Export Promotion Schemes – CBEC explains
The CBEC has explained the various schemes and the recent changes in them.
EXPORT ORIENTED UNDERTAKING SCHEMES
1. Net Foreign Exchange Earnings ( NFE ) : The unit has to achieve positive NFE in the block of five years starting from the date of commencement of production.
2. Rationalization of calculation of NFE with rate of depreciation allowed on the capital goods: for a unit exiting prior to expiry of 10 years, the NFE will be calculated on the value of capital goods and payment of foreign technical know-how fee based on the rate of deprecation allowable on the goods.
3. C learance or debonding of capital goods in the event of non achievement of positive NFE : Para 6.15(b) and para 6.18(e) of FTP have been amended to allow clearance or debonding of capital goods for disposal in DTA and exit from the scheme respectively only when the unit has achieved positive NFE taking into consideration of depreciation allowed.
4. Exit from EOU scheme to EPCG scheme: Para 6.18 (d) of FTP has been amended to allow exit from EOU scheme to Export Promotion Capital Goods scheme only when EOU has fulfilled positive NFE criteria on the date it wishes to de-bond or migrate to EPCG scheme.
5. Exit from EOU scheme to Advance Authorization Scheme: A new Para 6.18 (g) has been inserted in the FTP to allow a unit to exit to Advance Authorization scheme as a one time option subject to fulfillment of positive NFE criteria.
6. R ecovery of duty in event of non fulfillment of export obligation in the block period of 5 years: In terms of Board's circular No. 21/95- Cus dated 10.03.1995 ( F.No . 307/2/91- FTT ), demand of duty can be confirmed only after a definite conclusion regarding non- fulfillment of export obligation is arrived at by the Development Commissioner.
The requirement of a definite conclusion by the Development Commissioner before Customs/Central Excise authorities can initiate action, at times, causes inordinate delay in effecting duty recovery from a unit in the event of non fulfillment of export obligation as no action can be initiated till a conclusion is arrived at by the Development Commissioner. C & AG in Chapter I of Audit Report No. 7 of 2007 (Indirect Taxes-Performance Audit) on ‘Hundred percent Export Oriented Units' has observed adversely on the delay in recovery of duty from the defaulting EOUs .
This issue has been reviewed in consultation with the Department of Commerce. It has been decided that after the block of 5 years, final decision would be taken by the Development Commissioner with respect to fulfillment of export obligation as far as possible within 6 months but positively within one year. An amendment to this effect has also been made in Para 3 (ii) of Part (A) of Appendix 14-I-G to HBP .
Thus, duty, if any, may be demanded in the event of default in achieving NFE from a unit after a block of 5 years in accordance with the conclusion arrived at by the Development Commissioner/ Director STPI within a period of six months after the expiry of 5 years block period.
7. Accountal of inputs in accordance with Standard Inputs-Output Norms ( SION ): inputs imported or procured duty free are required to be accounted for in accordance with SION . For the items having no SION , consumption of inputs shall be allowed subject to generation of waste, scrap and remnants upto 2% of input quantity.
8. Flexibility for DTA sale for the units manufacturing and exporting multiple products: flexibility is provided by allowing DTA sale of a specific product upto 75% of the FOB value of export of the specific product within the overall total entitlement of 50% of total FOB value of exports which can be cleared at concessional rate of duties.
9. Payment of duty on DTA clearances on monthly basis. As a measure of trade facilitation and keeping in view that domestic manufacturer is already extended the facility of monthly payment of duty, the EOU / STP / EHTP / BTP units are also allowed to pay duty on the goods removed into DTA on a monthly basis. Duty paid shall be verified and scrutinized by the proper officer with the help of the returns E.R -2 filed by the units.
10. Anti dumping duty foregone to be paid by the units on DTA clearances: The intention of non-levy of anti dumping unit on EOUs is that the goods imported are eventually exported after being used in the manufacture or production. However, where the goods are not exported and are cleared into DTA , the purpose of non levy of anti dumping duty gets defeated. So pay Anti Dumping Duty.
11. New optional scheme of payment of excise duty only on DTA clearances for EOUs in textile /granite sector: A unit manufacturing goods wholly out of indigenous raw materials is allowed to clear these goods into DTA on payment of excise duty only. It has been represented that units in textile and granite sector are denied the benefits of payment of excise duty because these units use very minimal imported inputs and therefore are required to pay applicable customs duty. This makes them economically unviable.
In order to address difficulties of such units, a new optional scheme has been introduced under para 6.8 (l) of FTP. Similarly, a new entry has been made in the notification No. 23/2003-CE dated 31.03.2003 by notification No. 26/2008- C.E. dated 05.05.2008 so as to provide an option to the EOUs in the Textile and Granite sectors for payment of excise duty on DTA sale of goods manufactured by such units wholly from the indigenous raw material and also by use of duty paid imported inputs upto 3% of the FOB value of exports in the preceding financial year. Once such option is exercised, the unit would not be allowed to use duty free imported inputs for any purpose.
12. Supply of goods from DTA under benefit of deemed export are to be treated as imported goods: goods supplied to EOU / STP / EHTP / BTP unit from Domestic Tariff Area under claim of deemed export benefits are regarded as imported goods. As a result, goods manufactured out of such goods by EOU / STP / EHTP / BTP unit cannot be considered as goods manufactured wholly out of indigenous raw material to be eligible to avail benefits on clearances into DTA by payment of only central excise duty.
13. Goods procured on High Sea Sale basis in Indian rupee to be counted towards NFE obligation
14. Setting up service unit under EOU / STP / EHTP / BTP scheme: A service unit under EOU / STP / EHTP / BTP scheme can be set up for the services which are produced in India for export out of India in terms of Export of Service Rules, 2005.
15. Exemption for the goods required for production of services within the unit there was no parallel provision to allow non-specified items required for production of services. This put service units in a disadvantageous position and increased the cost of exported services.
This issue has been considered by this Department and service units are also allowed similar benefits. Amendment to this effect has been incorporated in the EOU notifications by notifications No. 47/2008- Cus and 24/2008- C.E. both dated 11.04.2008.
And so on…
Actually there is nothing new in this circular, but it is a good compilation of the latest amendments
CBEC Circular No. 12/2008-Customs Dated 24 July, 2008