FROM THE EDITOR’S DESK

The New Exim Policy amended by the Hon’ble Commerce Minister Shri Arun Jaitley, perhaps, exceeds the expectations of Trade after a long time.

There are many reasons to feel happy by all and under all the schemes. The revised edition introduces bold measures for boosting export by Service Providers and EOU/ AEZ/ SEZ, due to several new incentives and by others due to procedure being more simple and transparent. Corresponding Customs Notifications have been also issued simultaneously after a long time. Some of the new features of the Exim Policy include :

• Duty free import facility for Service Providers for importing equipments, spares and consumables.
   
• Fixation of DEPB rate for Agro Products by considering the duty incidence on input material such as Fertilizers, Pesticides and Seeds.
    
• Duty free import entitlement for status holder having incremental growth of more than 25%.
   
• The facility of Annual Advance Licence re - introduced.
   
• Permitting Diamond and Jewelery dollar account for related exporters.
   
• Treating Sales from DTA to SEZ as export and therefore eligible for DEPB and refund / exemption of CST and Service Tax. Foreign bound passengers allowed to take goods from SEZ and EOU units. Domestic Sales by SEZ exempted from Special Additional Duty. Requirement of realizing export proceeds within 1 year from the date of export removed for SEZ units and Requirement of maintaining value addition as per export performance as per value addition for EOUs substituted by net foreign exchange earning.
   
• Under EPCG scheme capital goods allowed for pre-production and post-production facilities. Also import of spares allowed without restricting them up to 20% of the value of the licence and import of Second Hand Capital Goods up to 10 years old allowed.
    
• The export obligation criterion under the scheme changed from 5 times of CIF value of import to 8 times of duty saved. Requirement of additional export obligation 50% for down stream products removed, export of end product manufactured by the exporter for fulfillment of export obligation instead of goods capable of being manufactured from the equipment imported under EPCG scheme and swapping of goods with services also allowed.
    
• Extension of export obligation period for sick unit on the basis of DIFR Rehabilitation Scheme, royalty payments and testing charges received in foreign exchange also eligible for discharge of obligation under EPCG scheme.
    
• Facility of provisional DEPB rate introduced for promoting export of new products.
    
• DFRC scheme extended to Deemed export also and under DFRC scheme import entitlement is now increased from 75% to 80% of FOB value of export.
    
• In respect of Advance Licence for supplies to be made to EOU / SEZ / EHTP /STP exemption of antidumping duty and safeguard duty is also allowed.
    
• Application fees for the application filed electronically reduced to 50%.
    
• Actual users condition for import of second hand capital goods up to 10 years old removed.
    
• Interest rate in the case of default in all the old cases reduced from 24% to 15%.
    
  Although, a lot has been done but there is always unfinished agenda, as the expectations of Trade keep the pace with new announcement. Previous year Ministery of Finance had issued several notifications i.e. reduction of interest rate in respect of EPCG and Advance Licences from 24% to 15%, extension in export obligation period to 12 years for EPCG licences having CIF value of more than 100 Crores and BIFR units with retrospective effect. There is need to provide similar treatment for the licences issued upto 31.3.2003 so that the benefit of the new announcement can be made effective for previous licences also. 
  
  Swapping of goods with services for fulfillment of export obligation should extended to all the products and services dealt by a Company or even by all the Companies in the same group. The requirement of manufacturing in the form of amnesty average export performance for previous licences was also required to be addressed.
  
  The new Criteria of of export obligation, equivalent to 8 times of duty saved amount in place of 5 times of import value under EPCG scheme is a welcome step as it will lead into effective export obligation of 3.664 times of import value only as against 5 times previously . However, since for additional duty credit in the form of Cenvat is allowed, the export obligation may be fixed on the basis of duty saved amount workable at 30.8% duty and not 50.8%. Even if it is not accepted, there is strong merit for charging the interest in case of default on duty amount after deducting additional duty on imports.
  
  For Deemed exports last year, the discharge of export obligation was allowed under EPCG scheme along with DEEC benefits and now DFRC scheme has been also extended to Deemed Export. Supplies under Deemed Export are made against stiff international competition and subjected to payment of Sales Tax as against NIL Sales Tax applicable to overseas supplier. For supplies to be made to SEZ, refund / exemption of CST and DEPB benefits are now allowed. There is a strong merit of introducing DEPB benefits and refund of Sales Tax to all types of supplies made under Deemed Exports. Also for supply of services under Deemed Export [ para 9.47 (ii) and (iv) ]refund of service tax should be allowed in similar manner, as the refund of Terminal Excise Duty is allowed for supply of goods under Deemed export. The exemption of Antidumping Duty and Safeguard Duty for the advance licences for Deemed Export also brings Deemed Export at par with physical export. However, such benefit should not be extended to supply being made to EOU / SEZ / ESTP / STP units only but to all other eligible supplies also.
  
  In case of Advance Licence scheme, the nexus criteria should be relaxed as has been done under DFRC scheme. Further, there is a merit in allowing endorsement of customs notification applicable to DFRC scheme on Advance Licences, also with applicable condition of DFRC, wherein export obligation has been fulfilled to make the Advance Licences transferable. This is necessary as on many occasions Merchant Exporters and Small Exporters are not able to utilise the Advance Licences issued with A.U. conditions. The need for allowing import of Fuel under DFRC also merits favourable consideration.
  
  Domestic sale from SEZ is now exempted from Special Additional Duty. By simplifying the criterion of EOU units related to export performance and bringing them at par with SEZ (i.e. positive foreign exchange earning) it is timely that sales from SEZ are also charged customs duty as sales from EOU (i.e. 50% of Customs Duties applicable on such products. As SEZ units will be required to compete with supplies from the Most Favoured Nations, the demand is further justified.
  
  As said earlier, the new announcements are very bold and now one can feel convinced that Commerce Ministry is receptive will take up the unfinish agenda quickly.
  
  For Eximkey.com
  
  Rakesh Agarwal