FTP

Foreign Trade
Foreign Trade Policy
Policy
2015- 2020
2015- 2020
By : CA Vishal Bhattad

1. FTP 1

2. FTP 3

3. FTP 7

4. FTP 9

5. FTP 12

6. FTP 14

7. FTP 16

8. FTP 20

9 FTP 22

10. FTP 23

21
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 Glossary (Acronyms)

Acronym Explanation Acronym Explanation

AA Advance Authorisation GATS General Agreement on
ACC Assistant Commissioner Trade in Services
of Customs ICD Inland Container Depot
ANF Aayaat Niryaat Form IEC Importer Exporter Code
BG Bank Guarantee ISO International Standards Organisation
BIFR Board of Industrial and ITC(HS) Indian Trade Classification (Harmonised
Financial Reconstruction System) Classification for Export & Import
BoA Board of Approval Items
BRC Bank Realisation Certificate ITPO India Trade Promotion Organisation
BTP Biotechnology Park LoC Line of Credit
CBIC Central Board of Indirect taxes Lol Letter of Intent
and Customs LoP Letter of Permit
CCP Customs Clearance Permit LUT Legal Undertaking
CEA Central Excise Authority MEA Ministry of External Affairs
CEC Chartered Engineer Certificate MEIS Merchandise Export from India Scheme
CIF Cost. Insurance & Freight MoD Ministry of Defence
CVD Countervailing Duty MoF Ministry of Finance
DC Development Commissioner NC Norms Committee
DFIA Duty Free Import Authorisation NFE Net Foreign Exchange
DGCI&S Director General, NOC No Objection Certificate
Commercial Intelligence & Statistics. PSU Public Sector Undertaking
DGFT Director General of Foreign Trade R&D Research and Development
DoR Department of Revenue RA Regional Authority
DTA Domestic Tariff Area RBI Reserve Bank of India
EDI Electronic Data Interchange RCMC Registration-cum-Membership Certificate
EEFC Exchange Earners Foreign S/B Shipping Bill
Currency SEIS Service Export from India Scheme
EFC Exim Facilitation Committee SEZ Special Economic Zone
EFT Electronic Fund Transfer SION Standard Input Output Norms
EH Export House SSI Small Scale Industry
EHTP Electronic Hardware STE State Trading Enterprise
Technology Park STP Software Technology Park
EIC Export Inspection Council TEE Town Export Excellence
E0 Export Obligation VA Value Addition
EOP Export Obligation Period
EOU Export Oriented Unit
EPC Export Promotion Council
EPCG Export Promotion Capital Goods
FDI Foreign Direct Investment
FIEO Federation of Indian
Export Organisation
FOB Free On Board
FT (D&R) Act Foreign Trade (Development &
Regulation) Act 1992
FTP Foreign Trade Policy

FTP 2
 Legislation Governing Foreign Trade in India

Legislation Government
of India
Foreign
Trade (D&R) Act
1992

Ministry of
Commerce and
Industry
Foreign Trade
Policy 2015-2020
[5 year Policy & DGFT FTP Formulated
Annual Updation] Controlled

Supervised

Handbook-1

CBIC RBI STATE VAT DEPT.

1. CBIC comes under Ministry of
Finance
2. It has two Departments namely,
Customs and Central & GST
facilitate in implementing the
provisions of the FTP.
3.Customs authorities follow the
policy formed by the DGFT while
clearing the goods.
4. Central GST authorities need to
be involved for all matters of
exports, where goods have to
be cleared without payment of
GST. Amended
1. RBI is the nodal bank in the Since VAT is payable on domestic
country which formulates the goods but not on export goods,
policies related to management f o r m a l i t i e s w i t h S t a t e VAT
of money, including payments departments assume importance
and receipts of foreign in ensuring tax free exports.
exchange.
2. It also monitors the receipt and
payments for exports and
imports. RBI works under the
Ministry of Finance.

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 Foreign Trade If provides development & regulations of foreign trade by
Students (Development & - Faciliating import into or
Notes Rule) Act 1992 - augmenting export from India
Foreign Trade Meaning : Foreign Trade Policy is a set of guidelines or procedures or
Policy regulatory requirements
issued or laid down by the Central Government
in matters related to foreign trade viz. Import / Export of Goods or
Services into, or from, India.
General Provision
1. It is formulated by Union Ministry of Commerce & Industry with DGFT
2. It is announced in every five years with annual updation.
3. It is also called Export Import Policy. i.e. Exim Policy.
Object of Foreign Trade Policy
- Developing export Potential
- Improving export performance
- Encouraging foreign trade & creating favorable balance of payment
Guiding Principle of Foreign Trade Policy 2015-2020
Guiding principles: The guiding principles of FTP 2015-2020 are as follows

l Generation of employment and increasing value addition in Country,

in keeping with Make in India vision.
l Focus on improving „ease of doing business and „trade facilitation by
simplifying procedures and extensive use of e-governance – move
towards paperless working.
l Encouraging e-commerce exports of specified products.
l Steps to encourage manufacture and export by SEZ, EOU, STP, EHTP
and BTP.
l Duty credit scrips to (a) encourage exports of specified products to
specified markets (b) export of services.
l Special efforts to resolve quality complaints and trade disputes. The
various measures taken in said direction include:
l The number of mandatory documents required for exports and imports of
goods from/into India have been reduced to 3 each
l The facility of 24 X 7 Customs clearance on specified port

Administration 1.
FTP Formulated
of Foreign
Trade Policy Controlled

Supervised
} By
Director
General of
Foreign Trade
DGFT

2. DGFT is an attached office of Ministry of Commerce

& Industry
3. Role of DGFT
a) Issue authorisation (license) for import or export
b) Grant IEC [ Import Export Code]
[Import Export not permitted without IEC]
c) Order of DGFT is final & binding in respect
- of interpretation of FTP
- Classification of any item in ITC(175)
Other Authorities involved
CBIC

RBI

STATE VAT DEPT.

FTP 4
 Content of
Foreign Trade Policy

Foreign Trade Policy

2015-2020
Notified by
Central Government

1. (HBP 2015-2020) containing various 1. Standard Input-Output 1. The Export Import Policy regarding import or
containing 9 appendices and Norms (SION) of export of a specific item is given in the Indian
chapters, covering forms relating to various products are Trade Classification Code based on Harmonized
procedural aspects import and export. notified from time to System of Coding [ITC(HS)].
of policy. time. 2. ITC-HS Coding was adopted in India for import-
2. This has been 2. Based on SION, export operations.
notified by Director exporters are 3. Indian custom uses eight digit ITC-HS Codes to
General of Foreign provided the facility to suit the national trade requirements.
Trade on make duty-free import
01.04.2015. of inputs required for
3. It is amended from manufacture of export
time to time as per products under the
requirements. Duty Exemption
Schemes like
Advance Authorisation Schedule I Schedule II
and DFIA. Import Export
It describe the It describe the
rules and rules and
guidelines related regulation related
to to
Import policies Export policies.
Prohibited Goods Most of goods are
Restricted Goods free goods except
Free Goods certain restriction
on few goods

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 Relationship between FTP and Indirect Tax Laws
The Foreign Trade Policy is closely knit with the Customs and Excise laws of India. However, the policy provisions per-se
do not override tax laws. The exemptions extended by FTP are given effect to by issue of notifications under respective tax
laws (e.g., Customs Tariff Act). Thus, actual benefit of the exemption depends on the language of exemption notifications
issued by the CBEC. In most of the cases the exemption notifications refer to policy provisions for detailed conditions.
Ministry of Finance/ Tax Authorities cannot question the decision of authorities under the Ministry of Commerce (so far as
the issue of authorization etc. is concerned).

Authorities related to Foreign Trade

DGFT Committee Board of Export Promotion

Trade (BOT) Council (EPC)
Regional
Authority Board of Trade (BOT) EPCs are non-profit
Norms EPCG has been constituted autonomous
1.Authority competent Committee Committee to advise Government organizations.
to grant an on Policy measures 1) These have been
Authorization under It fixes/modify It determines
for increasing set up to promote
FT (D&R) Act norms SION nexus of
under all scheme. capital goods l Exports and develop export
2. It working under (SION = Standard and benefit l Review export of the country.
the control of DGFT Input & Output Norms) under EPCG l Performance, 2) They assist and
review policy guide exporters.
l Procedures for 3) Their main aim is to
imports and exports project India’s
image abroad as a
l Examine issues reliable supplier of
relevant for high quality goods
promotion of Indias and services.
foreign trade.
l Commerce &
Industry Minister will
be the Chairman of
the BOT.
Government shall
also nominate upto
25 persons, of
whom at least 10 will
be experts in trade
policy.

Registration Cum Membership Certificate [RCMC]

Exporter has to obtain RCMC from EPC or Commodity Board.
● Mandatory : If exporter intends to obtain export incentives, then RCMC is mandatory.
● Optional : If exporter does not intend to obtain export incentives, then RCMC is optional.

FTP 6
 Some Important Concept
Import Export 1. It is a unique 10 digit code issued by DGFT to a person.
2. IEC is mandatory to export any goods out of India or to import any goods into India unless specifically exempt.
Code (IEC) 3. Permanent Account Number (PAN) is pre-requisite for grant of an IEC.
4. Only one IEC can be issued against a single PAN.
DGFT has decided to use income tax PAN as IEC number i.e., IEC will be issued by DGFT with the
difference that it will be alpha numeric (instead of 10 digit numeric at present) and will be same as PAN
of an entity.
Newly Inserted
With the introduction of GST, GSTIN would be used for purposes of
(i) credit flow of IGST on import of goods, and
(ii) refund or rebate of IGST related to export of goods.
It has been decided that importer/exporter would need to declare only GSTIN (wherever registered with
GSTN) at the time of import and export of goods. For residuary categories, UIN issued by GSTN and
authenticated by DGFT will be used. For others, common number will be notified by DGFT.
5. An application for IEC is to be made manually to the nearest RA (Regional Authority) of DGFT or alternatively, it
can be filed online, in Form ANF 2A and shall be accompanied by prescribed documents.
6. In case of STPI/ EHTP/ BTP units, the Regional Offices of the DGFT having jurisdiction over the district in which
the Registered/ Head Office of the STPI unit is located shall issue or amend the IECs.

Meaning - Permission to Import or export as per Provisions of FTP

Authorisation Terms and Conditions of an authorization: Every Authorization shall be valid for prescribed period of validity
and shall contain such terms and conditions as may be specified by Regional Authority (RA), which may include:
(a) Quantity, description and value of goods; (b) Actual User condition; (c) Export obligation;
(d) Minimum Value Addition to be achieved; (e) Minimum export/ import price; and
(f) Bank Guarantee/ Legal Undertaking/ Bond with Customs Authority/ RA.
(g) Validity period of import/export as specified in Handbook of Procedures
Authorization not a right: No person may claim an Authorization as a right and DGFT or RA shall have power to
refuse to grant or renew the same in accordance with provisions of FT(D&R) Act, rules made there under and
FTP.

State Trading 1. STEs are governmental and non-governmental enterprises, including marketing boards. Which deal with
goods for export and/or import.
Enterprises 2. Any goods, import or export of which is governed through exclusive or special privileges (grant of subsidy)
(STE) granted to State Trading Enterprises [STE(s)], may be imported or exported by STE(s) as per conditions specified
in ITC(HS).
3. DGFT may, however, grant an authorization to any other person to import or export any of these goods.
Examples of STE in India :
►The Food Corporation of India (exclusively authorized for import of most cereals)
►The State Trading Corporation of India Ltd (Govt of India enterprise)

Status STATUS HOLDER

1) Status Holders are business leaders who have excelled in international trade and have successfully
Holder contributed to country foreign trade.
2. All exporters of goods, services and technology having an import-export code (IEC) number shall be eligible
for recognition as a status holder.
3. Status recognition depends upon export performance.
4. An applicant shall be categorized as status holder upon achieving export performance during current and
previous two financial years, as indicated below:

Status of Export performance FOB / FOR Value* (in US $ )

(Export performance in at least 2 years out of 4 years)

1 Star Export House 30,00,000

2 Star Export House 2,50,00,000
3 Star Export House 10,00,00,000
4 Star Export House 50,00,00,000
5 Star Export House 200,00,00,000

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 Students
Notes
Clubbing provisions for determining status :
Holding Company exports and Subsidiary Company exports shall be clubbed.
Exports of EoU unit/SEZ unit can be clubbed with its DTA units.
Privileges of Status Holders: Status holders are granted certain benefits
like:
(a) Authorisation and custom clearances for both imports and exports
on self-declaration basis.
(b) Fixation of Input Output Norms (SION) on priority i.e. within 60
days.
(c) Exemption from compulsory negotiation of documents through
banks. The remittance receipts, however, would continue to be
received through banking channels.
(d) Exemption from furnishing of Bank Guarantee in Schemes under
FTP.
(e) Two Star Export Houses and above are permitted to establish export
warehouses.
(f) Three Star and above Export House shall be entitled to get benefit of
Accredited Clients Programme (ACP) as per the guidelines of
CBEC.
(g) Status holders shall be entitled to export freely exportable items
(excluding Gems and Jewellery, Articles of Gold and precious
metals) on free of cost basis for export promotion subject to an
annual limit of ` 1 crore or 2% of average annual export realization
during preceding 3 licensing years, whichever is lower.
For export of pharma products by pharmaceutical companies, the
Newly Inserted annual limit would be 2%** of the average annual export realisation
during preceding 3 licensing years.
**8% in case supply of vaccines and lifesaving drugs to health
programmes of international agencies such as UN, WHO-PAHO
and Government health programmes.

Standard Input Concept of SION (Standard Input Output Norms)

1) It is standard norms which define the amount of input/inputs required to
Output Norms manufacture unit of output for export purpose.
(SION) 2) Input output norms are applicable for the products such as electronics,
engineering, chemical, foods products including fish and marine products,
handicraft, plastic and leather products etc.
3) SION is notified by DGFT in the Handbook (Vol.2).
4) The Directorate General of Foreign Trade (DGFT) from time to time issue
notifications for fixation or addition of SION for different export products.

Value adition Value addition (VA): will be calculated as follows (except for gem and
jewellery sector)–
VA = [(A-B) x 100]/B
A = FOB value of export realised/FOR value of supply received.
B = CIF value of inputs covered by authorisation plus any other imported
materials used on which benefit of duty drawback (DBK) is claimed or
intended to be claimed.
Important points to be noted :
1) If some items are supplied free of cost by foreign buyer, its notional value
will be added in the CIF value of import and FOB value of export for purpose
of calculating value addition.
2) Exports to SEZ Units/ supplies to Developers/ Co-developers, irrespective
of currency of realization, would also be covered.

FTP 8
 Students
Example : Calculate value addition from following information
1) FOB Value of Export realised ` 40,00,000 Notes
2) For Value of Sale to SEZ ` 10,00,000
3) Value of Inputs
- Under advance authorisation `25,00,000
- Under DBK Scheme ` 15,00,000
4) Free material supplied by Foreign buyer ` 5,00,000
(Notional Value)

Answer
Calculate value addition from following information
A 1) FOB Value of Export realised ` 40,00,000
2) For Value of Sale to SEZ ` 10,00,000
3) Free material supplied by Foreign buyer ` 5,00,000
(Notional Value)
Total (A) = 55,00,000

B 3) Value of Inputs
- Under advance authorisation ` 25,00,000
- Under DBK Scheme ` 15,00,000
4) Free material supplied by Foreign buyer ` 5,00,000
(Notional Value)
Total (B) = 25,00,000
55,00,000 - 45,00,000
VA = = 22.22%
45,00,000

Exprt Credit Agencies (ECAs) [w.e.f. 5-12-2017]

(i) Export Credit Agencies (ECAs) are policy instrument for Government to support exports.
ECAs support exports by insurance, guarantee and also direct lending, Export Credit
Agencies (ECAs) like Export Credit Guarantee Corporation of India Ltd. (ECGC) provides
credit insurance support to exports and export credit lending.
Covers issued by ECGC to exporters, protect against losses arising out of
payment failures due to insolvency or default of the buyers or due to political risks. Exporters
can diversify their markets in addition to protecting existing markets through such covers.
ECGC also supports Medium and Long term (MLT) exports including project exports.
Exim Bank is the other ECA in the business of lending for MLT exports and
fronting the government’s line of credit.
(ii) ECGC indemnifies losses of exporters in export trade due to insolvency or default of the
buyer Additionally losses due to political risk like war, sudden import restriction, promulgation
of law or decree after the shipment has been effected are also covered.
Some of the anti-dumping measures or non-tariff barriers introduced after a shipment has
been made will come under the purview of the political risk. In such cases exporter’s interest
are protected by ECGC.

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 Categorization of goods to be imported/ exported
Goods are categorized into following 4 categories :
Categorization Import (Export) Policy for Exports/Imports under Scheme

Prohibited items Items prohibited for import (export) Import or Export of goods is strictly prohibited

Items reserved for Items reserved for import (export) by Importer other than STE cannot import (export) such
STE (State Trading Enterprise) STE (State Trading Enterprise) goods.
e.g. petroleum Products, Agricultural Subject
[Canalized Goods]

Restricted Items Items restricted for import (export) Items allowed to be imported (exported) subject to condition or licence

Free Goods Items freely importable (exportable)

Export Promotion Schemes

EXEMPTION SCHEMES EPCG SCHEME
Duty Duty
exemption 1. Advance Authorization remission 1. Duty Drawback
schemes Scheme schemes (DBK) Scheme
EOU SCHEME
2. Duty Free Import 2. Duty remission
Authorization schemes under
Scheme (DFIA) Central Excise Law

REWARD SCHEMES SEZ SCHEME

MEIS Merchandise Export SEIS Service Export from

From India Scheme India Scheme DEEMED EXPORTS

Advance Authorisation Scheme Students

Notes
What is this Scheme?

Under advance authorization scheme, INPUTS which are used in the export
product can be imported without payment of customs duty.
IGST and GST Compensation Cess have been exempted upto 01.10.2018 on imports
under Advance Authorisation for physical exports. Newly Inserted

May I know which duties exempted on imported material

under this scheme
The goods imported are exempt from basic customs duty, additional customs duty,
education cess, anti-dumping duty and safeguard duty, unless otherwise specified.

Validity 1) Advance Authorisation shall be valid for 12 months from the date of issue
of such Authorisation.
2) Advance Authorisation for Deemed Export shall be co-terminus with
contracted duration of project execution or 12 months from the date of
issue of Authorisation, whichever is more.
Export Period of fulfillment of export obligation under Advance Authorization is 18
obligation months from the date of issue of Authorization or as notified by DGFT.

Export Exports proceeds shall be realized in freely convertible currency except

realization otherwise specified.

FTP 10
Eligible Goods Students
Which goods allowed to be imported under this scheme? Notes
Eligible Non Eligible
Inputs, which are physically incorporated in Items which cannot be imported against advance
export product (making normal allowance for Authorization:
wastage). ► Prohibited items mentioned in ITC (HS)
► Fuel, oil, catalysts which are ► Energy
consumed/utilised to obtain export product. ► Items reserved for imports by STE (State
► Mandatory spares which are required to be Trading Enterprise)
exported/supplied with resultant product
permitted upto 10% of CIF value of
Authorization.
► Specified spices only when used for
activities like crushing/ grinding
/sterilization/ manufacture of oils or
oleoresins and not for simply cleaning,
grading, re-packing etc.
► However, items reserved for imports by
STES cannot be imported against advance
authorization.
Who are eligible for advance authorization: Advance Authorization can be issued either to a
manufacturer exporter or merchant exporter tied to supporting manufacturer(s).
Such Authorization can also be issued for:
(1) Physical exports
(2) Intermediate supply
(3) Supplies made to specified categories of deemed exports
(4) Supply of, stores on board of foreign going vessel/aircraft provided there is specific SION in
respect of items supplied.
Basis of issuance of Advance Authorisation: Advance Authorisation is issued for inputs in
relation to resultant product, on the following basis:
(A)As per SION notified (available in Hand Book of Procedures) or
(B) On the basis of self declaration Regional Authority may also issue Advance Authorisation where
there is no SION/valid Ad hoc Norms for an export product or where SION / Ad hoc norms have
been notified / published but exporter intends to use additional inputs in the manufacturing process,
based on self-declaration by applicant. Wastage so claimed shall be subject to wastage norms as
decided by Norms Committee. The applicant shall submit an undertaking to abide by decision of
Norms Committee. or
(C) Applicant specific prior fixation of norm by the Norms Committee. or
(D) On the basis of Self Ratification Scheme. Where there is no SION/valid Adhoc Norms for an export
product and where SION has been notified but exporter intends to use additional inputs in the
manufacturing process, eligible exporter can apply for an Advance Authorisation under this scheme
on self-declaration and self-ratification basis. RA may issue Advance Authorisations and such
cases need not be referred to Norms Committees for ratification of norms. An exporter
(manufacturer or merchant exporter) who holds AEO (Authorised Economic Operator) Certificate
under Common Accreditation Programme of CBI&C is eligible to opt for the scheme.

Actual user condition for Advance Authorisation:

Advance Authorization and/ or materials imported thereunder will be with actual user condition.

1. Not 1) It will not be transferable even after completion of export obligation.

Transferable
2) However, Authorization holder will have an option to dispose off product
2. Disposal manufactured out of duty free inputs once export obligation is completed.
3. Waste 3) Waste/scrap arising out of manufacturing process, as allowed, can be disposed
off on payment of applicable duty even before fulfillment of export obligation.

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 Students Value Addition Target Example : xyz ltd. as imported input of VA = [(A-B) x 100]/B
1) Minimum positive value addition is CIF value ` 30,00,000/- . Determine A = FOB value of export
Notes 15%, export value of FP to achieve min. value realised/FOR value of supply
except for physical exports for which received.
payments are not received in freely addition under AA scheme. B = CIF value of inputs
convertible currency and some other specified Assume No other inputs are used in processing. covered by authorisation plus
export products. any other imported materials
Solution : General Value Addition (%) = used on which benefit of duty
2) For tea, minimum value addition 15% drawback (DBK) is claimed or
FOB value of Export = CIF value of all intended to be claimed.
required shall be 50%.
inputs + 15% = 30,00,000 + 15% =
33,00,000

Domestic sourcing of inputs: Holder of advance authorization has an option to procure the materials/
inputs from indigenous manufacturer/STE in lieu of direct import against Advance Release Order (ARO)/
Invalidation letter/ Back to Back Inland Letter of Credit.
However, Advance Authorisation holder may obtain supplies from EOU/EHTP/BTP/STP/SEZ units,
without obtaining ARO or Invalidation letter.

Annual Advance authorization: Advance Authorization can be issued for annual requirement also.

Anual AA limit Entitlement (in terms of CIF Value of Imports) shall be

Higher of (a) ` 1 Crore or
(b) 300% of FOB Value of Exports / FOR value of deemed export in
preceding financial year (PY)
Exporters having past export performance (in at least preceding two financial
Criteria
years) shall be entitled for Advance Authorization for Annual Requirement.
Authorisation for Annual Requirement shall be issued only where SIONs or valid
Eligibility
Ad hoc norms exists on the date of issue of Authorisation. It is not available on self-
declaration basis. Amended
Exemption to IGST & GST Cess; but, import is subject to pre-import condition [w.e.f.13-10-2017]:
Imports under Advance Authorization for physical exports are also exempt IGST & GST Cess upto 1-10-
2018 [Section 3(7) & 3(9) of Customs Tariff}, as may be provided in the notification issued by Department
of Revenue, and such imports shall be subject to pre-import condition.
Amended
Admissibility of drawback: Drawback as per rate determined and fixed by Custom authority shall be
available for duty paid inputs (both imported and indigenous) used in the export product.

Duty free Import Authorization (DFIA)

What is this Scheme?

Under DFIA, INPUTS which are used in the export

product can be imported without payment of customs duty.

May I know which duties exempted on imported material

under this scheme
The goods imported are exempt ONLY from basic customs duty. IGST will be
payable on imports. Amended

Whether the provision of DFIA is similar to Advance Authorization Scheme?

Provisions applicable to Advanced Authorisation are broadly applicable in case
of DFIA. Subject to following differences.

AA Scheme DFIA Scheme

Eligible Goods Inputs which gets physically Inputs required for production of
incorporated under the export goods
export product Oil
Fuel Catalyst
Consumed/in the process of production of export goods
Oil
Catalyst FTP 2015-20)
Fuel cannot be Imported under
the new DFIA

FTP 12
 SION for DFIA Students
1) These Authorizations shall be issued only for products for which Standard Input and
Notes
Output Norms (SION) have been notified.
2) DFIA shall be issued
Pre export
Post export

No DFIA for Actual Úser condition inputs: No DFIA shall be issued for an export product where SION
prescribes Actual User condition for any input.

Ü The applicant shall file an online application to RA concerned before starting

exports under DFIA. Export shall be completed within 12 months from the date
of online filing of application and generation of file number. While doing
export/supply, applicant shall indicate file number on the export documents.

Ü No DFIA for 'Actual User' condition inputs: No DFIA shall be issued for an
export product where SION prescribes 'Actual User' condition for any input.

Ü Conditions for redeeming authorisation: It is necessary to establish that inputs

actually used in manufacture of the export product should only be imported
under the authorization and inputs actually imported must be used in the
export product, for redeeming the DFIA. The name/description of the input in
the DFIA must match exactly with the name/description endorsed in the
shipping bill.
Further, quantity of input to be allowed under DFIA shall be in proportion to the
quantity of input actually used/ consumed in production.
If goods are imported against advance authorization but export obligation is
not fulfilled, duty and interest is payable.
Aforesaid provisions will also be applicable for supplies to SEZs and supplies
made under deemed exports.

Transferability After completion of exports and realization of export proceeds, request for
issuance of transferable DFIA may be made to concerned RA within a period of:
(a) 12 months from the date of export
or
(b) 6 months (or additional time allowed by RBI for realization) from the date of
realization of export proceeds, whichever is later.
l RA shall issue transferable DFIA with a validity of 12 months from the date of
issue.

Export Exports proceeds shall be realized in freely convertible currency except otherwise
realization specified.

Domestic sourcing of inputs: Holder of DFIA has an option to procure the materials/ inputs from
indigenous manufacturer/STE in lieu of direct import against Advance Release Order (ARO)/ Invalidation
letter/ Back to Back Inland Letter of Credit. However, DFIA holder may obtain supplies from
EOU/EHTP/BTP/STP/SEZ units, without obtaining ARO or Invalidation letter.

Value Addition Target

1) Minimum positive value addition is 20%,
except for physical exports for which payments are not received in freely convertible currency and some other specified export products.

Amended
Admissibility of drawback: Drawback as per rate determined and fixed by Custom authority shall be
available for duty paid inputs, whether imported or indigenous, used in the export product.

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 Students Difference between Advance Authorization (AA) &
Notes Duty Free Import Authorization (DFIA)
AA Scheme DFIA Scheme
Duty Exemptions IGST has been exempted on there is no IGST exemption
on Imported Goods imports under Advance available if imports are under
Authorisation scheme upto 01- DFIA scheme
10-2018

SION Scheme is also applicable for Scheme is only applicable for

goods for which SION norms is goods for which SION norms is
not fixed. fixed.

Transferability Advance Authorisation' is not DFIA is transferable after export

transferable. obligation is fulfilled.

Value Addition Advance Authorisation scheme DFIA, minimum 20% value

requires 15% value addition addition is required.
Availability Advance Authorisation scheme Not for DFIA
is available to gem and
jewellery sector

DUTY REMISSION SCHEMES

DUTY DRAWBACK (DBK) SCHEME

Ü Various schemes like EOU, SEZ, DFIA, Advance Authorisation, manufacture under bond etc. are
available to obtain inputs without payment of customs duty or obtain refund of duty paid on inputs.
Ü Suppliers who are unable to avail any of these schemes can avail 'duty drawback'. Here, the customs
duty paid on inputs is given back to the exporter of finished product by way of 'duty drawback'.
Section 75 of Customs Act, 1962 provide for drawback on materials used in manufacture or
processing of export product.
Ü It may be noted that duty drawback under section 75 is granted when imported materials are used in
the manufacture of goods which are then exported, while duty drawback under section 74 is
applicable when imported goods are re-exported as it is, and article is easily identifiable.
Amended Ü As per rule 2(a) of the Customs and Central Excise Duties Drawback Rules, 2017, drawback in
relation to any goods manufactured in India and exported, means the rebate of duty excluding IGST
and Compensation Cess, chargeable on any imported materials or excisable materials used in the
manufacture of such goods.
Ü It is important to note that the duty drawback is only of customs duty. There is no duty drawback in
respect of GST.

DUTY REMISSION SCHEMES IN GST LAW :-

Duty remission/exemption is also granted under GST Law.

FTP 14
 REWARD SCHEME
1) Reward schemes are the schemes which entitle the exporters to duty credit scrips subject to various conditions.
2) These scrips can be used for payment of
Customs duties on import of inputs/goods including notified capital goods.
These scrips are transferable, i.e. they can be sold in market, if the holder of duty credit scrip does not intend to import goods against the scrips.
Goods imported under the scrip are also freely transferable.
Following are two schemes for exports of merchandise and services:
(i) Merchandise Exports from India Scheme (MEIS)
(ii) Service Exports from India Scheme (SEIS)

Particulars MEIS SEIS

Objective The objective of MEIS scheme is to promote the manufacture
and export of notified goods/ products.
The objective of SEIS scheme is to encourage export of
notified services from India. The scheme applies to export of
services made on or after 01.04.2015.
However, only services provided in the manner / mode
specified are eligible.
►Supply of a ‘service’ from India to any other country (Mode
1-Cross border trade);
►Supply of a ‘Service’ from India to service consumers of any
other country (Mode 2- Consumption abroad)

Eligible Exporter 1) Exporter who has realised foreign exchange 1) Service Provider with (IEC) where net free foreign
(Claimant of 2) Supporting Manufacturer exchange earned of such service provider in year of rendering
Reward) service is Amended
Individual service providers
US $10,000
and sole proprietorship

Other service
US $15,000
providers

Note : Payment in Indian Rupees for service charges earned on

specified services, shall be treated as receipt in deemed foreign
exchange as per guidelines of Reserve Bank of India.

Notified Goods & Under MEIS, exports of notified goods/products to notified Percentage Rate specified under SEIS (illustrative)
Rate of Reward markets shall be eligible for reward at the specified rate(s). Service Percentage rate
Unless otherwise specified, the basis of calculation of reward Business services 3 and 5
would be: Communication service 5
(i) on realised FOB value of exports in free foreign Construction and related 5
exchange, or Engineering service
(ii) on FOB value of exports as given in the Shipping Bills in Environmental Service 5
free foreign exchange, Health-related and social service 5
whichever is less. Tourism and travel-related service 3 and 5
Recreational, cultural and sporting 5
services (other than audiovisual services)
Transport services 5
% of Reward (Scrip FOB value of export goods. Net foreign exchange earned. ( Refer note 1)
value) based on
In-eligible The following exports categories/Sectors shall be inelligible Service based
Category under MEIS [amended w.e.f.5-12-2017] ●Service providers in Telecom Sector:
(i) Supplies made form DTA units to SEZ units. ●Export turnover relating to
(ii) Export of imported goods covered under ‘Import for Export’ ► services of units operating under SEZ or
provision ►s upplies of services made to such units ;
(iii) Exports through trrans-shipment, meaning thereby exports Source based
that are origination in third country but transhipped through ●Other sources of foreign exchange earnings such as equity or
India. debt participation, donations, receipts of repayment of loans
(iv) Deemed Exports etc. and any other inflow of foreign exchange, unrelated to
(v) SEZ/EOU/EHTP/BTP/FTWZ products exported through DTA rendering of service, would be ineligible.
units. Account based
(vi) Export products which are subject to Minimum export price or ● Payments for services received from EEFC Account
export duty. Goods based
(vii) Exports made by units in FTWZ. ● Exports of Goods

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 Students
Common Provisions for Exports from India Schemes (MEIS and SEIS)
Notes (i) CENVAT/ Drawback:
Ü Basic Custom duty paid in cash or through debit under Duty Credit scrip shall be adjusted for
Duty Drawback as per DoR rules or notifications.
Ü Duty credit scrip shall be permitted to be utilized for payment of customs duty in case of import
of capital goods under lease financing.

(ii) Transfer of export performance: Transfer of export performance from one IEC holder to another
IEC holder shall not be permitted. Thus, a shipping bill containing name of applicant shall be
counted in export performance / turnover of applicant only if export proceeds from overseas are
realized in applicant’s bank account and this shall be evidenced from e - BRC / FIRC. However,
MEIS rewards can be claimed either by the supporting manufacturer (along with disclaimer from the
company / firm who has realized the foreign exchange directly from overseas) or by the company/
firm who has realized the foreign exchange directly from overseas.

(iii) Incentives of MEIS are available to units located in SEZs also.

Note 1: Computation of net foreign exchange earning

Gross Earning of Foreign Exchange relating to service sector in the xxxx

Financial year) [Note A&B]
Less : Total expenses / payment / remittances of Foreign Exchange (xxx)
by the IEC holder, relating to service sector in the Financial year [Note B]
Net Foreign Exchage xxxx

Note:
A) Receipt of forex unrelated to provisioning of service shall not be considered : Foreign exchange
remittances other than those earned for rendering of notified services would not be counted for
entitlement. Thus, other sources of foreign exchange earnings such as equity or debt participation,
donations, receipts of repayment of loans etc. and any other inflow of foreign exchange, unrelated to
rendering of service, would be ineligible.
B) For-Ex earning and expenses in capacity of SP shall only be considered : If the IEC holder is a
manufacturer of goods as well as service provider, then the foreign exchange earnings and Total
expenses / payment / remittances shall be taken into account for service sector only.

FTP 16
 EXPORT PROMOTION CAPITAL GOODS SCHEME (EPCG) Students
1) Export Promotion Capital Goods Scheme (EPCG) permits exporters to import capital goods for Notes
pre-production ► At zero customs duty or
production ►Procure them indigenously without paying duty in the
post-production prescribed manner.
In return, exporter is under an obligation to fulfill the export obligation.
Ü Capital goods imported under EPCG Authorisation for physical exports
are also exempt from IGST and Compensation Cess upto 01.10.2018. Amended

Export Import under EPCG scheme shall be subject to an export obligation

Obligation equivalent to 6 times of duty, taxes & cess saved on capital goods to be
fulfilled in 6 years reckoned from the date of issue of authorization.
Validity of Authorisation shall be valid for 18 months from the date of issue of
Authorization Authorisation.
Actual User Import of capital goods shall be subject to „Actual User condition till export
Condition obligation is completed.

Transferability After export obligation is completed, capital goods can be sold or transferred.

Ü In case integrated tax and compensation cess are paid in cash on imports under EPCG, incidence of
the said integrated tax and compensation cess would not be taken for computation of net duty saved
provided input tax credit is not availed. Amended

2) Eligible exporters: Following are eligible for EPCG scheme:

● Manufacturer exporters with or without supporting manufacturer(s),
● Merchant exporters tied to supporting manufacturer(s), and
● Service providers including service providers designated as Common Service Provider (CSP)
subject to prescribed conditions.
3) Eligible and ineligible capital goods:
Eligible capital goods include
Capital Goods including capital goods in CKD/SKD condition
Computer systems and software which are a part of the Capital Goods being imported Amended
Spares, moulds, dies, jigs, fixtures,tools & refractories

Catalysts for initial charge plus onesubsequent charge

4) Export Obligation: Export obligation means obligation to export product(s) covered by Authorisation/
Capital goods for Project Imports notified by CBEC

IGST & GST Cess exempt on imports [w.e.f. 13-10-2017] Capital goods imported under
EPCG shceme for physical exports are exempt from IGST & GST COmpensation Cess upto 1-
10-2018 [levied u/s 3(7) and 3(9) of Customs Tariff Act as provided in notification under Deptt. of
Revenue]
Domestic purchases free of duty : Alternatively, the Authorisation holder may also procure
Capital Goods from indigenous sources.
Indigenous Sourcing of Capital Goods and benefits to Domestic Supplier
A person holding an EPCG authorisation may source capital goods from a domestic
manufacturer. Such domestic manufacturer shall be eligible for deemed export benefits under
FTP and as may be provided under GST Rules under the category of deemed exports. Such
domestic sourcing shall also be permitted from EOUs and these supplies shall be counted for
purpose of fulfilment of positive NFE by said EOU

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 permission in terms of quantity or value or both, as may be prescribed/specified by Regional or competent
Students authority. Export obligation consists of average export obligation and specific export obligation.
Notes
Specific export obligation (Specific EO) under EPCG scheme is equivalent to 6 times of duty saved on
capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue-
date. Specific EO is over and above the Average EO.
Note: In case of direct imports, EO shall be reckoned with reference to actual duty saved amount.
In case of domestic sourcing, EO shall be reckoned with reference to notional Customs duties
saved on FOR value.

Average export obligation (Average EO) under EPCG scheme is the average level of exports made by
the applicant in the preceding 3 licensing years for the same and similar products. It has to be achieved
within the overall EO period (including extended period unless otherwise specified).

5) Conditions applicable to the fulfilment of the Export Obligation (EO):

(a) EO shall be fulfilled by the authorisation holder through export of goods which are manufactured by
him or his supporting manufacturer / services rendered by him, for which the EPCG authorisation has
been granted.
(b) In case of indigeneous sourcing of capital goods, specific EO shall be 25% less than the EO
mentioned above, i.e. EO will be 4.5 times (75% of 6 times) of duty saved on such goods procured.
(c) Shipments under Advance Authorisation, DFIA, Drawback scheme, or reward schemes; would also
be counted for fulfilment of EO under EPCG Scheme.
(d) EO can also be fulfilled by the supply of Information Technology Agreement (ITA-1) items to DTA,
provided realization is in free foreign exchange.
(e) Both physical exports as well as specified deemed exports shall also be counted towards fulfilment of
export obligation.

6) Incentives for early fulfillment of export obligation

In cases where Authorization holder has fulfilled 75% or more of specific export obligation and 100%
of Average Export Obligation till date, if any, in half or less than half the original export obligation period
specified, remaining export obligation shall be condoned and the Authorization redeemed.

7) Post Export EPCG Duty Credit Scrip(s)

Under this scheme, capital goods are imported on full payment of applicable duties in cash. Later,
basic customs duty paid on Capital Goods is remitted in the form of freely transferable duty credit
scrip(s) [similar to the Reward schemes discussed earlier].

Salient features of the schemes are as follows:-

◾ Specific EO shall be 85% of the applicable specific EO stipulated under EPCG scheme. Average
EO remains unchanged.
◾ Duty remission shall be in proportion to the EO fulfilled.
◾ These Duty Credit Scrip(s) can be utilized in the similar manner as the scrips issued under reward
schemes can be utilised.

FTP 18
 EOU, EHTP, STP & BTP SCHEMES Students
Units Description Administered by Object Notes
EOU Export Oriented Ministry of Exportation of goods
Unit Commerce & Industry
EHTP Electronics Hardware Ministry of Export of Electronic
Technology Information technology Hardware Software
STP Software Ministry of Development of
Technology Park Information technology software export
BTP Bio-Technology Dept. of
Park Biotechnology

1, These units are setup for their export of entire production of goods & services [except permissible sale
in DTA]
2. They can import input & Capital Goods without payment of customs duty.
3. STP, EHTP, BTP Schemes are similar to EOU Schemes and provisions are more or less similar.

(I) ELIGIBILITY
v Such units may be set up for manufacture of goods, including repair, re-making, reconditioning,
re-engineering, rendering of services, development of software, agriculture.
v Trading units are not covered under these schemes.
v Only projects having a minimum investment of ` 1 crore in plant & machinery shall be
considered for establishment as EOUs.
However, this shall not apply to units in EHTP/ STP/ BTP, Handicrafts/ Agriculture/ Floriculture/ Aquaculture/ Animal Husbandry/
Information Technology Services, Brass Hardware and Handmade jewellery sectors. Board of Approvals may also allow
establishment of EOUs with a lower investment criteria.

(II) PROCEDURE FOR SETTING UP NEW EOU, EHTP, STP AND BTP
(a) Approval for setting up of units under EOU scheme shall be granted by the Units Approval
Committee within 15 days as per prescribed criteria. In other cases, approval may be granted
by Board of Approval set up for this purpose

(b) On approval, concerned authority will issue a Letter of Permission (LoP)/ Letter of Intent (LoI)
which will have initial validity of 2 years (extendable by 2 years and further extension, if
necessary, by BoA), by which time unit should have commenced production.

(III) NET FOREIGN EXCHANGE EARNINGS

v EOU/ EHTP/ STP/ BTP unit must be a positive net foreign exchange earner. However, a higher
value addition is specified for some sectors.

v How to compute NFE earnings?: NFE Earnings shall be calculated cumulatively in blocks of 5
years, starting from commencement of production.

In case unit is not able to achieve NFE due to:

(i) prohibition/ restriction imposed on export of any product, 5 years block period may be
extended suitably by BoA.
(ii) adverse market condition or any grounds of genuine hardship having adverse impact on
functioning of the unit, 5 year block is extendable upto 1 year.

Who monitors NFE?: Performance of EOU/ EHTP/ STP/ BTP units shall be monitored by Units
Approval Committee as per prescribed guidelines.

Which supplies to DTA can be counted for positive NFE?: Following supplies effected from
EOU/ EHTP/ STP/ BTP units to DTA (Domestic Tariff Area) will be counted for fulfillment of
positive NFE:

(a) Supplies in DTA to holders of Advance Authorisation/ Advance Authorisation for annual
requirement/ DFIA under duty exemption/ remission scheme/ EPCG scheme subject to
certain exceptions.
(b) Supplies affected in DTA against foreign exchange remittance received from overseas.
(c) Supplies to other EOU/ EHTP/ STP/ BTP/ SEZ units, provided that such goods

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 are permissible for procurement in terms of relevant provisions of FTP.
Students (d) Supplies made to bonded warehouses set up under FTP and/ or under section 65 of
Notes Customs Act and free trade and warehousing zones, where payment is received in foreign
exchange.
(e) Supplies of goods and services to such organizations which are entitled for duty free import
of such items in terms of general exemption notification issued by MoF.
(f) Supplies of Information Technology Agreement (ITA-1) items and notified zero duty
telecom/ electronics items.
(g) Supplies of items like tags, labels, printed bags, stickers, belts, buttons or hangers to DTA
unit for export.

(IV) ENTITLEMENTS TO UNITS UNDER EOU, EHTP, STP AND BTP SCHEMES

(a) Entitlements for supplies from DTA

v Supplies from DTA to EOU/ EHTP/ STP/ BTP units will be regarded as “deemed exports” and
DTA supplier shall be eligible for relevant entitlements for deemed exports, besides discharge
of export obligation, if any, on the supplier.
v The refund of GST paid on such supply would be available to the supplier subject to specified
conditions and documentations under GST law. Amended
In addition, EOU / EHTP / STP / BTP units shall be entitled to following:-
v Imported goods are exempt from basic customs duty. Further, IGST and GST compensation
Amended cess is exempt upto 01-10-2018.
v Input Tax Credit of GST paid on inputs and capital goods.

(b) Other Entitlements

v Exemption from industrial licensing for manufacture of items reserved for SSI sector.
v Export proceeds will be realized within 9 months.
v Units will be allowed to retain 100% of its export earnings in the EEFC account.
v Unit will not be required to furnish bank guarantee at the time of import or going for job work in
DTA, subject to fulfillment of required conditions.
v 100% FDI investment permitted through automatic route similar to SEZ units.
v Units shall pay duty on the goods produced or manufactured and cleared into DTA on monthly
basis in the manner prescribed in the Central Excise Rules.

(V) EXPORT AND IMPORT OF GOODS

Export : Following exports are permitted:
ü all kinds of goods and services except items that are prohibited in ITC(HS),
ü Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) subject
to fulfillment of the conditions indicated in ITC (HS).

Import : Following imports are permitted:

1) Export promotion material upto a maximum value limit of 1.5% of FOB value of previous
years exports.
2) All types of goods, including capital goods, required for its activities, from (i) DTA, (ii) bonded
warehouses in DTA/ International exhibition held in India, subject to 'Actual User' condition,
provided such goods are not prohibited items of import in the ITC (HS) subject following
conditions
(a) The imports and/ or procurement from bonded warehouse in DTA/International
exhibition held in India shall be without payment of basic customs duty. Such imports
and/ or procurements shall be made without payment of integrated tax and GST
Amended compensation cess upto 01.10.2018.
(b) The procurement of goods covered under GST from DTA would be on payment of
applicable GST and compensation cess. The refund of GST paid on such supply
from DTA to EOU would be available to the supplier subject to such conditions and
documentations as specified under GST law.
Goods including capital goods (on a self certification basis) required for approved activity,
free of cost or on loan/ lease from clients, subject to „Actual User condition.
3) Certain specified goods from DTA, without payment of duty, for creating a central facility
with/without payment of duty/ taxes as provided in point 2(a) and 2(b) above.
4) Second hand capital goods, without any age limit, duty free, with/without payment of duty/
taxes as provided in point 2(a) above.

FTP 20
 Procurement and export of spares/ components, upto 5% of FOB value of exports, may be allowed
to same consignee/ buyer of the export article, subject to the condition that it shall not count for NFE
Students
and direct tax benefits Notes
(VI) LEASING OF CAPITAL GOODS
An EOU/ EHTP/ STP/ BTP unit may:
ü on the basis of a firm contract between parties, source capital goods from a domestic/ foreign
leasing company with/without payment of duty/ taxes as provided above. In such a case, Amended
EOU/EHTP /STP / BTP unit and domestic/ foreign leasing company shall jointly file
documents to enable import/ procurement of capital goods.
ü sell capital goods and lease back the same from a Non Banking Financial Company (NBFC)
subject to fulfillment of specified conditions.
(VII) INTER UNIT TRANSFER
v Transfer of manufactured goods from one EOU/EHTP/STP/BTP unit to another EOU / EHTP
/ STP/ BTP unit is allowed on payment of applicable GST & Compensation cess with prior
intimation to concerned Development Commissioners of the transferor and transferee units
as well as concerned Customs authorities, following the prescribed procedure :
v Capital goods may be transferred or given on loan to other EOU/ EHTP/ STP/ BTP/ SEZ
units, with prior intimation to concerned DC and Customs authorities on payment of
applicable GST and compensation cess. Such transferred goods may also be returned by
the second unit to the original unit in case of rejection or for any reason on payment of
applicable GST and compensation cess.
Note: Goods supplied by one unit of EOU/ EHTP/ STP/ BTP to another unit shall be treated
as imported goods for second unit for payment of duty, on DTA sale by second unit.

(VIII) SALE OF UNUTILIZED MATERIAL

v In case an EOU/ EHTP/ STP/ BTP unit is unable to utilize goods (including capital goods) and
services, imported or procured from DTA, it may be
ü transferred to another EOU/ EHTP/ STP/ BTP/ SEZ unit; or
ü disposed off in DTA with intimation to Customs authorities on payment of
applicable duties and/ or taxes and compensation cess. Further, exemption of basic
customs duties availed, if any, on the goods, at the time of import will also be payable and
submission of import Authorisation; or Amended
ü exported.
Such transfer from EOU/ EHTP/ STP/ BTP unit to another such unit would be treated
as import for receiving unit.
v In case of capital goods, benefit of depreciation, as applicable, will be available in case of
disposal in DTA only when the unit has achieved positive NFE taking into consideration the
depreciation allowed. Amended
v No duty shall be payable other than the applicable taxes under GST laws in case capital
goods, raw material, consumables, spares, goods manufactured, processed or packaged,
and scrap/ waste/ remnants/ rejects are destroyed within unit after intimation to Customs
authorities or destroyed outside unit with permission of Customs authorities.
v Disposal of used packing material will be allowed on payment of duty on transaction value.

(IX) DTA SALE OF FINISHED PRODUCTS/ REJECTS/ WASTE/ SCRAP/ REMNANTS AND
BY-PRODUCTS
Entire production of EOU/ EHTP/ STP/ BTP units must be exported. However, following DTA
sales are permissible:
(1) Sale of goods in DTA:
Ü Units (other than gem and jewellery units) will be permitted to sell finished goods
manufactured by them which are freely importable under FTP in DTA, subject to
fulfilment of positive NFE, on payment of applicable GST and compensation cess
along with reversal of basic customs duty availed as exemption, if any on the inputs
utilized for the purpose of manufacturing of such finished goods.
Ü No DTA sale shall be permissible in respect of, pepper & pepper products, marble

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 Students and such other notified items as also to units engaged in only packaging. Labelling,
refrigeration, pulverilasiton etc.
Notes Ü Such DTA sale shall also be subject to refund of deemed export benefits availed by the
EOU/supplier as per FTP, on the goods used for manufacture of the goods cleared into the
DTA.
Ü An amount equal to Anti-Dumping duty under section 9A of the Customs Tariff Act, 1975
leviable at the time of import, shall be payable on the goods used for the purpose of
manufacture or processing of the goods cleared into DTA from the unit.
Amended
(2)
Services provided in DTA: For services, including a software unit sale in DTA shall also be
permissible up to 50% of FOB value of exports and/ or 50% of foreign exchange earned, where
payment of such services is received in foreign exchange.
(3) Sale of rejects in DTA: Rejects may be sold in DTA on payment of applicable GST and
Amended compensation cess along with reversal of basic customs duty availed as exemption on inputs
on prior intimation to Customs authorities. Sale of rejects upto 5% of FOB value of exports
shall not be subject to achievement of NFE.
(4) Sale of scrap/ waste/ remnants, arising out of production, in DTA:
1) Scrap/ waste/ remnants arising out of production process or in connection therewith may be
sold in DTA, as per SION notified under Duty Exemption Scheme, on payment of applicable
duties and/ or taxes and compensation cess. Amended
2) Such sales of scrap/ waste/ remnants shall not be subject to achievement of positive NFE.
3) Sale of waste/scraps/remnants by units not entitled to DTA sale or sales beyond DTA sales
entitlement, shall be on payment of full duties. Scrap/waste/remnants may also be exported.
4) In case scrap/ waste/ remnants are destroyed with permission of Customs authorities, no
duties/ taxes payable on same. However, the expression “no duties/ taxes” shall not include
applicable taxes and cess under the GST laws. Amended
(5) Sale of by-products in DTA: By-products may also be sold in DTA subject to achievement of
positive NFE, on payment of applicable GST and compensation cess along with reversal of
basic customs duty availed as exemption on inputs.
(6) Procurement of spares/components, up to 2% of the value of manufactured articles, cleared
into DTA, during the preceding year, may be allowed for supply to the same consignee / buyer
for the purpose of after-sale-service. The same can be cleared in DTA on payment of applicable
GST and compensation cess along with reversal of basic customs duty availed as exemption on
inputs. Amended

(X) EXPORT THROUGH OTHER EXPORTERS

An EOU/ EHTP/ STP/ BTP unit may export goods manufactured/ software developed by it
through another exporter or any other EOU/ EHTP/ STP/ SEZ unit subject to specified
conditions

(XI) EXIT FROM EOU SCHEME

With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment of
Amended applicable IGST/ CGST/ SGST/ UTGST and compensation cess, if any, and industrial policy in
force. If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.

(XII) CONVERSION
Existing DTA units may also apply for conversion into an EOU/ EHTP/ STP/ BTP unit. Existing
EHTP/ STP units may also apply for conversion/ merger to EOU unit and vice- versa. In such
cases, units will remain in bond and avail exemptions in duties and taxes as applicable.
Applications for conversion into an EOU / EHTP / STP / BTP unit from existing DTA units,
having an investment of ` 50 crores and above in plant and machinery or exporting ` 50 crores
and above annually, shall be placed before BOA for a decision. Amended

FTP 22
 DEEMED EXPORTS Students
Meaning :Deemed Exports for the purpose of this FTP Notes
It refers to those transactions in which goods supplied do not leave country, and payment for such
supplies is received either in Indian rupees or in free foreign exchange. Supply of goods as specified in
FTP shall be regarded as “Deemed Exports” provided goods are manufactured in India. Amended
Deemed Exports for the purpose of GST
It would include only the supplies notified under section 147 of the CGST/SGST Act, on the
recommendations of the GST Council. The benefits of GST and conditions applicable for such
benefits would be as specified by the GST Council and as per relevant rules and notification.

Objective : The objective of deemed exports is to ensure that the domestic suppliers are not in
disadvantageous position vis-à-vis foreign suppliers in terms of the fiscal concessions. The underlying
theory is that foreign exchange saved must be treated at par with foreign exchange earned by placing
Indian manufacturers at par with foreign suppliers.

Deemed exports broadly cover three areas.

a. Supplies to domestic entities who can import their requirements duty free or at reduced rates of
duty.
b. Supplies to projects/ purposes that involve international competitive bidding.
c. Supplies to infrastructure projects of national importance.

(I) CATEGORIES OF SUPPLIES CONSIDERED AS DEEMED EXPORT

Supply by manufacturer
Supply of goods against Advance
Authorisation/Advance
Authorisation for Annual
Requirement/ DFIA
Supply of goods to units located in
EOU/ STP/BTP/EHTP
Supply by main/sub-contractors(s)
Supply of goods to projects or turnkey contracts
financed by multilateral or bilateral agencies/Funds
notified by Department of Economic Affairs (DEA), under
International Competitive Bidding.
Supply of goods to any project where import is permitted
at zero customs duty as per customs Notification No.
50/2017-Cus dated 30.06.2017 and supply is made
against International Competitive Bidding.

Supply of capital goods against
EPCG authorisation
Supply of marine freight
containers by 100% EOU provided
said containers are exported within 6
months
Supply of goods to mega power projects against
International Competitive Bidding (even if customs duty
on imports made by such project is not zero).
Supply of goods to nuclear projects through competitive
bidding (need not be international competitive bidding).
Supply to goods to UN or international
organisations for their official use or supplied to projects
financed by them.

(II) BENEFITS FOR DEEMED EXPORTS

Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and
supply of goods, qualifying as deemed exports, subject to specified terms and conditions:
a. Advance Authorisation/ Advance Authorisation for Annual requirement/ DFIA
b. Deemed Export Drawback
c. The refund of drawback in the form of basic customs duty of the inputs used in manufacture
and supply under the said category shall be given on brand rate basis upon submission of
documents evidencing actual payment of basic custom duties. Amended

(IV COMMON CONDITIONS FOR DEEMED EXPORT BENEFITS

(i) Supplies shall be made directly to entities listed in the point (I) above. Third party supply
shall not be eligible for benefits/exemption.
(ii) In all cases, supplies shall be made directly to the designated Projects/Agencies/Units/
Advance Authorisation/ EPCG
Authorisation holder. Sub-contractors may, however, make supplies to main contractor
instead of supplying directly to designated

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 Students Projects/ Agencies. Payments in such cases shall be made to sub-contractor by main-
Notes (iii)
contractor and not by project Authority.
Supply of domestically manufactured goods by an Indian Sub-contractor to any Indian or foreign
main contractor, directly at the designated projects/ Agencys site, shall also be eligible for
deemed export benefit provided name of sub-contractor is indicated either originally or
subsequently (but before the date of supply of such goods) in the main contract. In such cases
payment shall be made directly to sub-contractor by the Project Authority.

FTP 24
MISCELLANEOUS PROVISIONS Students
RELATING TO IMPORT OF GOODS
Notes
1. Actual user condition: Goods which are importable without any restriction, may be imported by
any person. However, if such imports require an Authorization, actual user alone may import such
goods unless actual user condition is specifically dispensed with by DGFT.

2. Second hand goods: Import of second hand capital goods, including refurbished/ re- conditioned
spares shall be allowed freely. However, second hand personal computers/ laptops, photocopier
machines, air conditioners, diesel generating sets will only be allowed against authorisation.
Second hand (used) goods, [except second hand capital goods], shall be restricted for imports
and may be imported only against Authorization.

3. Removal of scrap/ waste from SEZ: Any waste or scrap or remnant including any form of
metallic waste & scrap generated during manufacturing or processing activities of an SEZ Unit/
Developer/ Co-developer shall be allowed to be disposed in DTA (Domestic Tariff Area) freely,
subject to payment of applicable customs duty.

4. Import of gifts and samples: Import of gifts shall be permitted where such goods are otherwise
freely importable under ITC(HS). In other cases, a Customs Clearance Permit (CCP) shall be
required from DGFT. Further, import of samples shall be governed by the prescribed procedures.
Authorisation for import of samples is required only in case of vegetable seeds, bees and new
drugs. Samples of tea upto ` 2,000 (CIF) per consignment will be allowed without authorization.
Samples upto ` 3,00,000 can be imported by all exporters without duty.

5. Passenger Baggage:
(a) Bonafide household goods and personal effects may be imported as part of passenger
baggage as per limits, terms and conditions thereof in the Baggage Rules, 1998.
(b) Samples of such items that are otherwise freely importable under FTP may also be imported as
part of passenger baggage without an Authorization.
(c) Exporters coming from abroad are also allowed to import drawings, patterns, labels, price tags,
buttons, belts, trimming and embellishments required for export, as part of their passenger
baggage without an Authorization.
Note: Baggage provisions have been discussed in detail in Chapter-7- Importation,
Exportation and Transportation of Goods.

6. Re-import of goods repaired abroad: Capital goods, equipments, components, parts and
accessories, whether imported or indigenous, except those restricted under ITC(HS) may be sent
abroad for repairs, testing, quality improvement or upgradation or standardization of technology
and re-imported without an Authorization.
7. Import of goods used in projects abroad: After completion of projects abroad, project
contractors may import, without an Authorization, goods including capital goods used in the
project provided they have been used for at least one year.
8. Sale on high seas: Sale of goods on high seas for import into India may be made subject to FTP or
any other law in force.
9. Import under lease financing: It is freely permitted. Permission of Regional Authority is not
required for import of capital goods under lease financing. However, RBI approval is required in
some cases.
10. Clearance of goods from customs: Goods already imported/ shipped/ arrived, in advance, but
not cleared from customs may also be cleared against an Authorization issued subsequently.
However, this facility will not be available to restricted items or items traded through STEs.
11. Execution of BG/ LUT: Whenever goods are imported duty free or otherwise specifically stated,
importer shall execute prescribed LUT (Letter of Undertaking)/ BG (Bank Guarantee)/ Bond with
Customs Authority before clearance of goods. In case of indigenous sourcing, Authorization
holder shall furnish LUT/ BG/ Bond to RA concerned before sourcing material from indigenous
supplier/ nominated agency as per the prescribed procedures.
12. Private/ public bonded warehouses for imports: Private/ public bonded warehouses may be
set up in DTA (Domestic Tariff Area) as per terms and conditions of notification issued by DoR. Any
person may import goods, except prohibited items, arms and ammunition, hazardous waste

V’Smart Academy www.vsmartacademy.com ( 8888388886 FTP 25

 Students and chemicals and warehouse them in such bonded warehouses. Such goods may be cleared for home
consumption against authorisation, whenever required. Customs duty as applicable shall be paid at
Notes the time of clearance of such goods. If such goods are not cleared for home consumption within a
period of one year or such extended period as the custom authorities may permit, importer of such
goods shall re-export the goods.

PROVISIONS RELATING TO EXPORT OF GOODS

1. Free exports: All goods may be exported without any restriction except to the extent that such
export is regulated by ITC(HS) or any other provision of FTP or any other law for the time being in
force. DGFT may however, specify through a public notice such terms and conditions according to
which any goods, not included in ITC(HS), may be exported without an Authorization.
2. Export of samples: Export of samples and free of charge goods shall be governed by prescribed
procedures. Export of bona fide trade and technical samples of freely exportable item shall be
allowed without any limit. In case of restricted items, application should be made to DGFT. Such
samples can be exported as part of passenger baggage without an Authorisation.
3. Export of passenger baggage: Bonafide personal baggage may be exported either along with
passenger or, if unaccompanied, within one year before or after passenger s departure from India.
However, items mentioned as restricted in ITC(HS) shall require an Authorization. Government of
India officials proceeding abroad on official postings shall, however, be permitted to carry alongwith
their personal baggage, food items (free, restricted or prohibited) strictly for their personal
consumption. Samples of such items that are otherwise freely exportable under FTP may also be
exported as part of passenger baggage without an Authorisation.
4. Export of gifts: Goods, including edible items, of value not exceeding ` 5,00,000 in a licensing
year, may be exported as a gift. However, items mentioned as restricted for exports in ITC(HS) shall
not be exported as a gift, without an Authorization. For export of samples/gifts/ spares/ replacement
goods (other than SCOMET items) in excess of ceiling/period, application can be made to DGFT in
form ANF-2Q.
5. Export of spares: Warranty spares (whether indigenous or imported) of plant, equipment,
machinery, automobiles or any other goods, [except those restricted under ITC(HS)] may be
exported along with main equipment or subsequently, but within contracted warranty period of such
goods subject to approval of RBI.
6. Third party exports: Third - party exports means exports made by an exporter or manufacturer
on behalf of another exporter(s). In such cases, export documents such as shipping bills shall
indicate name of both manufacturing exporter/manufacturer and third party exporter(s). BRC, GR
declaration, export order and invoice should be in the name of third party exporter. Such third party
exports shall be allowed under FTP.
7. Export of imported goods: Goods imported, in accordance with FTP, may be exported in same or
substantially the same form without an Authorization, provided that an item to be imported or
exported is not restricted for import or export in ITC(HS).
Exports of such goods imported against payment in freely convertible currency would be permitted
provided export proceeds are realized in freely convertible currency. However, export of such
goods to notified countries will be permitted in Indian rupees subject to at least 15% value addition.
8. Export of replacement goods: Goods or parts thereof on being exported and found defective/
damaged may be replaced free of charge by the exporter and such goods shall be allowed
clearance by customs authorities, provided that replacement goods are not mentioned as restricted
items for exports in ITC(HS).
9. Export of repaired goods: Goods or parts exported and found defective, damaged or otherwise
unfit for use may be imported for repair and subsequent re-export. Such goods shall be allowed
clearance without an Authorization and in accordance with customs notification.
However, re-export of such defective parts/spares by the Companies/firms and Original Equipment
Manufacturers shall not be mandatory if they are imported exclusively for undertaking root cause
analysis, testing and evaluation purpose.
10. Private Bonded Warehouses for exports: Private bonded warehouses, which are set up
exclusively for exports shall be entitled to procure goods from domestic manufacturers without
payment of duty. Supplies made by a domestic supplier to such notified warehouses shall be treated
as physical exports provided payments are made in free foreign exchange.

FTP 26
11. Denomination of export contracts: All export contracts and invoices shall be denominated either Students
in freely convertible currency or Indian rupees but export proceeds shall be realised in freely
convertible currency. However, export proceeds against specific exports may also be realized in
Notes
rupees, provided it is through a freely convertible Vostro account of a non resident bank situated in
any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan.
Additionally, rupee payment through Vostro account must be against payment in free foreign
currency by buyer in his non-resident bank account.

Free foreign exchange remitted by buyer to his non-resident bank (after deducting the bank service
charges) on account of this transaction would be taken as export realization under export
promotion schemes of FTP. Contracts for which payments are received through ACU shall be
denominated in ACU Dollar. Central Government may relax provisions in this regard in appropriate
cases. Export contracts and invoices can be denominated in Indian rupees against EXIM Bank/
Government of India line of credit.

12. Non-realisation of export proceeds: If an exporter fails to realise export proceeds within time
specified by RBI, he shall, without prejudice to any liability or penalty under any law in force, be liable
to action in accordance with provisions of FT(D&R) Act, rules and orders made thereunder and
provisions of FTP.

13. Free movement of export goods: Consignments of items meant for exports shall not be withheld/
delayed for any reason by any agency of Central/ State Government. In case of any doubt,
authorities concerned may ask for an undertaking from exporter and release such consignment.

14. No seizure of export related stock: No seizure of stock shall be made by any agency so as to
disrupt manufacturing activity and delivery schedule of exports. In exceptional cases, concerned
agency may seize the stock on basis of prima facie evidence of serious irregularity. However,
such seizure should be lifted within 7 days unless the irregularities are substantiated.

D. Personal hearing by DGFT for Grievance Redressal:

Government is committed to easy and speedy redressal of grievances from Trade and Industry. As a
last resort to redress grievances of Foreign Trade players, DGFT may provide an opportunity for
Personal hearing before Policy Relaxation Committee (PRC) subject to fulfillment of certain
conditions.

Export Promotion Councils: Basic objective of Export Promotion Councils (EPCs) is to promote
and develop Indian exports. Each Council is responsible for promotion of a particular group of
products, projects and services.

Registration-cum-Membership Certificate (RCMC): Any person, applying for an Authorization

to import/ export, or any other benefit or concession under FTP shall be required to furnish on
DGFT s website in the Importer Exporter profile, RCMC granted by competent authority. For
instance, Certificate of Registration as Exporter of Spices (CRES) issued by Spices Board shall be
treated as RCMC for the purposes under this Policy.

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 Students
Notes

FTP 28