Two schemes have been introduced under the Indian Foreign Trade Policy 2015-20 (FTP 2015-20) as a part of Exports from India Scheme. These schemes are namely:
- Service Exports from India Scheme (SEIS)
- Merchandise Exports from India Scheme (MEIS)
Encouraging the export of notified services from India is the main objective of the Service Exports from India Scheme (SEIS). The details of the Service Exports from India Scheme (SEIS) are discussed below.
What are the rewards of the Service Exports from India Scheme (SEIS) under Foreign Trade Policy (FTP) 2015-20?
Under the Service Exports from India Scheme (SEIS), the Duty Credit Scrips are accorded as rewards. The goods imported against the Duty Credit Scrips or the goods nationally acquired against the Duty Credit Scrips will be transferable freely. Given below is a list of requirements which can be fulfilled using the Duty Credit Scrips:
- Customs Duty payment and fee as per paragraph 3.18 of the policy.
- Customs Duties payment for importing goods or inputs, other than the items mentioned in Appendix 3A.
- Excise duties payment on the acquisition of goods or inputs, this includes capital goods according to the DoR notification.
- Service Tax payment upon acquisition of services according to the DoR notification.
What is the eligibility criteria for the Service Exports from India Scheme (SEIS)?
The eligibility criteria for the Service Exports from India Scheme (SEIS) can be listed as follows:
- Subject to the conditions as notified, Service Providers who are based in India and are indulged in providing notified services are eligible to get rewards under Service Exports from India Scheme (SEIS). Those services that are extended as mentioned in Para 9.51 (i) and Para 9.51 (ii) of the policy will be eligible for the Service Exports from India Scheme (SEIS). Appendix 3D contains the list of services which are notified and the reward rates pertaining to the notified services.
- In order to be eligible for the Duty Credit Scrip, in the preceding financial year, the service provider must have at least a minimum total free foreign exchange earnings. This minimum earning is set at $15,000.
- In case of sole proprietorship business and Individual Service Providers, the minimum net free foreign exchange earnings for the preceding financial year should be $10,000 in order to be eligible for the Duty Credit Scrip.
- As per the guidelines of the Reserve Bank of India (RBI), if payment for earned service charges in specified services is made in Indian Rupees (INR), the payment will be considered to be a receipt in deemed foreign exchange. Such specified services are listed in Appendix 3E.
- Net Foreign Exchange earnings under this scheme is calculated as follows: Net Foreign Exchange:
Particulars Amount Gross Earnings of Foreign Exchange - Less: Total Expenses/Payments - Less: IEC holder's Remittances of Foreign Exchange, with respect to the service sector in that particular financial year - Net Foreign Exchange -
- In case the Importer Exporter Code (IEC) holder is engaged in manufacturing of goods and rendering services, then the foreign exchange earnings as well as net expenses, payments, and/or remittances of Foreign Exchange will be considered exclusively for the service sector.
- A service provider must hold a valid Importer Exporter Code (IEC) when rendering the services to claim the rewards under SEIS.
Under what conditions will a service provider be considered ineligible for the Service Exports from India Scheme (SEIS)?
Under the following conditions, a service provider will be ineligible for the Service Exports from India Scheme (SEIS) and thus, the rewards of the scheme:
- Foreign exchange remittances which are earned through offering of services other than the notified services will not be considered to be eligible for the SEIS. Examples of such earnings are donations, debt participation, loan repayment receipts and so on.
- The following will not be considered for the SEIS:
Foreign Exchange Remittances:
- Remittances associated with the Financial Service Sector:
- All kinds of loans offered via self-raising foreign currency funds raised
- Foreign Equity issued via GDRs/ADRs or the like
- Realisation of export proceeds of clients
- Sale of securities’ proceeds as well as any other financial instruments
- Issuing foreign currency bonds
- Any receivable which is not related to the service offered by financial companies
- Remittances gained via regular or contract employment in foreign countries
- Remittances associated with the Financial Service Sector:
- Payments received against services provided by Exchange Earners’ Foreign Currency (EEFC) Account
- Equity participation, gifts or donations, and similar foreign exchange turnovers made by Healthcare companies.
- Equity participation, gifts or donations, and same type of foreign exchange yield made by Educational organisations.
- Service providers belonging to telecom sector.
- Activities related to goods export.
- Foreign exchange earnings arising from services provided by airlines or shipping lines not touching India.
- Addition of the yield of services provided by BTP/STPI/EHTP/EOU/SEZ units with the yield of DTA Service Providers.
- Export yield from services of units in operation under BTP/STPI/EHTP/EOU/SEZ Schemes or services supplied to such units.
- Foreign Exchange Remittances:
Entitlement and utilisation under Service Exports from India Scheme (SEIS):
The service providers are entitled to Duty Credit Scrip if the service provided by them are eligible under SEIS. The Duty Credit Scrip is available at the rates which are notified on total foreign exchange earnings. The Duty Credit Scrips can be used for paying customs duties for importing goods and inputs (other than the notified items), service taxes on acquisition of services, excise duties on acquisition of input and capital goods, etc. The imported goods or the goods procured within national boundaries will be eligible for free transferability if they are acquired against the Duty Credit Scrips. The scheme offers relaxation to the actual user condition and the Duty Credit Scrips.
Remittances for Service Exports from India Scheme (SEIS) made through Credit Cards and the like:
The value of exports will be calculated after the consideration of the Free Foreign Exchange which is earned using international credit cards and the like, as per the permission granted by the Reserve Bank of India (RBI).
What is the time limit granted for filing an application for Duty Credit Scrips?
A time period of 12 months is granted for filing of an application in terms of obtaining Duty Credit Scrips. This 12-month period starts from the end of a relevant financial year of claim period. The application has to be filed online in Form ANF 3B on a yearly basis for a financial year. Digital signature is mandatory for form-filing.
How long is a Duty Credit Scrip valid for?
From the date of issuance, a Duty Credit Scrip is valid for a time period of 18 months.
What is the effective date of scheme for Service Exports from India Scheme (SEIS)?
The scheme will be considered to be effective beginning on the date on which the policy is notified. That also means that the rewards of the Service Exports from India Scheme (SEIS) will be applicable for all the eligible export services offered on or post the notification date of the policy.
What are the provisions of the Service Exports from India Scheme (SEIS)?
The provisions of the Service Exports from India Scheme (SEIS) can be classified into 2 broad categories. They are the special provisions and the common provisions.
Special Provisions: The special provisions under the Service Exports from India Scheme (SEIS) can be summed up as follows:
- The government has the right to specify the export markets, services, or products, which will not qualify for the addition of Duty Credit Scrip entitlement.
- In Appendix 3A, goods will be specified by the government which are not permitted for debiting via Duty Credit Scrips in the case of import.
- Under this chapter, the government has the right to restrict or change the ceiling applicable on Duty Credit Scrip.
- The government shall set the value cap for products, else, restrict the total reward to one IEC holder at any given point in time, under this chapter.
- Transitional Arrangement With respect to the goods sent out or benefits provided till this Policy notification date, that were generally qualified for scrips issuance under past Chapter 3 of the prior Foreign Trade Policy(ies) and scrip is connected/offered on or post notice of this Policy against such fare of merchandise or administrations provided, the then winning arrangement and technique with respect to qualification, privilege, transferability, utilization of scrip and some other factor in drive at the season of fare of merchandise or providing administrations, should be relevant to scrips like this.
- CENVAT/ Drawback Extra Excise Duty, Customs Duty, or Services Tax payment in cash/via Duty Credit Scrip might be balanced as Duty Drawback or CENVAT Credit according to DoR standards or notice. Essential Customs duty payment in cash/via Duty Credit Scrip might be balanced for Duty Drawback according to DoR norms or notices.
- Import under lease financing With respect to capital goods import in FTP - paragraph 2.34, under lease financing in terms of provision, use of Duty Credit Scrip will be allowed for duty payment.
Export performance transfer
- Export performance transfer between IEC holders is not permitted. Thus, if a shipping bill contains the name of an applicant, the performance of export or yield of the applicant will be realised in the bank account of the applicant and the e-BRC/FIRC will be considered as an evidence.
- However, in case of MEIS, the supporting manufacturer or the company/firm responsible for realising the foreign exchange directly from overseas can claim the reward. In case the supporting manufacturer claims the reward, it has to be done along with a disclaimer from the firm or company which has realised the foreign exchange from abroad directly.
Risk Management System
- As per the scheme, a Risk Management System must be functional. On a random basis, the headquarters will be selecting 10% of the cases for every Regional Authority (RA) for which the scrips have been allocated already. In turn, the RA might ask for original documents pertaining to all the chosen cases to undergo detailed examination and further clarification. After the detailed examination, in case some discrepancy arises, the applicant will be required to make the required rectifications and/or initiate refunds over claim in cash along with the interest. The rate of the interest is mentioned under Section 28AA of the Customs Act 1962. This rectification and/or refund has to be made in the appropriate Head of Account of Customs within a month from the date of scrip issuance. However, the original holder of the scrip can initiate such refunds over claims without paying interest. Interest will not be charged even if the scrip is partly utilised or fully unutilised.
- The Regional Authority (RA) might ask for the original proof of the annexures connected to the ANFs, landing certificates, etc. which were uploaded during a time period of 3 years from the date of issuance of the scrip. In case the applicant fails to submit the documents, he/she would be obligated to refund the reward and the interest granted on it. The rate of interest will be as per the rate mentioned in Section 28AA of the Customs Act 1962 and will be charged from the scrip issuance date. The applicants should be responsible for maintaining all the relevant documents for a minimum time period of 3 years from the scrip issuance date.
Status Holder under Service Exports from India Scheme (SEIS):
- The leaders of the business industry who have made excellent contributions in global trade and made provisions for the betterment of the country’s foreign trade are called status holders. Status holders are not only responsible for contributing towards the export trade but are also expected to offer guidance and pave the way for the improvement of new entrepreneurs.
- The status holder tag is available for all the exporters who are engaged in export of technology, services, and goods and have a valid import-export code (IEC). The status recognition is dependent on the performance of export. As mentioned in paragraph 3.21 of the Foreign Trade Policy, an applicant will be eligible for the status holder tag on successfully achieving the performance of export in the present and past 2 financial years. The export performance is calculated based on the FOB value of the free foreign exchange export earnings.
- The FOR value of exports (calculated in Indian currency) has to be converted to US Dollars, in case of deemed export. This conversion has to be made using the rate of exchange specified by the CBEC on 1st April of that particular Financial Year.
- The export performance for at least 2 out of 3 years is absolutely necessary for granting status to an applicant.
Status Category under Service Exports from India Scheme (SEIS):
- Export Performance
- One Star Export House 3 FOB / FOR (as converted) Value (in US $ million)
- Two Star Export House 25 FOB / FOR (as converted) Value (in US $ million)
- Three Star Export House 100 FOB / FOR (as converted) Value (in US $ million)
- Four Star Export House 500 FOB / FOR (as converted) Value (in US $ million)
- Five Star Export House 2000 FOB / FOR (as converted) Value (in US $ million)
Status Holders’ Privileges
A status holder will be qualified for certain privileges. These privileges can be summed up as follows:
(a) A Status Holder can grant authorisation and customs clearance for exports as well as imports on the basis of self-declaration.
(b) The Norms Committee can fix the Input Output regulations, in under 60 days on top priority.
(c) Unless it is specified otherwise in the FTP or HBP, Status Holders don't have to furnish Bank Guarantee for those schemes which are specified under FTP.
(d) Status Holders will be exempted from documents' negotiation that is to be made via banks. However, the remittances or receipts shall be obtained via banking networks.
(e) As per the guidelines of the Department of the Revenue, export houses having 2 stars or more will be allowed to set-up export warehouses.
(f) According to 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).
(g) To be eligible for favourable treatment under certain agreements like Comprehensive Economic Partnership Cooperation Agreements (CEPA, Comprehensive Economic Cooperation Agreements (CECA), Free Trade Agreements (FTAs), and Preferential Trading Agreements (PTAs), the manufacturers who also have the Status Holder status (3 star/4 star/5 star) shall be allowed self-certification of their manufactured goods (according to their LOI/IL/IEM).
(h) As per para 2.108 (d) of the Handbook of Procedures, the manufacturer exporters who possess the Status Holder status will qualify for self-certification of their manufactured goods based in India.
(i) The concerned agencies will provide preferential treatment and priority in handling the consignments of an individual who has the Status Holder status.
(j) For the purpose of export promotion, status holders will be allowed to export freely exportable items for free of charge 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.
(k) 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.
(l) 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.