Foreign Trade Policy

Foreign Trade Policy

Export promotion has always been one of the top priorities of the Government of India. Boosting exports is important as it ensures trade balance and is good for the economy of a country. The policy which determines the export and import related rules and norms is called the Foreign Trade Policy or the FTP.

LIST OF TOPICS COVERED:

Background

  • Foreign Trade Policy of FTP is a framework which prescribes the policy and strategy to promote export and trade. The policy is a detailed document wherein all export benefits, restrictions, import-related procedures, etc. are stipulated. FTP is also known as Export-Import or EXIM policy.
  • The FTP is regularly reviewed to make it more relevant as per the current foreign trade market. An FTP once formulated is usually valid for 5 years, unless extended by the Government. Post the expiry of 5 years, the FTP is reviewed and revamped.
  • The FTP currently in force is the FTP 2015-20.
  • Salient features of FTP:
  1. Export-Import of goods and services is generally free unless specifically regulated by the provisions of the policy or any other law for the time being in force.
  2. Export and import are broadly categorised as Free, Prohibited, and Restricted
  3. There are restrictions on imports and exports for various strategic, health, defence, environmental, and other reasons. If goods are restricted but not prohibited, the Government can permit them on a case to case basis.
  4. Goods and services are to be promoted, not taxes. Hence, taxes on exports are either exempted or refunded on both output and input through schemes of Duty Exemption, Duty refund.
  5. In certain cases, imports get duty exemption/ concession for certain special purposes. In such a case, to enable domestic suppliers, to compete with international suppliers, the domestic supplies are treated as deemed exports.

Directorate General Of Foreign Trade

The Directorate General of Foreign Trade (DGFT) is an office attached to the Ministry of Commerce and Industry and is headed by the Director-General of Foreign Trade.

DGFT is an ISO 9000:2008 certified Organization. All regional offices provide facilitation to exporters in regard to developments in international trade, i.e. WTO agreements, Rules of Origin and anti-dumping issues, etc. to help exporters in their import and export decisions in an internationally dynamic environment.

DGFT Headquartered at New Delhi

Key Incentives For Exporters

The FTP 2015-20 has the following key export promotion schemes prescribed under it:

    • RoDTEP (Remission of Duties or Taxes on Export Products) Scheme: This scheme is a new scheme applicable w.e.f. 1 January 2021. It replaces the Merchandise Exports to India Scheme (MEIS). Although the rates of RoDTEP have not been notified as yet, an ​​exporter desirous of availing the benefit of the RoDTEP scheme shall be ​​required to declare his intention for each export item in the shipping bill or bill of export. The said scheme intends to reimburse local taxes such as mandi tax, coal cess, electricity duties, and the fuel used for transportation which is not refunded or exempted under any other existing scheme. The RoDTEP shall be allowed, ​​subject to specified conditions, and exclusions.
    • Service Export Incentive Scheme (SEIS): Under this scheme, an exporter of services is eligible for the incentives if notified services are exported to notified markets as given under Appendix 3D. The SEIS benefit is available at the prescribed rate of the net foreign exchange earned. Key notified services include legal, accounting, architectural, engineering, educational, hospital services, hotels and restaurants, and other business services.
      Notably, the credit scrips granted under MEIS and SEIS are freely transferrable. Such scrips can be used to pay basic customs duty, safeguard duty, transitional product-specific safeguard duty, and anti-dumping duty. In the erstwhile regime, they were used for the payment of customs, excise, and services tax as well; however, now the same can be used to pay GST.
  • Export Promotion Capital Goods (EPCG): This scheme permits the import of capital goods for manufacturing at zero customs duty and IGST exemption if it is used for manufacturing goods that are meant for exports. The objective of the scheme is to enhance India’s production capabilities. However, the condition for availing of this scheme is that an export obligation needs to be met of 6 times of duty saved within 6 years from the date of issuance of the authorization. The capital goods allowed under EPCG Scheme includes spares (including reconditioned/ refurbished), fixtures, jigs, tool, molds, and dies. Further, second-hand capital goods may also be imported under the EPCG Scheme.
  • Deemed Exports: As per para 7.02 of the FTP, deemed exports are those transactions where the goods do not leave the country and payment is received either in Indian currency or free foreign exchange. Deemed export benefits are not available for services. In the case of goods manufactured in India, the following categories shall be regarded as ‘deemed exports’:
  1. Supply of goods against Advance Authorisation / DFIA;
  2. Supply of goods to EOU/STP/EHTP/BTP;
  3. Supply of capital goods against EPCG Authorisation

Benefits available under deemed export transactions

  1. Advance Authorisation / Advance Authorisation for annual requirement / DFIA.
  2. Deemed export drawback
  3. Refund of Terminal Excise Duty

Key Rulings

Some key rulings:

Sr. No.NameHighlights

1

Anu Cashews And Mangalath Cashews Vs The Commissioner Of Customs, Cochin, The Assistant/Deputy Commissioner Of Customs, Cochin, The Deputy Director General Of Foreign Trade, Trivandrum, Director General Of Foreign Trade, Ernakulam And Director General Of Foreign Trade H Wing, New DelhiThe Kerala HC held that the denial of a claim for export benefit could not have been done in a mechanical manner merely because there was a technical lapse on the part of the exporter concerned in not checking a particular box in the web portal, more so when there was sufficient indication from the other details entered therein that pointed to the exporter’s intention to claim the reward. The respondents to consider the claim of the petitioners for the export benefit, afresh, and to grant the export benefits, if, on an overall consideration of the details furnished by the petitioner, the intention to claim the benefit of the MEIS Scheme was seen manifested at the time of export.

2

M/S. Hira Traders Versus The Director General Of Foreign Trade, The Joint Director General Of Foreign Trade, The Additional Director General Of Foreign Trade, The Commissioner Of Customs

Validity of restriction imposed on import of pigeon peas, Beans of the species Vigna Mungo (L.) Hepper (Moong Dal) wherein the import policy of the goods were amended vide above notifications from “free” to “restricted”.

The Madras HC held that the restrictions imposed by the Government of India are justified, which are brought out by the Government of India through the DGFT for the benefit of the farmers, who are cultivators of indigenous peas, as the import of Peas flooding the market reduce the demand for locally grown peas – the peas growers in India are unable to get the right price resulting in loss to small farmers.

3

Commissioner of customs versus m/s. Atul Automation Pvt. Ltd., and Parag domestic appliancesSupreme Court ruled on the detention of imported items that were prohibited. The SC held that – Indisputably, the respondents did not possess the necessary authorisation for their import. The customs authorities therefore prima facie cannot be said to be unjustified in detaining the consignment. Merely because earlier on more than one occasion, similar consignments of the respondent or others may have been cleared by the customs authorities at the Calcutta, Chennai, or Cochin ports on payment of redemption fine cannot be a justification simpliciter to demand parity of treatment for the present consignment also. The defense that the DGFT had declined to issue such authorisation does not appeal to the Court.

4

CCE vs Gujarat Ambuja Exports LimitedThe SC ruled on the actual user condition of crude palm oil which was imported was used for making edible products like refined oil/Vanaspati. In the process of said manufacture, 25% of fatty (palm) was produced and 75% was oil which was edible. Thus, when the main manufacturing activity relates to an edible product which is 75%. If in the process 25% of fatty (palm) emerges as a by-product it cannot be said that the first requirement of exemption notification is satisfied. Even if Industrial Fatty Acid is to be treated as separate manufacturing activity and it is non-edible, the same is only to the extent of 25%. That, according to us, would not satisfy the requirement of the exemption notification in question.

5

CCE, Gujarat vs Crown International & Anr.The SC ruled on the Availment of the fraudulent DEPB Scheme. Held that respondents have procured the goods for valuable consideration and in turn, received the foreign exchange fully for the sale of goods to the foreign buyers. Therefore, there is no reason to discard the transaction value as between the manufacturer and the respondents nor as between the respondents and foreign buyers.

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