EXPORT PROMOTION & INCENTIVES

Incentives/ exemptions:
* Sales Tax / VAT exemption
* Excise Exemption
*Duty Drawback
*Income Tax concessions
*Import concessions
*Special Economic Zones
*Free Trade and Warehousing Zones
*Star Export Houses
*EOUs, Electronic Hardware Technology Parks, Software
technology parks, Bio-Technology Parks.
*Deemed Exports
1). Sales Tax / VAT exemption

*Sales Tax in India has been replaced by VAT.

* Any exporter need not pay VAT for the materials procured
for exports.
*Form H is to be given to the supplier .
2 EXICSE EXEMPTION
*Tax or duty levied on manufacture of goods.
*Exports are exempt from excise duty.
*Excise under claim of Excise rebate- as per rule 18 of
Central excise rules
*Export Under bond
3 DUTY DRAWBACK
*Under duty drawback scheme the export products get relief in respect of
Customs and excise Duties paid on raw materials and component used in the
production.- “ CUSTOMS AND CENTRAL EXCISE DUTY DRAWBACK
RULES 1995”
*There are two types of duty drawbacks:
1. All Industry Rate notified by the Govt. every year.
2. Brand Rate – fixed on the individual request of an exporter / manufacturer.
This may be due to no all industry rate available for that product or where the
rate is not applicable because the
 4. INCOME TAX CONCESSIONS
*Firms operating in SEZs that manufacture products or
computer software are eligible for deduction of export
profits.
*For firms commencing operations from notified SEZs on or
after 1st April 2002, the tax holiday is available as follows:
Deduction of 100 % of export profits for five years followed
by 50 % of export profits for subsequent 2 years.
5. Import concessions:
5 a. Export Promotion Capital Goods
Scheme:
*The scheme allows import of capital goods for production and post
production (including CKD/SKD well as computer software
systems) at 5 % Customs duty subject to an export obligation
equivalent to 8 times of duty saved on capital goods imported on
EPCG scheme, to be fulfilled over a period of 8 years.

*In the case of agro units the obligation is 6 times the duty saved . ….
Over a period of 12 years.

•The capital goods shall include spares (including

refurbished, reconditioned spares)
*Second hand capital goods without any restriction of age
may also be imported.
*Import of motor cars, SUVs shall be allowed only to hotels,
travel agents, tour operators and companies owning /
operating golf resorts whose total foreign exchange
earnings in current and preceding three licensing years is
Rs. 15 crores.

•Import shall be subject to actual user condition.

*In respect of EPCG licenses with a duty saved of RS. 100
crore or more , the export obligation is allowed to be
 fulfilled over a period of 12 years.
*In the latest amendment, further flexibility has been given in
terms of average export performance and also in the
extension of export obligation period by 2 years, based on
certain conditions

5 b. ADVANCE LICENCE
*Issued for duty free imports of inputs physically
incorporated in the export product (allowing normal
wastage).
*Quantity - According to the Standard-input-output norms
– this has been fixed for a large number of export items
and published in the Handbook of Procedures (vol 2),
2004- 2009.
Advance Licence can be issued for:
*1. Physical exports

*Exports to SEZ, actual manufacture, merchant exporter tied to a

manufacturer.
Advance Licence can be issued for:
*2. Intermediate
Supplies

*Imports of inputs required in the manufacture of goods to be

supplied to the ultimate exporter/ deemed exporter holding another
advance licence.
Advance Licence can be issued for:
3. Deemed Exports

*Issued to the main contractor for import of manufacture of goods/

CG to be supplied to EOUs, EHTP/ SP/ BTP,
*CG supplies to holders of EPCG licence
 DEEMED EXPORTS
*Deemed exports refers to those transactions in which the goods
supplied do not leave the country and payment for such supplies is
received either in Indian rupees or in free foreign exchange.
*The following categories of supply of goods are regarded as deemed
exports:
(a). Supply of goods against Advance License / DFRC/ Duty
exemption rep. scheme.
(b). Supply of goods to EOUs, Units in Software technology park,
Electronic Hardware Technology park, or Bio Tech. park

•Supply of capital goods under EPCG scheme.

*Supply of goods to UN funded agencies.
Benefits of deemed exports:
•Advance license for intermediate supply.
*Deemed exports drawback

Other conditions of Advance Licence:

*Subject to actual user condition
*Export obligation is based on positive value addition: =A
–B 100
B
A= FoB value of export
B= CiF value of imports
*Valid for 18 months from the date of issue.
5 c. Duty Free Replenishment Certificate -
DFRC
*Most of the conditions same as Advance licence.

*Can be used in respect of export proceeds received in non-

convertible currency.
5 d. DUTY ENTITLEMENT PASSBOOK
SCHEME- DEPB
*Exporters are allowed to claim customs duty credit at a
 specified percentage of FoB value of exports.
*DEPB will be granted against exports already made.
*The credit rate shall be as specified in the book “Schedule
of DEPB Rates” issued by DGFT.
STAR EXPORT HOUSES
*Category:

One Star export house

Two Star export house
Three star export house
Four Star export house
Five star export House
*Total fob value during the current licensing year + the previous 3
year:
*Rs. 15 crores.
*RS. 100 crores
*Rs. 500 crores
*Rs. 1500 crores
*Rs. 5000 crores
Benefits for Star Export Houses
•100% retention of foreign exchange in EEFC account.
*Enhancement of normal repatriation period from 180 days
to 360 days.
*Exemption from compulsory negotiation of documents
through banks. The remittance however should come
through banking channels.
-----Benefits for Star Export Houses
*Allowed licence / certificate/ permissions and Customs
clearance for both exports and imports on self-declaration
basis.

*Exemption from furnishing bank guarantee in schemes

under the Foreign Trade policy
EOUs, Electronic Hardware technology park etc
*Export Oriented Unit
*Electronic Hardware Technology Park
*Software Technology Park
*Bio-Technology Park

--------EOUs, Electronic Hardware technology

park etc
*Reimbursement of CST
*Exemption of payment of Central Excise duty
*Exemption of payment of service tax
*Exemption of Income Tax
*Export proceeds can be realised withing 12 months
*100% of export earnings in EEFC account.
Special Focus Initiatives – 2004-09
*To double India’s percentage share of global merchandise
trade by 2009

*To act as an effective instrument of economic growth by

giving a thrust to employment generation, specially in
semi-urban and rural areas
Thrust sectors:
*Agriculture
*Handicrafts
*Handlooms
*Gems and Jewellery
*Leather and Footwear
Agriculture
*Vishesh Krishi Upaj Yojana introduced to boost exports of
fruits, vegetables, flowers, minor forest produce and their
value added products.: Export of these products shall
qualify for duty free credit entitlement equivalent to 5% of
FOB value of exports. The
entitlement is freely transferable and can be used for a
variety of inputs and goods
 ------Agriculture
*Duty free imports of capital goods under EPCG scheme
*Import of seeds, bulbs, tubers and planting material
liberalised
*Export of plant portions, extracts and derivatives liberalised
with a view to promote export of medicinal and herbal
plants
Gems and Jewellery
*Duty free imports of consumables for metals other than
Gold and Platinum upto 2% of FOB value of exports
allowed.
*Duty free re-import of rejected jewellery upto 2% of FOB
value of exports
*Duty free import of commercial samples increased to Rs.1
lakh.

Handloom and Handicraft

*Duty free imports of trimmings and embellishments
increased 5% of FOB value of exports
*Import of trimmings and embellishments and samples
exempted from CVD
*Handicraft Export Promotion Council authorised to import
trimmings, embellishments and samples for small
manufacturers.
Leather and Footwear
*Duty free import of trimmings , embellishments and
footwear components for leather industry increased to
3% of FOB value of exports
*Duty free import of specified items for leather sector
increased to 5%.
*Machinery and equipment for effluent treatment plants
exempted from customs duty.
TARGET PLUS SCHEME
*Exporters who have achieved a quantum growth in exports
would be entitled to duty free credits based on incremental
exports substantially higher than the general actual export
target fixed.
*Rewards will be granted based on a tiered approach:

“Served from India Scheme”:

*Individual service providers who earn foreign exchange of at least
Rs. 5 lakhs and other service providers who earn atleast Rs. 10
lakhs will be eligible for a duty credit entitlement of 10% of total
foreign exchange earned by them.
*Stand alone restaurants entitlement- 20%
*Hotels- 5%
*Can use their duty free entitlement to import food items and alcoholic
beverages
FOCUS MARKETS
*The Ministry of Commerce has identified certain markets
and products with a view to intensify export marketing
efforts for increasing and sustaining exports in promising
markets.
*Focus LAC
*Focus Africa
*Focus CIS (restoration of rupee trade with Russian
federation in a limited manner)

FOCUS LAC:
*Major Trading Partners: Mexico, Brazil, Argentina, Chile, Peru,
Venezuela, Columbia, Trinidad & Tobago.
*LAC focus shall aim to focus on the following major products
groups :
*Textiles including RMG, carpets and handicrafts
*Engineering goods including computer software
*Chemical including drugs / pharmaceuticals.
FOCUS AFRICA:
*Target countries: Nigeria, South Africa, Mauritius, Kenya,
 Ethiopia, Tanzania, Ghana, Angola, Botswana, Ivory
Coast, Zambia, Zimbabwe, Egypt, Sudan, Algeria, Libya,
Morocco, Tunisia
*Target Commodities: Cotton yarn, fabrics and other
madeups, Pharmaceuticals, machinery, transport
equipment, telecom and IT.

Focus CIS
*Russia, Armenia, Azerbaijan, Belarus, Georgia, Moldova, Ukraine,
Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan
(central Asian republics), Baltic states: Latvia, Lithuania, and
Estonia.
*Focus product groups: Plantation crops, RMG of various textile
materials, Pharmaceuticals, Machinery, Leather and footwear,
Agriculture products, Plastic and linoleum , cosmetics/ toiletries.
MARKET DEVELOPMENT ASSISTANCE
*MDA grant for overseas export promotion activities
*Sales-cum-study teams, participation in fairs and exhibitions and
Publicity abroad.
*Beneficiaries:
*Star export houses
*Exporters other than SEHs, having a FOB value of exports of Rs. 5
crores in the preceding year.
*EPCs, Commodity Boards and other exprot promotion organisations.

•Further assistance for participation in Trade fairs abroad

and travel grant is available to such exporters if they travel
to countries in one of the four focus areas: Latin America,
Africa, CIS region, ASEAN countries, Australia and New
Zealand.

Approved organisations for sponsoring

applications for MDA.:
•Export Promotion Councils, Commodity Boards, FIEO for
sponsoring the applications for their member exporters.
*Grants will be limited to 90% of total expenditure to SSI and
75% for others.