chapter 7 of the Foreign Trade Policy

Posted on 20 April 2023 Category : GST EXIM

chapter 7 of the Foreign Trade Policy

CHAPTER 7

DEEMED EXPORTS

7.00 Objective

To provide a level-playing field to domestic manufacturers in certain specified cases, as may be decided by the

Government from time to time.

7.01 Deemed Exports

“Deemed Exports” refer 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 Paragraph 7.02

below shall be regarded as “Deemed Exports” provided goods are manufactured in India.

7.02 Categories of Supply

Supply of goods under following categories (a) to (d) by a manufacturer and under categories (e) to (h) by main / subcontractors shall be regarded as “Deemed Exports”:

A. Supply by manufacturer:

(a) Supply of goods against Advance Authorisation / Advance Authorisation for annual requirement / DFIA;

(b) Supply of goods to EOU / STP / EHTP / BTP;

(d) Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers) provided said containers are exported out of India within 6 months or such further period as permitted by customs;

B. Supply by main / sub-contractor (s):

(e)

(i) Supply of goods to projects financed by multilateral or bilateral Agencies / Funds as notified by Department of Economic Affairs (DEA), MoF, where legal agreements provide for tender evaluation without including customs duty.

(ii) Supply and installation of goods and equipment (single responsibility of turnkey contracts) to projects financed by multilateral or bilateral Agencies/Funds as notified by Department of Economic Affairs (DEA), MoF, for which bids have been invited and evaluated on the basis of Delivered Duty Paid (DDP) prices for goods manufactured abroad.

(iii) Supplies covered in this paragraph shall be under International Competitive Bidding (ICB) in accordance with procedures of those Agencies / Funds.

(iv) A list of agencies, covered under this paragraph, for deemed export benefits, is given in Appendix 7A.

(f)

(i) Supply of goods to any project or for any purpose in respect of which the Ministry of Finance, by Notification No. 12/2012 –Customs dated 17.3.2012, as amended from time to time, permits import of such goods at zero customs duty subject to conditions specified in the above said Notification. Benefits of deemed exports shall be available only if the supply is made under procedure of ICB.

(ii) Supply of goods required for setting up of any mega power project, as specified in the list 32A, at Sl. No. 507 of Department of Revenue Notification No. 12/2012- Customs dated 17.03.2012, as amended from time to time, shall be eligible for deemed export benefits provided such mega power project conforms to the threshold generation capacity specified in the above said Notification.

(iii) For mega power projects, ICB condition would not be mandatory if the requisite quantum of power has been tied up through tariff based competitive bidding or if the project has been awarded through tariff based competitive bidding.

(g) Supply of goods to United Nations or International Organisations for their official use or supplied to the projects financed by the said United Nations or an International organisation approved by Government of India. List of such organisation and conditions applicable to such supplies is given in the Excise Notification No 108/95-CE, dated 28.08.1995, as amended from time to time. A list of Agencies, covered under this paragraph, is given in Appendix-7B.

(h) Supply of goods to nuclear power projects provided:

(i) Such goods are required for setting up of any Nuclear Power Project as specified in the list 33 at Sl. No. 511 of Notification No. 12/2012 – Customs dated 17.3.2012, as amended from time to time.

(ii) The project should have a capacity of 440 MW or more.

(iii) A certificate to the effect is required to be issued by an officer not below the rank of Joint Secretary to Government of India, in Department of Atomic Energy.

(iv) Tender is invited through National competitive bidding (NCB) or through ICB.

7.03 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 terms and conditions as given in HBP and ANF-7A:

(a) Advance Authorisation / Advance Authorisation for annual requirement / DFIA.

(b) Deemed Export Drawback.

7.04 Benefits to the Supplier /Recipient

Benefits of supplies as given in para 7.03 above, whichever is applicable

Categories of supplies as per para 7.02

Para 7.03 (a) Advance Authorisation Para 7.03 (b) Duty Drawback Para 7.03 (c) Terminal Excise Duty

(a) Yes (for intermediate supplies against an invitation letter) Yes (against ARO or back to back letter of credit) (i) Exemption, in case of Invalidation Letter

(ii) Refund, in case of ARO or back to back letter of credit

(iii) No exemption/ refund against supply to DFIA as CVD is not exempted

(b) Yes Yes Exempted

(d) No Yes Refund

(e) Yes Yes Exempted

(f) Yes Yes Exemption, if supplies under ICB. Refund, if supplies under tariff based competitive bidding

(g) Yes Yes Exempted

(h) Yes Yes Refund

7.05 Conditions for refund of terminal excise duty

(i) Supply of goods will be eligible for refund of terminal excise duty as per Para 7.03 (c) of FTP, provided recipient of goods does not avail CENVAT credit/rebate on such goods.

(ii) However, supply of goods which are exempted abinitio from payment of Terminal Excise Duty would be ineligible to get refund of TED. Exemption from TED is available to the following:

(a) Supplies under ICB;

(b) Supplies of intermediate goods, against invalidation letter, made by an Advance Authorisation holder to another Advance Authorisation holder;

(d) Supply of goods to UN/International Organisation or project funded by it.

7.06 Conditions for refund of deemed export drawback

Supplies will be eligible for deemed export drawback as per para 7.03 (b) of FTP, as under:

(a) In case CENVAT credit / rebate has not been availed on the inputs / input services, by the supplier of goods,

then, benefit as per Column ‘A’ of All Industry Rate of Duty Drawback Schedule shall be admissible.

(b) If CENVAT credit / rebate has been availed by the supplier of goods, on inputs / input services, then, no Drawback shall be admissible as per Column ‘B’ of All Industry Rate of Duty Drawback Schedule. However, in such cases, Basic Customs Duty paid can be claimed as Brand Rate of Duty Drawback based upon submission of documents evidencing actual payment of duties.

7.07 Common conditions for deemed export benefits

(i) Supplies shall be made directly to entities listed in the Para 7.02. 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. Subcontractors may, however, make supplies to main contractor instead of supplying directly to designated Projects/ Agencies. Payments in such cases shall be made to sub-contractor by main-contractor and not by project Authority.

(iii) Supply of domestically manufactured goods by an Indian Sub-contractor to any Indian or foreign main

contractor, directly at the designated project’s/ Agency’s 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.

7.08 Benefits on specified supplies

(i) Deemed export benefits shall be available for supplies of ‘Cement” under Para 7.02 (e) only.

(ii) Deemed export benefit shall be available on supply of “Steel”:

(a) As an inputs to Advance Authorization/ Annual Advance Authorization/DFIA holder/ an EOU.

(b) To multilateral/ bilateral funded Agencies as per sub-Para 7.02(e).

(iii) Deemed export benefit shall be available on supply of “Fuel” provided supplies are made to:

(a) Project listed for petroleum operations in the Customs Notification No. 12/2012–Cus. dated 17.03.2012 under Sr. No. 356, 358 to 360 and covered in Para 7.02 (f) of FTP;

(b) EOUs;

7.09 Liability of Interest

Incomplete/deficient application is liable to be rejected. However, simple interest @ 6% per annum will be payable

on delay in refund of duty drawback and terminal excise duty under the scheme, provided the claim is not settled

within 30 days from the date of issue of final Approval Letter by RA.

7.10 Risk Management and Internal Audit mechanism

(a) A Risk Management system shall be in operation, wherein every month, Computer system in DGFT headquarters, on random basis, will select 10% of cases, for each RA, where benefit(s) under this chapter has/have already been granted. Such cases shall be scrutinized by an internal Audit team, headed by a Joint DGFT, in the office of respective Zonal Addl. DGFT. The team will be responsible to audit claims of not only for its own office but also the claims of all RAs falling under the jurisdiction of the Zone.

(b) The respective RA may also, either on the basis of report from Internal Audit/ External Audit Agency(ies)

or suo-motu, reassess any case, where any erroneous/in-eligible payment has been made/claimed. RA will take necessary action for recovery of payment along with interest at the rate of 15% per annum on the recoverable amount.

7.11 Penal Action

In case, claim is filed by submitting mis-declaration/misrepresentation of facts, then in addition to effecting recovery

under Para 7.10(b) above, the applicant shall be liable for penal action under the provisions of F.T. (D&R) Act, Rules

and orders made there under.

Local procurement of goods by EOU under GST

Export obligation before GST after GST under EPCG scheme.

Utilization of Advance Authorization scheme before GST and after GST

Drawback and TED on deemed exports under GST?

Will IGST be refunded against unutilized ITC under EPCG scheme?

Should Compensation cess payable on imports under GST?

Is Educational cess applicable on imports under GST?

Is Central Excise registration is required under GST regime?