In the past two decades, the incorporation of the domestic economy through capital flows and trade has accelerated significantly. This growth has led to the growth of the Indian economy from Rs.32 trillion in 2004 to Rs.153 trillion in 2016. The per capita income of India also saw a huge growth during the same time period. The GDP and the per capita income witnessed significant growth due to the trade and external sector of India.
Foreign Trade Policy 2015-2020
The Foreign Trade Policy 2015-20 was established with the aim of making India an important player in the global trade by the year 2020. It provides an important substructure to promote the export of goods and services, generate more employment scopes, and increase the value addition in the country. Through the Foreign Trade Policy 2015-20, the government is focusing to provide support to both the services and the manufacturing sectors, facilitating ‘ease of doing business’.
Mid Term Review of the Foreign Trade Policy 2015-2020
On the 5th of December, 2017, the Mid Term Review of the Foreign Trade Policy 2015-2020 was announced. The main idea behind this policy was to prompt traditional and sunrise sectors which are associated with exports of goods and services. The Mid Term Review of the policy aimed at the facilitation of the ‘Ease of Doing Business’ by means of shifting the power of decision-making from the central government to the state government. This will simplify the procedure further. The important highlights from the Mid Term Review can be summed up as follows:
- The rates of Merchandise Exports from India Scheme (MEIS) for labour intensive sectors like carpet making, leather-work, marine, hand tools, medical products, and scientific products were increased by 2%. The same was implemented for certain labour intensive services like accountancy, legal, architecture, hotels and restaurants, education sector, etc.
- The Authorised Economic Operators (AEO) scheme enables customs clearance in both India and foreign countries. Hence, exporters are encouraged to apply for the above-mentioned scheme by the trust based system employed in granting Advance Authorisation for no norms cases of exporters who are registered as AEO. This also signifies the new beginning of dependence on trade.
- The Mid Term Review announced that the Agricultural Export Policy will be released with the view of doubling the income of the farmers by providing long-term stable and open exports.
- The review announced the creation of a new Logistics Division in the Department of Commerce.
- It also announced the decision to develop the National Logistics Information Portal for online logistic market players. This decision is aimed at reducing the logistics cost in India.
- The ambition of the National Logistics Information will be backed by the Trade Facilitation Agreement and e-Way Bill introduction as well.
- The review also implemented certain procedural simplifications. They are as follows:
- The Importer Exporter Code (IEC) was replaced by Permanent Account Number (PAN).
- The validity of scrips was extended from 18 months to 24 months.
- The restriction on DTA sale on applicable import duty was removed.
- The ARO facility was reintroduced for the supply against Advance Authorisation/EPCG/EOU.
- The EPCG Authorisation was clubbed including instances where the export obligation period has expired.
- The export obligation was extended including the block-wise export by the Regional Authority of DGFT.
Salient features of the policy
The salient features of the Foreign Trade Policy can be summed up as follows:
- Facilitation of trade and ease of doing business: The Government has prioritised the trade facilitation with the primary aim of curtailing the cost and time required for making transactions. This will, in turn, will implement more competition in the Indian export market. The new measures which have been compiled in the Foreign Trade Policy for the betterment of trade facilitation are listed below:
|Digitisation||A decision has been taken to come up with an online procedure which will allow Chartered Accountants, Company Secretary, or Cost Accountants to upload digitally signed documents. The applications under Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) are covered under this.|
|It facilitates the option to upload the documents such as IEC, RCMC, Manufacturing License, PAN, etc. in the Exporter or Importer Profile.|
|With the objective of reducing the time needed for approval, the online inter-ministerial consultations for approval Norms fixation, export of SCOMET items, Import Authorisations, Export Authorisation, etc. will be managed in a phased manner.|
|Users will be allowed to register complaints and receive the status or reply online through an Online Complaint registration and monitoring system which will be available on the DGFT website.|
|24x7 Customs Clearance||In addition to certain airports, the policy has enabled the facility of 24x7 Customs Clearance for specific imports through 18 seaports across India.|
|Movement of Consignments||The Consignments of items which are meant for exports will not be delayed by any state or central government for any reason.|
|EPCG Authorisation||There has been a reduction in the maintenance of records by the EPCG Authorisation holders from 3 years to 2 years.|
|The final redemption of EPCG authorisation has been dispensed for the cases where an independent Chartered Engineer can submit a certificate implying the confirmation of the spares, catalysts, refractory, and tools that have been imported and used.|
|Contact@DGFT||The DGFT website (www.dgft.gov.in) has an operational new service for the purpose of complaint resolution of exporters and importers. It also has a single window contact which is coordinated through Contact@DGFT.|
General provisions pertaining to imports and exports The new provisions in relation to the management of import and export of goods and services are as follows:
|Importer Exporter Code (IEC)||The electronic form for e-IEC is now up and running.|
|The implementation of Goods and Services Tax (GST) has made the usage of PAN of an entity for the purpose of IEC. The IEC will be issued by the DGFT. It will be alphanumeric and will reflect the PAN of the entity. The application of the IEC will be made to the DGFT, who will authorise the PAN as the IEC.|
|Documents which are mandatory||The list of mandatory documents has been limited to three, for both import and export. For the purpose of export, the mandatory documents will be the Invoice cum Packing List, Shipping Bill, and the Bill of Lading or Airway Bill. The same for import will be the Invoice cum Packing List, Bill of Entry, and the Bill of Lading or Airway Bill.|
|Self-Certification of COO||For the sake of Self-Certification of Certificate of Origin in regards to manufactured goods which originate from India, a new scheme has been introduced called the Approved Exporter Scheme. This has been introduced with the aim to receive preferential treatment under FTAs, PTAs, CEPA, and CECA. Manufacturer Status Holders are eligible for the scheme.|
|Actual User||An amendment has been introduced to the meaning of Actual User in order to include a new clause that says that a definitive address is required for the establishment where the person uses the goods (both natural and legal). This norm is applicable for both Industrial and Non-Industrial users.|
|Import of Samples||(a) There will be no requirement for authorisation in cases where trade samples of items restricted in the ITC (HS) and bonafide technical goods are imported. However, vegetable seeds, bees, and new drugs are excluded from this provision. Authorisation form any individual connected to the Tea Industry is not required for consignments which contain samples of tea worth Rs.2,000 or less. (b) As per the terms and conditions of Customs Notification, duty-free import of samples of up to Rs.3 lakh will be allowed for all exporters.|
|Export of Samples||(a) There will be no limit on the export of bonafide trade and technical samples of items which are freely exportable. (b) As per ANF-2Q, an application can be made to the DGFT for the purpose of exporting samples or exhibits which have a restriction imposed on them for export.|
Promotional schemes There are two schemes in the Foreign Trade Policy under Export from India Schemes. These schemes are:
- Merchandise Exports from India Scheme (MEIS)
- Service Exports from India Scheme (SEIS)
Business leaders who have made great deal of contributions to the foreign trade of the country through excellent performance in international trade, are eligible to be Status Holders. In order to be categorised as a status holder, an applicant has to achieve the following export performance during the current financial year and the previous three financial years:
|Status Category||Export Performance FOB/FOR (as converted) Value|
|1 Star Export House||$3 million|
|2 Star Export House||$25 million|
|3 Star Export House||$100 million|
|4 Star Export House||$500 million|
|5 Star Export House||$2,000 million|
The status recognition is dependent on the export performance which is calculated on the basis of FOB value of earnings from export in free foreign exchange.
Privileges of Status Holders A Status Holder will be eligible for the following privileges:
|Input Output Norms||The Norms Committee can fix the Input Output Norms on priority within 60 days|
|Provision for self-declaration||A Status Holder can grant authorisation and customs clearance for both imports and exports on self-declaration basis.|
|Provision for self-certification of manufactured goods||In order to qualify for preferential treatment under various agreements such as Preferential Trading Agreements (PTAs), Free Trade Agreements (FTAs), Comprehensive Economic Cooperation Agreements (CECA), and Comprehensive Economic Partnership Cooperation Agreements (CEPA), the manufacturers who also have the Status Holder status (3 star/4 star/5 star) will be allowed to self-certify their manufactured goods (as per their IEM/IL/LOI).|
|As per para 2.108 (d) of the Handbook of Procedures, the manufacturer exporters who possess the Status Holder status will be allowed to self-certify their manufactured goods as originating from India.|
|Provisions related to banking||Unless it is specified otherwise in the FTP or HBP, Status Holders are exempted from furnishing the Bank Guarantee for schemes under FTP.|
|Status Holders will be exempted from compulsory negotiation of documents through banks. However, the remittances or receipts will be accepted via banking channels.|
|2 star and above||As per the guidelines of the Department of the Revenue, export houses having 2 stars or more will be allowed to establish export warehouses.|
|3 star and above||As per the guidelines of the CBEC, export houses having 3 stars or more will be eligible to avail the benefits of the Accredited Clients Programme (ACP).|
|Preferential treatment in handling of consignments||Preferential treatment and priority will be provided by the concerned agencies for handling the consignments of an individual who has the Status Holder status.|
|Freely exportable items||For the purpose of export promotion, status holders will be allowed to export freely exportable items on a free of cost basis to an extent of Rs.2 crore or 2% of average annual export realisation in the previous 3 licensing years. However, it will not be applicable for gems, jewellery, articles made of gold, and precious metals.|
|Export of pharma products||The annual limit will be up to 8% of the average annual export realisation during the previous 3 licensing years, in case of supplies of vaccines, life-saving drugs, and pharmaceutical products are sent to health programmes of international agencies like UN, WHO-PAHO, and government health programmes.|
|The annual limit for export of pharmaceutical products by pharmaceutical companies will be 2% of the average annual export realisation during the previous 3 licensing years.|
Duty Exemption or Remission Scheme
The Foreign Trade Policy (FTP) enables the exporters to import the inputs for export production. Replenishing inputs and remission of duty are included under the Duty Exemption Scheme.
The scheme consists of the following features:
- Duty-Free Import Authorisation (DFIA): It allows duty-free import of inputs and allows an exemption in terms of the payment of Basic Customs Duty. Additional Customs Duty or Excise Duty paid can be adjusted as CENVAT credit. A value addition of at least 20% has to be achieved.
- Advance Authorisation (AA) [including Advance Authorisation for Annual Requirement]: On the basis of Standard Input Output Norms (SION) or Self-Declaration, duty-free import of input used for physical incorporation in products of export will be duty-free. However, the minimum requirement in terms of value addition is 15% and the period of fulfillment of export obligation is 18 months. This period is considered from the date of issuance of the authorisation.
The import of all kinds of capital goods required for the purpose of pre-production, post-production, or production of goods meant for export is exempted from customs duty under the EPCG Scheme. As per Trade Notice No. 11 dated 30.06.2017 under GST Regime, no exemption from payment of IGST and Compensation Cess would be available for imports under EPCG. However, as per Notification No. 33 dated 13 October 2017, Capital goods imported under EPCG scheme for physical exports are also exempt from whole of the Integrated Tax and Compensation Cess leviable thereon up to 31 March 2018.
The kind of transactions where the supplied goods stay within the country, and the payment made for such supplies is received either in Free Foreign Exchange or in Indian Rupees, are called deemed exports. As per the provisions under Chapter 7 of the Trade Notice 11 dated 30.06.2017, the disadvantages would be limited to refunding the basic customs duty only. With respect to those items that are specified in Schedule 4 under the Central Excise Act of 1944, if the item is permitted for such supply then the refund shall be covered under the drawback.
Quality Complaints and Trade Disputes
A new chapter on ’Quality Complaints and Trade Disputes’ has been incorporated in the Foreign Trade Policy (FTP) which is responsible to deal with and resolve the complaints in regards to quality and disputes pertaining to trade between exporters and importers. A Committee on Quality Complaints and Trade Disputes (’CQCTD’) has been built in 22 offices having members from Export Promotion Council/FIEO/APEDA/EICs/RBI etc. to deal with such complaints and resolve the disputes at a faster rate. The enquiry and investigation of all kind of complaints related to quality and other complaints in relation to trade will be taken care of by the CQCTD. If certain complaints are liable to fall under the jurisdiction of the respective RAs, the CQCTD will be liable for the enquiry and resolution. The committee will take care of the grievances within 3 months from the date of receipt of the complaint. These grievances will include complaints from exporters, importers, and overseas buyers. However, the proceedings to be carried on by the CQCTD will be reconciliatory in nature. Hence, the aggrieved party can also choose to pursue any legal resource.
Main changes in FTP 2015-20 are as under
|Advance Authorisation||As notified in the Trade Notice No. 11 dated 30.06.2017 under GST Regime, for imports which are made under Advance Authorisation, no exemption will be available from the payment of IGST and Compensation Cess. However, as per Notification No. 33 dated 13.10.2017, exemptions from IGST and Compensation Cess have been allowed on imports that are made under Advance Authorisation (till 31.03.2018) only if they belong to the pre-import condition.|
|For the sake of duty-free import of fabric, a Special Advance Authorisation Scheme has been introduced for the export of Articles of Apparel & Clothing Accessories, subject to the specified conditions.|
|Eligible exporters can apply for an Advance Authorisation, on self-declaration and self-ratification basis, under the Self-Ratification Scheme. In such cases, there are no SION/valid Adhoc Norms for an export product. However, if the exporter intends to use additional inputs in the manufacturing process, SION has to be notified beforehand.|
|Imports will now be exempted from Transition Product Specific Safeguard Duty and Countervailing Duty under Advance Authorisation.|
|Issuance of Advance Authorisation for annual requirements will be made only for the items that are notified in SION and it shall not be available in cases of ad hoc norms.|
|Additional Ports||Calicut Airport, Kerala, and Arakkonam ICDs (Tamil Nadu) are notified as additional ports allowed for export and import.|
|DFIA||Duty-Free Import Authorisation (DFIA) will get an exemption in terms of payment of Basic Customs Duty. However, a minimum value addition of 20% has to be achieved in order to make the exemption effective.|
|Each Port and SION are issued DFIA individually on the basis of 'post export'. DFIA is not given to export products for which SION subscribes to the 'Actual User' rule for any input.|
|The Regional Authority will be issuing a transferable DFIA once the exports are made under DFIA from a single port. The validity of the transferable DFIA will be 12 months from the date of issuance. Once the validity is over, the Regional Authority will not grant a revalidation further.|
|Duty Remission||Duty Remission is a Duty Drawback Scheme. It is administered by the Department of Revenue.|