP (Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agriculture Infrastructure Incentive Scrip, Vishesh Krishi and Gram Udyog Yojana and Incremental Export Incentive Scheme) which had varying sector-specific or actual user only conditions attached to their use have been merged into a single scheme, namely the Merchandise Export from India Scheme (MEIS). Notified goods exported to notified markets will be incentivized on realized FOB value of exports. For the purpose of granting incentibes, the countries have been grouped into three categories as follows:

Government has expanded the coverage of the MEIS on 29 October 2015 by adding 110 new items. The incentive rate/country coverage of 2228 items has been enhanced.

The new foreign trade policy aims to double India’s exports to $900 billion by 2020. To achieve this target, the exports need to grow at about 14% every year. This growth is a function of global recovery, which seems to be distant at present. However, the policy must be lauded for its recognition that exports cannot be made competitive just by throwing sops for exporters. The government has made the duty free scrips freely transferable as per the global norms. This would be used by exporters to pay indirect taxes and duties and will be available to SEZs too. Further, the Export obligation under the Export Promotion Capital Goods Scheme has also been reduced, ostensibly to give a boost to “Make in India”. All these are efforts towards making exports more competitive. What India needs to do is to raise the share of manufacturing in its economy and promote exports of manufactured goods. Towards this direction, the government needs to slash and rationalize import duties further.