Export-Import Policy (Overview)
¨ Export-Import
free unless specifically regulated by the provisions of the
Policy or any other law for the time being in force.
¨ Import/ Export
Policy, Procedures are available on the DGFT website : www.nic.in/eximpol
¨ Policy for
import/export for each item available as per ITC HS : published and notified by DGFT
¨ Restrictions for
reasons of public morals, health, quality, etc.
·
Principles of Restriction (a) Protection of public morals (b)
Protection of human, animal or plant life or health (c) Protection of patents, trademarks
and copyrights and the prevention of deceptive practices (d) Prevention of prison labor
(e) Protection of national treasures of artistic, historic or archaeological value (f)
Conservation of exhaustible natural resources (g) Protection of trade of fissionable
material or material from which they are derived; and (h) Prevention of traffic in arms,
ammunition and implements of war.
·
Labeling and Marking Rules for
Imports : stipulates that MRP,
generic name of product, month and year of entry in trade channel, importer name and
address and quantity in standard units must be carried prominently on the “principle
display panel” of the of prepackaged commodities for retail sale only.
·
Technical Standards
for quality : The government has
subjected imports of some products to mandatory compliance of Indian Quality Standards.
The foreign manufacturers and exporter are required to register with Bureau of Indian
Standards (BIS) to comply with this requirement. Quality Standards are not applicable on
imports made under Advance Licenses for physical exports issued with actual user
condition. Similarly the imports made for re-export purposes are also exempted from the
quality standards.
·
Agriculture Permit System for
Plants / Plant Materials / Fruits / Seeds for Consumption: The import of
agriculture products is controlled by the Ministry of Agriculture, by means of Phytosanitary Certificate. The goods upon entry into India are subjected to
plant quarantine inspection and treatment against a fee.
·
Sanitary Import Permit for Animal
Products Imports : Animal products
importers are required to produce a sanitary permit at the customs gate before entry into
the country. Meat and meat products, eggs, milk and milk products, pet food, embryos, ova
or semen and other live stock products from livestock are covered.
¨
Restricted goods
can be imported / exported through a license or as per procedure in a public notice for
this.
·
Restricted item license /
certificate / permission may be granted by the Director General of Foreign Trade or any
other licensing authority authorized by him in this behalf. The DGFT / Licensing authority
may take the assistance and advice of a facilitation committee. The Facilitation Committee
consists of representatives of technical authorities and Departments / Ministries
concerned.
¨
Duty
Free Import of inputs for Export/Deemed Exports :(in detail later)
^^Top
¨ Concessional
Duty Import of Capital Goods for Export purposes : (in detail later)
¨ EOU / SEZ Schemes:
For export driven units : (in detail later)
¨ Deemed Exports:
Supplies within country which replaces imports :
· ARE supplies that do
not leave country, BUT replaces the
imports thus, saving Foreign Exchange INCLUDES supplies to
Advance License, EPCG, EOU, SEZ, specified projects and are ELIGIBLE for all benefits
of physical exports but for DEPB and Sales Tax.
¨ Re-exports: of Imported Goods is allowed without a license.
·
Export of Imported Goods : in the same or substantially the same form
may be made without a license / certificate / permission provided that the item to be
imported or exported is not mentioned as restricted for import or export in the ITC (HS).
Goods, including those mentioned as restricted item for import (except prohibited items)
may be imported under Customs Bond for export in freely convertible currency without a
license / certificate / permission provided that the item is freely exportable without any
conditionality / requirement of license / permission as may be required under ITC (HS)
Schedule II. If the goods have to be exported after having been paid duty, for reasons of
being defective or unusable etc, they can be exported under drawback.
·
Import on Export basis : New or second hand capital goods, equipments,
components, parts and accessories, containers meant for packing of goods for exports,
jigs, fixtures, dies and moulds may be imported for export without a license / certificate
/ permission on execution of Legal Undertaking / Bank Guarantee with the Customs
Authorities provided that the item is freely exportable without any conditionality /
requirement of license / permission as may be required under ITC (HS) Schedule-II.
¨ Re-imports: Of exported goods for repairs, up-gradation, testing,
etc. is allowed without license.
·
Capital goods,
equipments, components, parts and accessories, whether imported or indigenous, may be sent
abroad for repairs, testing, quality improvement or up-gradation or standardization of
technology and re-imported without a license / certificate / permission. Reimports of goods for reasons of being defective or rejected etc.
can be reimported wherein all the benefits that had been
claimed are required to be reversed.
¨ Payments for Import / Export : Are Covered by FEMA (Foreign Exchange
Management Act), with RBI (Reserve Bank of
India) being the nodal
and monitoring Bank. Documents of Export / Import are required to be routed through Banks
though there are relaxations for advance payments, status holders etc. Also relaxation may
be given by RBI in specific cases on application by the importer and exporter.
The payments for import are supposed to be made with in six months and the proof of
payment is to be submitted with the bank. The payments for export are supposed to be
received with in six months.
Authorities Involved
¨
Customs: (www.cbec.gov.in) Customs are
responsible for clearance of export and import goods after their valuation and
examination. Customs follow the policy formed by the DGFT while clearing the goods.
Customs works under the Ministry of Finance.
General Imports & Exports
¨
Import of Capital Goods
^^Top
·
Duty
structure. : Capital Goods,
machinery, equipments mostly covered under chapter 84 and 85 normally attract duty of 20%
CVD of 16%. Duties are lesser for computers & and computer parts and telecom related
products. The duties are further reduced by exemption notifications based on the usage of
goods for specified purposes and for specified industries.
·
Second hand
Capital Goods : ARE restricted
for import if they are more than 10years old.
à
Application
and Approval Procedure : An
application to the Exim Facilitation Committee in DGFT is to
be made for this. The committee considers issues like economic and infrastructural
development of the country, availability of concerned capital goods in the country etc.
before giving the approval.
à However CG
imported on re-export basis may be imported without a license.
·
Benefits
: Project Imports are covered
under chapter 98 and covers all goods which are being imported for a new project, initial
setting up of a unit or substantial expansion of an existing unit. All goods can be
assessed under one heading thus obviating any disputes.
·
Concessional duty : The government has recently reduced the
import duty for projects where investments are more than Rs. 5 Crores
(approx 1.1 million USD). All items under the project import as above will now attract
only 10% duty + CVD as against a normal of 20%.
·
Projects
need to be registered with customs : For importing the goods under project
imports, the importer needs to register his contract with the customs. An application
giving details of the project needs to be made to the relevant custom house for the same,
along with the import license if applicable, and a recommendation from the concerned
government department.
¨
Import
of Goods / Raw Materials
·
General
import duty structure:
à
The imported goods are
levied with the basic duty and additional duty (equivalent to the excise duty on like
products). In addition other duties like anti dumping, safe guard duties are applicable in
specific cases. The duties normally are advalorem 20% + CVD
(16%)
à
The duties on the
agricultural goods are 30% going upto 40 and 45% and even 65%
in other cases. For alcohols and spirits duties upto Rs. 150
per liter are levied.
à
For minerals normal duty
are 20%, 10%, 5%.
à The duty on the textile fabrics are with
floor value on per sqm. basis depending upon the kind of and
weight of the fabric.
·
Import
of second hand goods.
à
All second hand goods are
restricted for imports and may be imported only in accordance with the provisions of the
Policy, ITC (HS), Public Notice or a license / certificate / permission issued in this
behalf.
à The following items may be imported without a
license / certificate / permission.
°
Any
form of metallic waste, scrap, seconds and defectives, other than those which are of a
value below the value specified for any such items by a notification issued in this
behalf, and excluding hazardous, toxic waste, radio active contaminated waste/ scrap
containing radio active material;
°
Woolens
rags / synthetic rags / shoddy wool in completely mutilated form subject to the condition
that mutilation must conform to the requirements as specified by the customs authorities.
°
PET
bottle / waste
° Import of all
types of ships may be made without a license / certificate / permission on the basis of
guidelines issued by Ministry of Shipping and as per the age/residual life norms
prescribed by the Ministry of Shipping.
¨ Export
Benefits (Post Export)
·
Duty Remission / Exemption Scheme
à
The Duty Remission
Scheme enables post export replenishment/ remission of duty on inputs used in the export
product. Duty Remission scheme consist of (a) DFRC and (b) DEPB. DFRC permits duty free
replenishment of inputs used in the export product. The DEPB scheme allows remission of
basic import duty on inputs used in the export product.
à
The Duty Exemption
Scheme enables duty free import of inputs required for export production. An Advance
License is issued under Duty Exemption Scheme. This is covered in more details in the next
section- Imports for Exports
·
Input - Output norms
à
The government has
published the input-output norms of several products (more than 6000). These are available
in the Handbook of Procedures (Vol-II) of Exim
Policy. While applying for DFRC the input-output norms are to be followed for duty free
inputs.
·
Duty Free Replenishment
Certificate (DFRC)
à
DFRC is issued to
a merchant-exporter or manufacturer-exporter (post export) for the import of inputs used
in the manufacture of goods without payment of basic customs duty. However, such inputs
are subject to the payment of additional customs duty equal to the excise duty at the time
of import.
à
DFRC is issued on
minimum value addition of 25%, only in respect of products covered under the SIONs as notified by DGFT. DFRC and or the material(s) imported
against it are freely transferable.
·
Duty Entitlement Passbook Scheme
à
The objective of
DEPB is to neutralize the incidence of Customs duty deemed to have been suffered on the
import content of the export product. The neutralization is provided by way of grant of
duty credit against the export product.
à
Under the DEPB, an
exporter may apply for credit, as a specified percentage of FOB value of exports, made in
freely convertible currency.
à
The DEPB and/or
the items imported against it are freely transferable.
·
Procedure
for application and approval
à The application for DFRC and DEPB is to be
made in a prescribed format along with the original shipping bills (customs document for
export) and proof of payments received to the Regional Office of DGFT where the exporter
is situated. Care has to be taken at the time of export to file relevant shipping bill to
the customs.
·
Duty
drawback
à
Drawback scheme provides
refund of duties (Customs & Central Excise) paid on Raw Material.
à All Industry Rate: Government has
published drawback rates for several products which are regularly exported through a
drawback schedule. Exporters of these products can get the drawback at the prescribed
rates for the customs of port of export.
à Brand Rate Fixation: In case however
the export product is not covered under the schedule, the exporter can file for drawback
under brand rate of fixation to recover the duties actually suffered in the process.
à
Procedure for
application and approval
°
For
products covered under All Industry Rates the Shipping Bill (Customs document for export)
itself becomes the claim form. The drawback amount is credited in the account of the
exporter at the concerned port.
° For products not
covered above the claim along with the proof of duties suffered is filed with the
jurisdictional excise authorities. After verification of the claim by the excise
authorities the drawback is paid by the customs at the port of export.
Imports For Exports
¨
Import of Capital Goods
·
EPCG
Scheme : An advantageous scheme for export generators
^^Top
à
The Export Promotion
Capital Goods (EPCG) scheme allows import of capital goods (including CKD/SKD thereof as
well as computer software systems and spares, jigs, fixtures, dies and moulds) at 5%
Customs duty subject to an export obligation equivalent to 8 times of duty saved, to be
fulfilled over a period of 8 years reckoned from the date of issuance of license.
Second hand capital goods upto 10 years old are also be imported under the EPCG scheme.
à The scheme covers
manufacturer exporters with or without supporting manufacturer(s) / vendor(s), merchant
exporters tied to supporting manufacturer(s) and service providers.
à
Actual user
conditions: Import of capital
goods shall be subject to Actual User condition till the export obligation is completed.
à
Export
obligation: The export
obligation shall be fulfilled by the export of goods capable of being manufactured or
produced by the use of the capital goods imported under the scheme.
à
Indigenous
Sourcing: A person holding an
EPCG license may source the capital goods from a domestic manufacturer instead of
importing them. The domestic manufacturer supplying capital goods to EPCG license holders
shall be eligible for deemed export benefits.
·
Application
and approval:
à
The application for EPCG
License is made in a prescribed format along with the documents suggested, as per Handbook
of Procedures, to the Regional Office of DGFT where the exporter is situated. The Office
issues the license normally with in one week’s time if the application and documents
are correct.
¨
Duty free imports for export goods (Pre Export)
·
Duty Exemption Scheme
à
The Duty Exemption
Scheme enables duty free import of inputs required for export production. An Advance
License is issued under Duty Exemption Scheme.
·
Advance License
à
An Advance License
is issued to allow duty free import of inputs, which are physically incorporated in the
export product (making normal allowance for wastage) subject to actual user condition.
Such licenses (other than Advance License for deemed exports) are exempted from payment of
basic customs duty, additional customs duty, anti dumping duty and safeguard duty, if any.
à
Advance licenses
are issued with an obligation to export the quantity and value of goods mentioned therein
in a fixed period of 18 months. Before imports customs ask for a bond or a bank guarantee
towards security for duty saved, till export obligation is fulfilled.
·
Input - Output norms
à
The government has
published the standard input-output norms (SION) more than 6000 products. These are
available in the Handbook of Procedures (Vol-II) of Exim Policy. While applying for advance license the input-output
norms are to be followed for duty free inputs. If however no norms are available, license
can be still be applied on self declaration basis.
·
Indigenous sourcing
à
The holder of
advance license and DFRC may also source their inputs from indigenous sources. In such
cases, supplier to Advance License holder can import his own raw material duty free.
·
Procedure
for application and approval
à The application for the above may be made in
a prescribed format along with the documents suggested, as per Handbook of Procedures, to
the Regional Office of DGFT where the exporter is situated. The Office issues the license
normally with in one week’s time if the application and documents are correct.
EOU Scheme
¨
Scheme
for Export driven companies. ^^Top
·
Units undertaking to
export their entire production of goods and services (except permissible sales in the
DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronic Hardware
Technology Park (EHTP) Scheme or Software Technology Park (STP) Scheme for manufacture of
goods, including repair, re-making, reconditioning, re-engineering, and rendering of
services. No trading units are however, be permitted.
·
An EOU / EHTP / STP unit
may export all goods and services except items that are prohibited in ITC (HS). Export of
Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be
subject to fulfillment of the conditions indicated in the ITC (HS).
¨
All
imports (Capital Goods and Raw material) in an EOU are duty free.
·
An EOU / EHTP / STP unit
may import without payment of duty all types of goods, including capital goods, as defined
in the Policy, required by it for its activities or in connection therewith, provided they
are not prohibited items of imports in the ITC (HS). The units are also permitted to
import goods required for the approved activity, including capital goods, free of cost or
on loan from clients.
¨ Supplies
to EOU from DTA (Domestic Tariff Area) are considered deemed exports.
¨ Second
hand Capital Goods of any age can be imported without a license.
¨ The
entire production of EOU/EHTP/STP units is required to be exported:
·
Units, other than gems
and jewellery units in DTA may sell goods / services upto 50 % of FOB value of exports, subject to fulfillment of
positive NFE and on payment of applicable duties.
·
Unless specifically
prohibited, rejects may be sold in the Domestic Tariff Area (DTA) on payment of duties as
applicable.
¨ Needs
to be a net positive foreign exchange earner.
·
Calculated cumulatively
for a period of five years from the commencement of production.
¨ Application
for approval to concerned Development Commissioner.
·
Application and
Approvals
à
Only project
having a minimum investment of Rs.1 Crore and above in
building, plant and machinery are considered for establishment under EOU scheme. Minimum
investment should take place on coming into production of the unit.
Applications for
setting up of units under EOU scheme other than proposals for setting up of unit in the
services sector (except software and IT enabled services or any other service activity as
may be delegated by the BOA), is approved or rejected by the Units Approval Committee.
à
In other cases,
approval is granted by the Board of Approval (BOA) set up for this purpose.
¨
Foreign Investments upto 100% are allowed, subject to sectoral norms.
¨
Income
Tax holiday till 2010.
SEZ Scheme
¨ Duty
free enclave, deemed foreign territory.
^^Top
¨ Provides
developed infrastructure for export / import in an area.
·
Special Economic Zone
(SEZ) is a specifically delineated duty free enclave and is deemed to be a foreign
territory for the purposes of trade operations and duties and tariffs.
·
Goods and services going
into the SEZ area from DTA are treated as exports and goods coming from the SEZ area into
DTA are treated as if these are being imported.
·
SEZ units may be set up
for manufacture of goods and rendering of services.
·
SEZ units may export
goods and services including agro-products, partly processed goods, sub-assemblies and
components except prohibited items of exports in ITC (HS). The units may also export
by-products, rejects, waste scrap arising out of the production process. Export of Special
Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to
fulfillment of the conditions indicated in the ITC (HS) Classification of Export and
Import Items.
·
SEZ unit may
import/procure from the DTA without payment of duty all types of goods and services,
including capital goods, whether new or second hand, required by it for its activities or
in connection therewith, provided they are not prohibited items of imports in the ITC(HS).
·
SEZ unit shall be a
positive Net Foreign exchange Earner. Net Foreign Exchange Earning (NFE) shall be
calculated cumulatively for a period of five years from the commencement of production.
·
Applications for setting
up a unit in SEZ other than proposals for setting up of unit in the services sector
(except software and IT enabled services, trading or any other service activity as may be
delegated by the BOA), shall be made to Units Approval Committee as per procedure
indicated in the policy. In other cases approval is granted by the Board of Approval.
·
SEZ unit may sell goods,
including by-products, and services in DTA in accordance with the import policy in force,
on payment of applicable duty.
¨
Foreign
investment upto 100% is allowed.
¨
Income
Tax holiday for first 5 years, concessional Tax for next 5
years.
Doing Business in India
A
foreign enterprise wishing to do business in India has following
options
^^Top
¨
Agency
·
This provides an indirect
presence in India to the foreign entity. An Indian entity can
be appointed as agent of the foreign business. Depending upon the scope of the agency
agreement, the agent can buy or sell or provide any other service.
¨
Liaison Office
·
These are owned and
controlled by the foreign enterprises. However the liaison offices are not allowed to earn
any income and are primarily opened by foreign companies to liaise with their customers in
India and for promoting export & import. No
manufacturing, trading or any other commercial activity is allowed in liaison offices.
¨ Branch Office
·
The branches are
basically an extended arm of the foreign company and can undertake export / import of
goods, consultancy, research, coordination with local buyers and sellers, provide
technical support for products sold in India, development of software and airline /
shipping business. However branches are not allowed to undertake manufacturing activities
except research work in which parent company is engaged. These branches are treated as
foreign company in India.
¨ 100% subsidiary
and Joint Venture
·
This is the most sought
after route for foreign companies wishing to establish a base in India. For this an Indian company with limited
liability is formed in India, whose liabilities are limited to Indian
operations only. The Companies once approved are treated like other Indian companies and
enjoy all the benefits of being Indian Company. Depending upon the business sector, the
investments on repatriation basis are allowed under automatic route or through a prior
approval by FIPB (Foreign Investment Promotion Board).
¨ Foreign Investment
·
Foreign Investment in India is subject to policy guidelines framed by
the Government of India from time to time in accordance with its Industrial Policy. In
terms of the Industrial Policy and Procedure announced by the Government of India foreign
equity, with or without sectoral caps, is permitted by Reserve
Bank under the Automatic Route in specified industries / services sector.
Applications that do not conform to the parameters of the Automatic Route, are required to
be made to the Secretariat for Industrial Assistance (SIA), Ministry of Commerce and
Industry, Government of India, New Delhi. Foreign Institutional Investors are permitted to
invest in securities in primary and secondary markets in India as per guidelines issued by Reserve Bank in
this regard.
¨ Direct Investments
·
Foreign entities can
invest through 100% subsidiaries or Joint Ventures in India (known as direct investments) subject to
sector-wise investment limits. Investment in certain sectors upto
specified percentage is allowed under the automatic scheme. Prior approval from FIPB / SIA
is required for investments in sectors not covered under automatic scheme or for
investments beyond specified limits for sectors covered under automatic scheme, which is
granted on case-to-case basis.
¨ Foreign Technology & Know how
·
Indian businesses are
allowed to buy technical know-how and expertise from foreign enterprises for their
businesses. Technology tie-ups involving payment up to US$ 2 million and royalty up to 5%
on domestic sales and 8% on exports for a period of 7 years from the date of commercial
production are cleared by Reserve Bank under automatic scheme. Tie-ups involving higher
amounts are subject to approval from SIA (Secretariat for Industrial Assistance) on
case-to-case basis.
·
Products covered under
compulsory licensing, products reserved for SSI sector, renewal of technology agreements,
or cases where technology was earlier sold to an Indian party also require prior approval
from SIA.
