Tax provision in respect to tax incentives to

exporters

Presented by: KOMAL (6229)

ANUPREET KAUR GREWAL (6234)

Tax

• Tax is to impose a financial charge or other levy upon a taxpayer (an individual or Legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law.

• Two types of tax:– Direct tax – Indirect tax

Direct tax

• Tax paid by a person on whom it is charged is a direct tax.

• Examples of direct taxes.– Income tax– wealth tax

Indirect Tax

• An indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer).– VAT– TNGST– Local Sales Tax

EXPORT INCENTIVES

• DGFT is the nodal body formulating the Export Import Policy.

• It works under the Ministry of Commerce.

• DGFT perform its functions in coordination with state governments and all the other departments of Ministry of Commerce and Industry, Government of India.

• DGFT is a government organization in India responsible for the formulation of exim guidelines and principles for Indian importers and Indian exporters of the country.

• DGFT has several offices in various parts of the country which issues licenses, incentives etc based on the policy formed by the headquarters at Delhi.

• Before 1991, DGFT was known as the Chief Controller of Imports & Exports (CCI&E).

FUNCTIONS• Preparation, formulation and implication of Exim Policies is one of

the main functions of DGFT. • DGFT is also responsible for issuing IEC or Import Export Code.

• DGFT also play an important role in controlling DEPB Rates

• Setting standard input-output norms is also controlled by the DGFT.

• DGFT permits or regulate Transit of Goods from India or to countries adjacent to India in accordance with the bilateral treaties between India and other countries.

INCENTIVES AVAILABLE TO INDIAN EXPORTERS

• Government of India gives various incentives to exporters in order to improve their competitiveness in the foreign markets.

• These incentives and facilities relate to export performance, promotion of exports, fiscal incentives, schemes aimed at facilitation of imports for exports and various subsidies.

• Duty drawback• Duty entitlement pass book scheme• Status holder exporter scheme• Export Promotion capital goods scheme• Market access initiative• Market development assistance• Served from India scheme• Vishesh Krishi Upaj Yojana (special agricultural

produce scheme)

DUTY DRAWBACK

• It refers to the refund in respect of central excise and customs duties paid in respect of raw materials and other inputs used in the manufacture of the product prior to its export.

• Exporters can claim the amount of duty drawback as soon as the exports of goods take place.

• Filing Duty Drawback: The processing of drawback is done by customs authorities after the required documents are filled

• Time for Claiming Drawback Claim: Within 3 months from the date of LET EXPORT ORDER.

• Payment of duty drawback: within a period of one month from the date of receipt of the claim.

DUTY ENTITLEMENT PASS BOOK SCHEME

• The objective of the DEPB is to neutralize the incidence of Customs duty on the import content of the export product.

• Under the DEPB scheme, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency.

• The Credit is granted against such export products and at such rates as may be specified by the Director General of Foreign Trade

• DEPB is valid for a period of 24 months from the date of its issuance.

• Application should be within 180 days from the date of exports or within 90 days from the date of realization, whichever is later.

• The DEPB and/or the items imported against it are freely transferable.

• It should be noted that the imports under DEPC should be made from the same port from where the exports have been made

EXPORT PROMOTION OF CAPITAL GOODS SCHEME

(EPCG)• EPCG scheme was introduced in order to

enable manufacturer exporter to import machinery and other capital goods for export production at concessional or no custom duties at all.

• Facility is subject to export obligation i.e. the exporter is required to guarantees exports of certain minimum value.

• EPCG allows of capital goods for production at 5 % custom 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 date of issue of licence.

• However, in respect of EPCG licences with a duty saved of Rs.100 crore or more, the same export obligation shall be required to be fulfilled over a period of 12 years.

• To aid technological upgradation of the export sector, EPCG Scheme at Zero Duty has been introduced in the foreign trade policy 2009-14.

STATUS HOLDER EXPORTER SCHEME

Status holders shall be eligible for the following facilities:

• Licence/certificate/permissions and Customs clearances for both imports and exports on self-declaration basis.

• Exemption from compulsory negotiation of documents through banks. The remittance, however, would continue to be received through banking channels;

• 100% retention of foreign exchange in EEFC (Exchange earners foreign currency) account;

• Entitlement for consideration under the Target Plus Scheme

• Exemption from furnishing of Bank Guarantee as required in various Schemes under this Policy.

• All kinds of exporters namely, merchant exporters, manufacturer exporters, service exporters, SEZ units, 100% EOUs , Bio technology park units, etc are eligible to apply for status as export house.

• Validity Period: 3 years starting from 1st April of the licensing year during which the application is made for the grant of recognition.

• On expiry application for renewal to be made within 6 months of expiry.

MARKETING DEVELOPMENT ASSISTANCE

• The main thrust is to provide for development of marketing of Indian products and commodities in foreign markets by providing grants in aid for the eligible marketing activities to the eligible exporters.

• The eligible exporters can participate in these schemes either directly or through export promotion councils, India trade promotion Organisation etc.

• Eligibility of exporters:The exporter should have an annual export turnover of upto Rs 5 crores

• The grant under MDA is in the form of non-refundable financial assistance given to the exporters by way of reimbursement of the actual expenditure incurred by them subject to the scale of grants laid down under the scheme

• The application for the grant of MPA should be made to the concerned Export promotion council within 3 months of the activity

MARKETING ACTIVITIES AND THE SCALE OF ASSISTANCE

Sales cum Study Tour Abroad: • Maximum 90% of the Actual Fare for SSI

exporters and 75% for other than SSI exporters subject to a limit of Rs 60,000/- for travel in economy class for all class of exporters.

Participation in fairs/Exhibitions abroad: • Maximum 90% of the total expenditure incurred

on items of expenditure viz., air travel in economy class, space rent, decoration, electricity, interpreters, etc. in case of SSI Exporters and 75% of total expenditure in the case of non-SSI exporters subjected to the maximum of Rs. 90,000/- in all the cases.

• Publications/Publicity (for bringing out publications for use abroad and insertion of advertisement in the foreign media to promote brand publicity: Maximum of Rs. 50,000/- in financial year or 25% of the actual cost, whichever is less.

• Research and Product Development: 50% of expenditure approved for this activity by the Office of the Dy. Director (EAC), Ministry of Commerce, Udyog Bhawan, New Delhi

.• Opening of Foreign Office:

For the first year, 25% of the salary of the staff (One senior and one junior) and 20% of the office rent.

• Opening of warehouse: Grant at the rate of 25% for three years.

SERVED FROM INDIA SCHEME• This scheme is aimed at promoting services exports from India by

providing incentives exclusively for the exporters of services.

• All Service providers who have a total foreign exchange earning of at least Rs.10 lakhs in the preceding or current financial year shall be eligible to qualify for a duty credit entitlement.

• For individuals who are service providers, the total foreign exchange earned criteria would be Rs.5 lakhs in the preceding financial year.

• The duty credit entitlement is 5% in the case of hotels, 20% in the case of stand alone restaurants and 10% incase of service providers in the healthcare, education & other sectors

• Duty credit entitlement may be used for import of any capital goods including spares, office equipment and professional equipment, office furniture and consumables, provided it is part of their main line of business.

• In the case of hotels and stand-alone restaurants, the duty credit entitlement may also be used for the import of food items and alcoholic beverages.

• The entitlement and the goods imported shall be non-transferable.

VISHESH KRISHI UPAJ YOJANA• This is an initiative for the promotion of export of

agricultural products.

• The objective of the scheme is to promote export of fruits, vegetables, flowers, minor forest produce, and their value added products, by incentivising exporters of such products.

• Exporters of such products shall be entitled for duty credit scrip equivalent to 5% of the FOB value of exports.

• The scrip and the items imported against it would be freely transferable.

DUTY FREE IMPORT AUTHORISATION SCHEME

• DFIAS is a kind of licence which allows duty free imports for export production.

• Imports made under this authorisation scheme are exempted from basic customs duty, additional customs duty, anti-dumping duty.

• DFIAS enables exporters to import the required inputs before exports

TAX BENEFITS• VAT paid on raw material used in manufacture of

goods for export would be refunded by the State Government in cash adjustment.

• The exports would become more competitive in the world market as there would be no tax henceforth on raw material used for manufacture of goods for export.

• Tax holiday is provided for 10 years for newly established undertakings in SEZs, 100% EOUs etc.