Annual Supplement of Foreign Trade Policy
Annual supplement of foreign trade policy focuses to reduce imports, technological upgradation and diversification of exports, encouraging exports of manufacturing, exports from north-east states, reduce transaction costs, generate employment opportunities, among others.
To revive investors’ interest in SEZs and to boost exports–In view of the acute difficulties in aggregating large tracts of uncultivable land for setting up SEZs, while ensuring vacancy and contiguity, the Minimum Land Area Requirement for multi-product SEZ has been reduced from 1000 hectares to 500 hectares and for sector-specific SEZ from existing 100 hectares to 50 hectares. To provide greater flexibility in utilizing land tracts falling between 50-450 hectares, it has been decided to introduce a Graded Scale for Minimum Land Criteria which would permit a SEZ an additional sector for each contiguous 50 hectare parcel of land. This will also bring about more efficient use of the infrastructure facilities created in such an SEZ. Further flexibility to set up additional units in a sector specific SEZ is being provided by introducing Sectoral broad-banding to encompass similar / related areas under the same sector.
IT Exports constitute a very significant part of India ’s exports and IT SEZs have a major contribution in it. Exports from IT SEZs during financial year 2012-13 have exceeded Rs. 1.40 lakh crore registering a growth of over 70% over the previous year’s exports. In order to boost growth of this very important sector and also to give a fillip to employment and growth in Tier-II and Tier-III cities, there would be no minimum land requirement for setting up an IT/ITES SEZ. Only the minimum built up area criteria would be required to be met by the SEZ developers. The minimum built up area requirement has also been considerably relaxed with the requirement of one lakh square meters to be applicable for the 7 major cities viz: Mumbai, Delhi (NCR), Chennai, Hyderabad , Bangalore , Pune and Kolkata. For the other Category B cities 50,000 square meters and for remaining cities only 25,000 square meters built up area norm will be applicable. The present SEZ Framework does not include an Exit Policy for the units and has now been decided to permit transfer of ownership of SEZ units, including sale.
Zero Duty Export Promotion Capital Goods (EPCG) Scheme—Earlier, foreign trade policy has two variants under this scheme, namely, Zero Duty EPCG for few sectors and 3% Duty EPCG for all sectors. In the annual supplement of 2013-14, Government has decided to harmonize Zero Duty EPCG and 3% EPCG Scheme into one scheme which will be a Zero Duty EPCG Scheme covering all sectors.
The salient features of the Zero Duty EPCG Scheme are:
· Authorization holders will have export obligation of 6 times the duty saved amount. The export obligation has to be completed in a period of 6 years.
· The period for import under the Scheme would be 18 months.
· Export obligation discharge by export of alternate products as well as accounting of exports of group companies will not be allowed.
· The exporters who have availed benefits under Technology Upgradation Fund Scheme (TUFS) administered by Ministry ofTextiles, can also avail the benefit of Zero duty EPCG Scheme.
· The import of motor cars, SUVs, all purpose vehicles for hotels, travel agents, or tour transport operators and companies owning/operating golf resorts will not allowed under the new Zero Duty EPCG Scheme.
Reduced EO for domestic sourcing of capital goods –The quantum of specific Export Obligation (EO) in the case of domestic sourcing of capital goods under EPCG authorizations has been reduced by 10% which would promote domestic manufacturing of capital goods.
Reduced EO for units in the State of Jammu & Kashmir– In order to encourage manufacturing activity in the State of Jammu & Kashmir, it has been decided to reduce the specific export obligation (EO) to 25% of the normal export obligation. Earlier, this benefit was announced in respect of units located in North Eastern Region and Sikkim .
Widening of Interest Subvention Scheme to 134 sub-sectors of engineering sector.– At present, 2% interest subvention scheme is available to certain specific sectors like Handicrafts, Handlooms, Carpets, Readymade Garments, Processed Agricultural Products, Sports Goods and Toys. The scheme had been further widened to include 134 sub-sectors of engineering sector. Government had also announced that the benefit of this scheme of 2% interest subvention could be available upto 31st March 2014.
Widening the Scope of Utilization of Duty Credit Scrip—Duty Credit Scrips issued under Focus Market Schemes, Focus Product Scheme and Vishesh Krishi Gramin Udyog Yojana(VKGUY) can be used for payment of service tax on procurement of services within the legal framework of service tax exemption notifications under the Finance Act, 1994. Holder of the scrip shall be entitled to avail drawback or CENVAT credit of the service tax debited in the scrips as per Department of Revenue rules.
Market and Product Diversification— Norway has been added under Focus Market Scheme and Venezuela has been added under Special Focus Market Scheme. The total number of countries under Focus Market Scheme and Special Focus Market Scheme becomes 125 and 50 respectively. Approximately, 126 new products have been added under Focus Product Scheme. These products include items from engineering, electronics, chemicals, pharmaceuticals and textiles sector and about 47 new products have been added under Market Linked Focus Product Scheme (MLFPS). These products are from engineering, auto components and textiles sector. Two new countries i.e., Brunei and Yemen have been added as new markets under MLFPS.
Incremental Exports Incentivisation Scheme-Government has announced Incremental Export Incentivisation Scheme for the exports made during January 2013 to March 2013. This scheme is available for exports made to USA , EU and Asia and has been decided to extend for the year 2013-14. Countries of Latin America and Africa have been added with the objective to increase India ’s share in these markets. The present export to each of these markets is less than US $ 100 million.
Served from India Scheme (SFIS)– Service providers are entitled to duty credit scrips under Served from India Scheme at the rate of 10% of free foreign exchange earned during a financial year. The entitlement shall now be calculated on the basis of net free foreign exchange earned (i.e., after deducting foreign exchange spent from the total foreign exchange earned during the financial year).
Service exporters who are also engaged in manufacturing activity are permitted to use SFIS duty credit scrip for importing/domestically procuring capital goods. Hotels, travel agents, tour operators or tour transport operators and companies owning/operating golf resorts having SFIS scrip can import or domestically procure motor cars, SUVs and all purpose vehicles using SFIS scrips for payment of duties. Such vehicles need to be registered for “tourist purpose” only.
Recredit of 4% SAD as a trade facilitation measure –Utilization of recredited 4% SAD scrips shall be allowed upto 30th September 2013 as a trade facilitation measure.
Duty Free Import Authorization Scheme (DFIA) –Anti Dumping Duty and Safeguard Duty was exempted under DFIA Scheme. Exemption from payment of Anti Dumping Duty and Safeguard Duty shall henceforth not be available after endorsement of transferability of such authorizations
Import of Cars–Import of cars/vehicles is permitted through designated ports only. Now import of cars/vehicles would also be allowed at ICD Faridabad and Ennore Port (TN).
Widening of items eligible for import for Handloom/Made ups and Sports Goods– Additional items (embroidery/sewing threads/poly/quilted bedding materials and printed bags) are included in the list of items which are allowed duty free within the existing limits upto 5% FOB value of exports of handloom made ups in preceding year or within the existing limit of upto 1% of FOB value of exports of cotton/man-made ups in preceding year. Similarly, five additional items have been added pertaining to sports goods exports.
Warm regards,
Dr. S P Sharma
Chief Economist
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PHD Research Bureau
PHD Chamber of Commerce and Industry
August Kranti Marg, New Delhi – 110016
Tel 91 11 49545454, Fax 91 11 26855450,
E mail – research@phdcci.in
Website http://www.phdcci.in
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