Analysis of major changes in various provisions and issues
for further follow up and clarification
On EPCG Scheme following amendments have been
introduced w.e.f. 1.4.2002.
1. Para 5.1 : Exim
Policy (RE-02) :
Import in CKD / SKD form is allowed.
2. Para 5.1 : Exim Policy (RE-02) :
NFE criterion for fulfillment of export obligation
has been withdrawn.
3. Para 5.1 : Exim Policy (RE-02) :
For EPCG licences above Rs.100.00 crores, the
export obligation period is 12 years.
4. Para 5.5(i) : Exim Policy (RE-02)
The condition for fulfillment of
export has been amended as under :
From To
| The export obligation shall be fulfilled by export of goods manufactured or produced by produced the use of Capital Goods imported under the scheme. | The export obligation shall be fulfilled by export of goods, capable of being manufactured or by the use of Capital Goods imported under the scheme |
5. Para
5.5.1 Exim Policy ( RE-02) :
If the Company is acquiring the unit, which is
under BIFR, it is allowed 12 years for fulfillment of export from the date of
issuance of licences..
6. Para 3.8
of Exim Policy (RE-02) –
Following
is added :
The Service
Provider as defined in para 9.47 are now entitled for all facilities mentioned
in the policy. It is specifically
stated that all provisions of the Policy shall apply mutatis-mutandis to such
export of services as they apply to goods.
7. Para 9.47 (iv) Exim Policy (RE-02)
The
definition of Service Provider, as given earlier at para 3.48 (iv) at para 9.47
(iv) has been amended to read as under :
From
_________ To________________________
Supply of Services in India relating to Supply of Services in India relating
export paid in free foreign exchange to export paid in free foreign
exchange or for such services
paid in
Indian Rupees which are
otherwise
considered as free
foreign
exchange by RBI.
8. Para 5.7.3 – Hand
Book of Procedures – Vol.1 (RE-02)
Supplies under deemed export have been now also made
eligible for discharge of export obligation under EPCG along with other
benefits for deemed exports (i.e.) Advance Licence, Duty Draw Back and Refund
of Terminal Excise duty.
9. Export
Obligation under EPCG Licence
The provisions at para 6.5 (v) Exim Policy (RE-01) prescribing that
export made against any EPCG licence except the EPCG licences which have been
redeemed shall not be added up for calculating the average export performance
for the purpose of subsequent EPCG Licence have been withdrawn.
10. Para
2.25.3 – Hand Book of Procedures – Vol.1 (RE-02)
Where the
payment is not realized from buyer but same has been realized by the exporter
through ECGC cover, such exports to be taken into account for benefit under
this Policy.
Following areas may need
further follow up and clarification :
1. Clarity about the provisions at paras 5.5 (i) related to
‘capable of being’ and addition made at para 3.38.
2. Although the requirement of Maintenance of Average Export is
not applicable to service providers but still for manufacturers it has not been
diluted.
3. Withdrawal of NFE criterion has resulted into increase in
value of export obligation for service providers. Since the turn over vis.viz capital investment ratio for service
providers is very low as compared to manufacturers the total export obligation
on FOB basis for service providers should be brought down from 5 times to 40 or
50% of that applicable to the export of goods.
4. Reintroducing the provisions of para 6.5(v)- Exim Policy
(RE-01) related to export obligation conditions.
1. Para 4.6 of Hand Book of Procedures (RE-02) :
New comers are now eligible for issuance of the licence for full value, as applied for, in
place of Rs.25.00 lacs earlier.
2. Para 4.6 of Hand Book of Procedures (RE-02) :
The
definition of new comer has been amended as under :
From__________________________ To__________________________
Who have
not availed any licence Who have
not exported in each of
under the
policy and/or who have the preceding 3 licensing years
not
exported each of the preceding
3
licensing years.
3. In terms of various provisions in Hand Book of Procedures, the interest on duty for unutilized material has been reduced from 24% to 15%.
4. Para 4.13 of Hand Book of Procedures (RE-02)
Specific provision has been made that the
facility of intermediate licences shall be available even in cases where
intermediate supplier has supplied or intend to supply the material subsequent
to fulfillment of export obligation by ultimate exporter holding advance
licence. This meets the requirement of
trade against Trade Notice No.11 dated
9.9.2001.
5. Para 4.25 of Hand
Book of Procedures (RE-02)
The
requirement of logging of DEEC book by custom authorities has been dispensed
with for physical exports. For deemed
exports the copy of the invoice duly signed by the unit receiving the material
and their juditional excise authorities, certifying the item of supply, is now
necessary. However, in terms of para
4.27 of Hand Book of Procedures Volume 1 (RE-02), the licences issued upto
31.3.2002 will be governed by the provisions contained in Hand Book of
Procedures, Vol. 1 (RE-01) only.
6. Para 2.56 of Hand
Book of Procedures (RE-02)
This provision allows the conversion of one scheme to other scheme by Licensing Authority or Customs, provided the exporter is entitled to the benefit under the scheme in which the shipment is subsequently converted.
7.
Compensation for High Fuel Cost
Some sectors have been allowed the import of fuel and energy under Advance Licence to compensate the high cost of power. The permission at relevant standard norms should be checked.
8. Para 4.2.4 of Exim Policy (RE-02)
Under DFRC scheme the requirement of allowing the import of inputs as per SION having same quality, technical characteristics and specifications as those used in the end product should be indicated in the shipping bills has been replaced with import of inputs as per SION as indicated in the shipping bills as per para 4.2.4 ( viz.viz ) para 7.4 (ii). However, this will require corresponding amendment in the customs notification No.48/2000 dated 27.4.2000.
9. Para 2.25.3 – Hand Book of Procedures – Vol.1 (RE-02)
Where the payment is not realized from buyer but same has been realized by the exporter through ECGC cover, such exports to be taken into account for benefit under this Policy.
10. Deemed Exporters are now eligible
for discharge of export obligation under EPCG scheme also along with availing
of benefits of Advance Licence / Draw Back / Refund of Terminal Excise
Duty. The supply values are also
eligible for being awarded Status House Certificater.
However, following suggestions of the trade need further follow up for being accommodated :
i. There is a need for broad banding the norms for Advance
Licence also in view of reduced customs duties and unlimited flexibility in all
alternate schemes such as (DEPB /Draw Back / DFRC).
ii. The definition of input material at para 4.1.1 of Exim
Policy is not WTO compatible and it should incorporate the word used also i.e.
which are physically incorporated / used in export product (making
normal allowance for wastage).
iii. In respect of advance licences issued till 31.3.2002 for
audit, customs authorities should be directed to complete the audit within a
specified time and after such specified period is over, the DEEC book should be
assumed as audited.
iv.
Under Advance Licensing scheme consignment-wise Bank
Guarantee should be allowed as has been already allowed under EPCG Scheme.
v. Advance Licences are not only subjected actual user’s
conditions but also the material imported against the advance licence is not
transferable even after completion of export.
This is completely contrary to alternate schemes. As many times the
licence holder does not need the material immediately for replenishment, the
validity of the licence expires. Hence
following options should be incorporated :
a. Allowing the transfer of the
material in terms of para 2.43 of
Hand Book of Procedures (RE-02)
to Actual users only.
b. Option to the licence holders
for deletion of condition related to non-transferable,however, in such case
the licence could be endorsed with the condition for payment of additional duty
on balance quantity of import.
In both the above options, there is no revenue loss to the Government.
vi. The penalty of 5% and 1% for extension in export obligation period is very high. This should be also reduced in line with interest rate i.e. 0.5% and 3%.
vii. To treat Deemed Exports at par with physical export the DEPB
and DFRC schemes should also be
extended to them and refund of Terminal Excise Duty should be replaced with the
scheme of Exemption of Terminal Excise duty.
viii. Non Tariff Barriers; such as BIS compliance should not be
applicable to Advance Licence for deemed export and DFRC also as they are
contrary to Duty Exemption Scheme. Such
relaxation has been already allowed for advance licence for physical export
with actual user condition.
ix.
The requirement for
maintaining value addition of 33% under DFRC scheme seems to be based on the
fact that DFRCs are transferable in nature.
However, as DBK, DEPB and Advance Licence schemes now call for (+) value
addition only, this requirement needs to be omitted.
x. The logic for maintaining cap value on few items only is beyond understanding. It would have been better in case the cap value had been removed for all the products.
1. In respect of Status Certificate, NFE criterion, and the criterion on export performance in preceding licensing year have been withdrawn. However, it appears that deemed exports values are also now eligible for being considered for awarding Status House Certificate as the provisions at para 12.5(a) of Exim Policy (RE-01) have been withdrawn and FOR value has been incorporated in prescribed criterion at para 3.7.2 in Exim Policy (RE-02).
With regards to Service Providers and exports related to Agro Products as mentioned in Chapters 15 and 16 of Exim Policy (RE-01) and Hand Book of Procedures (RE-01), the provisions have been merged at various places in new Policy and Hand Book of Procedures (RE-02). Now such exporters are eligible to become Export House with the export of Rs.5.00 crores only. However, for superior status there is no difference between them and exporter of the goods.
2. The Honb’ble Commerce Minister in his speech stated that the Brand Rate for Duty Draw Back would be fixed within 15 days. This can be possible only if the responsibility for fixation of Brand Rate is decentralized and delegated to Central Excise authorities having jurisdiction over the factories of exporters. There is a need to take up the matter with Finance Ministry.
3. The Hon’ble Commerce Minister have also announced in his
speech that DTA units supplying to SEZ
units shall be entitled for DEPB benefits.
However, the provisions in Exim Policy are contrary as they allow deemed
exports benefits only.
4. The provisions for reallocation of the
plant exceeding Rs.50.00 crores depreciated value, as announced by the Hon’ble
Commerce Minister, do not appear anywhere.
Hand Book of Procedure at para 2.33 prescribe that the import of second
hand capital goods will be free subjected to the conditions mentioned there in,
however, this provision is in existence since long. If there is a scheme related to encouraging the reallocation by
allowing such imports under EPCG scheme or extending other benefits, that
should be notified at the earliest.
Presented by eximkey