The Government of India has released the Foreign Trade Policy (Policy) for the 5 year period between 2015 and 2020 on 1 April 2015. The Policy is aimed simplifying the procedure for doing business in India and facilitating import into and export out of India. The export promotion schemes have been simplified and export obligations against duty free import has been reduced by 25% to promote the “Make in India” initiative of the Government of India. A reconciliatory dispute resolution process has also been introduced to amicably settle disputes between importers and exporters in a time bound manner relating to quality complaints and trade disputes on commercial dealings.
The central theme of the Policy is to make India a significant player in world trade by the year 2020. The Policy, together with the proposed introduction of the goods and service tax in 2016, is expected to increase the ease of doing business in India and accelerate economic growth.
The key changes in the Policy are highlighted below:
Export Incentive Schemes
- The multiple incentive schemes, namely the Focus Product Scheme, Market Linked Focus Product Scheme, Focus Market Scheme, Agriculture Infrastructure Incentive Scrip, Vishesh Krishi and Gram Udyog Yojana and Served From India Scheme, which existed previously have now been subsumed into two simplified schemes:
- Merchandise Exports from India Scheme (MEIS) for export of goods; and
- Service Exports from India Scheme (SEIS) for export of services.
- Some of the key features of the new schemes are as follows:
- The benefits have been extended to Special Economic Zone units;
- The schemes have no actual user conditions and are freely transferable;
- Basic Customs Duty debited in the MEIS scrip is now eligible for drawback;
- Taxes and duties debited in the SEIS scrip would be eligible for CENVAT credit;
- The SEIS scrip can be claimed by “Service providers located in India” as opposed to “Indian service providers” as was provided by the erstwhile Policy. Therefore, irrespective of the constitution or nature of brand, any notified service provided from India is now eligible for benefits of SEIS. This change eliminates the distinction between service provided by Indian company and foreign company as long as the service is provided from India.
- The nomenclature of status holders has been changed to a gradation of One Star (USD 3 million), Two Star (USD 25 million), Three Star (USD 100 million), Four Star (USD 500 million) and Five Star Export House (USD 2,000 million) based on the export performance. The requirement of consistent export performance has been reduced from the erstwhile 2 out of 4 years to 2 out of 3 years.
- Status holders are allowed to self-certify their manufactured goods as originating from India to qualify for preferential treatment under multi-lateral trade agreements.
Export Promotion Capital Goods Scheme (EPCG)
- In case of indigenous procurement of capital goods, the export obligation (EO) has been reduced to 75% from 90% of the prescribed EO. Concessional EO of 50% on import of spares has been withdrawn.
- Payment received in Rupee for notified services will be considered towards fulfillment of the EO.
- Exemption from payment of anti-dumping duty, safeguard duty and transitional product specific safeguard duty is withdrawn on import of capital goods under EPCG.
Export Oriented Units (EOU)/Electronics Hardware Technology Parks (EHTP)/Software Technology Parks (STP)/Biotechnology Parks (BTP)
- EOU/EHTP/STP/BTP are allowed to share infrastructural facilities among themselves. Inter unit transfer of goods and services among the units have been permitted.
- EOUs have been allowed domestic clearance of spares/components up to 2% of the value of the manufactured articles for after sale services under concessional rate of duty.
- Deemed exports are categorized under two category, viz., (i) supply by manufacturer, and (ii) supply by contractor/sub-contractor. Further, the following benefits have been restricted only to manufacturers:
- Supply of goods against Advance Authorisation/Advance Authorisation for annual requirement/Duty Free Import Authorisation;
- Supply of goods to EOU/STP/ EHTP/BTP;
- Supply of capital goods against EPCG Authorisation;
- 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;
- Goods imported under Advance Authorisation are exempted from payment of transitional product specific safeguard duty in addition to exemption from anti-dumping duty and safeguard duty.
- Extended EO period of 24 months has been permitted for defence, military store, aerospace and nuclear energy items under Advance Authorization (as against the normal period of 18 months) from the date of issue of authorization or co-terminus with contracted duration of the export order, whichever is later.
Ease of Doing Business
- Electronic filing of documents signed by Chartered Accountant/Company Secretary/Cost Accountant for applications, etc. allowed for paperless processing.
- Landing documents of export consignment as proofs for notified market in order to claim MEIS or SEIS benefit can be digitally uploaded.
- Online filing of refund claims in respect of deemed exports facilitated.
- Committee on Quality Complaints and Trade Disputes is being constituted for faster disposal of quality complaints and to resolve trade disputes between exporters and importers.
Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET)
- The validity of SCOMET export authorisation has been extended from the present 12 months to 24 months.
- The verification of End User Certificate is simplified for export of SCOMET items under the Defence Export Offset Policy.
Track and Trace System for Export of Pharmaceuticals and Drugs
- Primary level packaging requires universal global product identification code in the format of a 14 digits Global Trade Item Number (GTIN) along with batch number, expiry date and a unique serial number of the primary pack. However, two dimensional barcode is exempted till further notification.
- Secondary level and tertiary level packaging requires incorporation of one dimensional barcode encoding GTIN along with batch number, expiry date and a unique serial number.
Packaging data is required to be uploaded on the central portal of the Government of India by the manufacturer or its designated agency before release of the drugs manufactured on or after 1 April 2015 for sale or distribution.