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1. DUTY EXEMPTION SCHEMES

Duty Exemption Schemes enable duty free import of inputs required for export production. A Duty Remission Scheme enables post export replenishment / remission of duty on inputs used in the export product. Goods exported under Advance Authorisation / DFRC / DEPB may be re-imported in the same or substantially the same form subject to such conditions as may be specified by the Department of Revenue from time to time.

Advance / Advance Intermediate Authorisation
An Advance Authorisation / Advance Intermediate Authorisation is issued to allow duty free import of inputs, which are physically incorporated in the export product. In addition, fuel, oil, energy, catalysts etc. which are consumed in the course of their use to obtain the export product, may also be allowed under the scheme.

Advance Authorisation can be issued for:-

Physical Exports;
Intermediate Supplies;
Deemed Exports;

DEPB
The objective of Duty Entitlement Pass Book (DEPB) is to neutralise the incidence of Customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product. Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency.
DEPB Scheme has been extended till May, 2009.
Duty Free Replenishment Certificate (DFRC) shall be available for exports only up to 30.04.2006. This scheme is being replaced by the Duty Free Import Authorisation (DFIA) w.e.f. 01.05.2006.

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2. Duty Free Import Authorisation (DFIA)

This scheme will come into force from 1^st May, 2006.

A Duty Free Import Authorisation is issued to allow duty free import of inputs which are used in the manufacture of the export product (making normal allowance for wastage), and fuel, energy, catalyst etc. which are consumed or utilised in the course of their use to obtain the export product.

The Authorisation shall be issued on the basis of inputs and export items given under Standard Input and Output Norms (SION). The import entitlement shall be limited to the quantity mentioned in SION.

Such Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s)

A minimum 20% value addition shall be required for issuance of such Authorisation

Once export obligation has been fulfilled, request for transferability of the Authorisation or the inputs imported against it may be made before the Regional Authority. Once, transferability is endorsed, the Authorisation holder will be at liberty to transfer the duty free inputs, other than fuel and any other item (s) notified by DGFT for this purpose.

	DFIA	Advance Authorisation Scheme
Transferability	Conditional	Actual User Clause
Value Addition	Minimum 20%	Positive Value Addition
Basis of Application	Only SION Based	SION or Self Declared Basis

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3. EPCG SCHEME

The EPCG scheme allows import of capital goods for pre production, production and post production at 3% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported to be fulfilled over a period of 8 years reckoned from the date of issuance of the authorisation.

The capital goods shall include spares (including refurbished/ reconditioned spares), tools, jigs, fixtures, dies and moulds. EPCG Authorisation may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the authorisation holder.

An EPCG authorisation can also be issued for import of capital goods for supply to projects notified by the Central Board of Excise and Customs under wherein the basic customs duty on imports is 10% with a CVD of 14%.

Payment of Duty under EPCG Scheme, through debit of DEPB or other duty credit scrips would be allowed w.e.f. 01.01.2009

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4. DEEMED EXPORTS

“Deemed Exports" refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange

Deemed exports shall be eligible for any / all of the following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to the terms and conditions as given in Handbook (Vol. I) viz.:--

Benefit of duty free imports of inputs;

Refund of Terminal Excise Duty;

Supply of goods will be eligible for refund of Terminal Excise Duty provided the recipient of the goods does not avail CENVAT credit / rebate on such goods. Similarly, supplies will be eligible for deemed export drawback on the Central Excise paid on inputs /components, provided CENVAT credit facility/rebate has not been availed by the applicant. Such supplies will however be eligible for deemed export drawback on the customs duty paid on the inputs /components.

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5. STATUS HOLDERS

Merchant as well as Manufacturer Exporters, Service Providers, Export Oriented Units (EOUs) and Units located in Special Economic Zones (SEZs), Agri Export Zone (AEZs), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio Technology Parks (BTPs) shall be eligible for status.

Applicant shall be categorized depending on his total FOB (FOR - for deemed exports) export performance during current plus previous three years (taken together) upon exceeding limit below. For Export House (EH) Status, export performance is necessary in at least two out of four years (i.e., current plus previous three years).

Category Performance	(Rupees in Crores)
Export House (EH)	20
Star Export House (SEH)	100
Trading House (TH)	500
Star Trading House (STH)	2500
Premier Trading House (PTH)	10000

A Status Holder shall be eligible for the following facilities:

Authorisations and Customs clearances for both imports and exports on self-declaration basis;

Fixation of Input-Output norms on priority within 60 days;

Exemption from compulsory negotiation of documents through banks. Remittance / Receipts, however, would be received through banking channels;

100% retention of foreign exchange in EEFC account;

Enhancement in normal repatriation period from 180 days to 360 days;

Exemption from furnishing of Bank Guarantee in Schemes under FTP;

SEH and above shall be permitted to establish Export Warehouses as per DoR guidelines.

Target Plus Incentive previously available to Status Holders stands abolished for exports from 01.04.2006 vide Notification No: 57 (RE-2005)/2004-2009 dt: 31.03.2006. Relevant paragraph in the policy stands deleted.

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6. Focus Market Scheme

The objective of the Focus Market Scheme is to offset the high freight cost and other disabilities to select international markets with a view to enhance our export competitiveness to these countries.

Exports of all products to the notified countries shall be entitled for duty credit scrip equivalent to 2.5% of the FOB value of exports for each licensing year commencing from 1st April, 2006. The scrip and the items imported against it would be freely transferable.

Under the Scheme, export to all countries as specified in the Handbook of Procedures (Vol. I) shall qualify for export benefits with certain exceptions as outlined.

The Duty Credit may be used for import of inputs or goods including capital goods, provided the same is freely importable under ITC (HS).

Exporters shall have the option to apply for benefit either under the Focus Market Scheme or under the Focus Product Scheme or under Vishesh Krishi and Gram Udyog Yojana in respect of the same exported product/s.

Appendix 37C - List of Notified Markets under Focus Market Scheme

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7. Focus Product Scheme

The objective of the Focus Product Scheme is to incentivise export of such products which have high employment intensity in rural and semi urban areas so as to offset the inherent infrastructure inefficiencies and other associated costs involved in marketing of these products.

Exports of notified products to all countries shall be entitled for duty credit scrip equivalent to 1.25% of the FOB value of exports for each licensing year commencing from 1st April, 2006. The scrip and the items imported against it would be freely transferable.

Under the Scheme, export of such products as specified in the Handbook of Procedures (Vol. I) shall qualify for export benefits with certain exceptions as outlined.

The Duty Credit may be used for import of inputs or goods including capital goods, provided the same is freely importable under ITC (HS).

Exporters shall have the option to apply for benefit either under the Focus Market Scheme or under the Focus Product Scheme or under Vishesh Krishi and Gram Udyog Yojana in respect of the same exported product/s.

Appendix 37D - List of Notified Products under Focus Product Scheme

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8. Vishesh Krishi Gram and Upaj Yojana (VKGUY)

The objective of the Vishesh Krishi Gram Upaj Yojana (VKGUY) is to promote exports of:

   a) Agricultural produce and their Value added products;

   b) Minor Forest Produce and their value added variants;

   c) Gram Udyog Products;

   d) Forest Based Products

Duty scrip benefits are granted with aim to compensate high transport costs. Exporters of notified products shall be entitled for duty credit scrip equivalent to 5.00% of the FOB value of exports. The scrip and the items imported against it would be freely transferable.

All Status Holders shall be incentivised with duty credit script equal to 10% of FOB value of agricultural exports which can be used for duty free import / procurement of capital goods related to infrastructure meant for agro-processing to promote agricultural exports.

Under the Scheme, export of such products as specified in the Handbook of Procedures (Vol. I) shall qualify for export benefits with certain exceptions as outlined.

The Duty Credit may be used for import of inputs or goods including capital goods, provided the same is freely importable under ITC (HS).

Exporters shall have the option to apply for benefit either under the Focus Market Scheme or under the Focus Product Scheme or under Vishesh Krishi and Gram Udyog Yojana in respect of the same exported product/s.

Appendix 37A - List of Export Items allowed under VKGUY Scheme

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9. SERVICES EXPORTS

With the new Foreign Trade Policy, the Government of India has aimed to accelerate the growth in export of services so as to create a powerful and unique ‘Served from India’ brand.

In light of the above, all Service providers who have a total foreign exchange earning or earning in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI, of at least Rs.10 lakhs in the preceding or current financial year shall be eligible to qualify for duty credit scrip.

They shall be entitled to duty credit equivalent to 10% of the foreign exchange earned by them in the preceding financial year.

Duty credit entitlement may be used for import of any capital goods including spares, office equipment and professional equipment, office furniture and consumables, provided it is part of their main line of business.

Appendix 10 - List of Eligible Services

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10. 100% EOU, SEZ, etc.

Units undertaking to export their entire production of goods and services (except permissible sales in the DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP) Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) scheme for manufacture of goods, including repair, re-making, reconditioning, re-engineering and rendering of services. Trading units, however, are not covered under these schemes.

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs.

SEZ units may be set up for manufacture of goods and rendering of services.

Goods and services going into the SEZ area from DTA shall be treated as exports and goods coming from the SEZ area into DTA shall be treated as if these are being imported.

The Income Tax exemption previously available to 100% EOUs u/s 10B of the IT Act, till 31.03.2009 has been extended for one more year.

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1. DUTY EXEMPTION SCHEMES

A Duty Free Import Authorisation is issued to allow duty free import of inputs which are used in the manufacture of the export product (making normal allowance for wastage), and fuel, energy, catalyst etc. which are consumed or utilised in the course of their use to obtain the export product.

The Authorisation shall be issued on the basis of inputs and export items given under Standard Input and Output Norms (SION). The import entitlement shall be limited to the quantity mentioned in SION.

Such Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s)

A minimum 20% value addition shall be required for issuance of such Authorisation

Transferability

Conditional

Actual User Clause

Value Addition

Minimum 20%

Positive Value Addition

Basis of Application

Only SION Based

SION or Self Declared Basis

The capital goods shall include spares (including refurbished/ reconditioned spares), tools, jigs, fixtures, dies and moulds. EPCG Authorisation may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the authorisation holder.

An EPCG authorisation can also be issued for import of capital goods for supply to projects notified by the Central Board of Excise and Customs under wherein the basic customs duty on imports is 10% with a CVD of 14%.

Payment of Duty under EPCG Scheme, through debit of DEPB or other duty credit scrips would be allowed w.e.f. 01.01.2009

“Deemed Exports" refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange

Deemed exports shall be eligible for any / all of the following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to the terms and conditions as given in Handbook (Vol. I) viz.:--

Export House (EH)

20

Star Export House (SEH)

100

Trading House (TH)

500

Star Trading House (STH)

2500

Premier Trading House (PTH)

10000

Target Plus Incentive previously available to Status Holders stands abolished for exports from 01.04.2006 vide Notification No: 57 (RE-2005)/2004-2009 dt: 31.03.2006. Relevant paragraph in the policy stands deleted.

The objective of the Focus Market Scheme is to offset the high freight cost and other disabilities to select international markets with a view to enhance our export competitiveness to these countries.

Exports of all products to the notified countries shall be entitled for duty credit scrip equivalent to 2.5% of the FOB value of exports for each licensing year commencing from 1st April, 2006. The scrip and the items imported against it would be freely transferable.

Under the Scheme, export to all countries as specified in the Handbook of Procedures (Vol. I) shall qualify for export benefits with certain exceptions as outlined.

The Duty Credit may be used for import of inputs or goods including capital goods, provided the same is freely importable under ITC (HS).

Exporters shall have the option to apply for benefit either under the Focus Market Scheme or under the Focus Product Scheme or under Vishesh Krishi and Gram Udyog Yojana in respect of the same exported product/s.

The objective of the Focus Product Scheme is to incentivise export of such products which have high employment intensity in rural and semi urban areas so as to offset the inherent infrastructure inefficiencies and other associated costs involved in marketing of these products.

Exports of notified products to all countries shall be entitled for duty credit scrip equivalent to 1.25% of the FOB value of exports for each licensing year commencing from 1st April, 2006. The scrip and the items imported against it would be freely transferable.

Under the Scheme, export of such products as specified in the Handbook of Procedures (Vol. I) shall qualify for export benefits with certain exceptions as outlined.

The Duty Credit may be used for import of inputs or goods including capital goods, provided the same is freely importable under ITC (HS).

Exporters shall have the option to apply for benefit either under the Focus Market Scheme or under the Focus Product Scheme or under Vishesh Krishi and Gram Udyog Yojana in respect of the same exported product/s.

Duty scrip benefits are granted with aim to compensate high transport costs. Exporters of notified products shall be entitled for duty credit scrip equivalent to 5.00% of the FOB value of exports. The scrip and the items imported against it would be freely transferable.

All Status Holders shall be incentivised with duty credit script equal to 10% of FOB value of agricultural exports which can be used for duty free import / procurement of capital goods related to infrastructure meant for agro-processing to promote agricultural exports.

Under the Scheme, export of such products as specified in the Handbook of Procedures (Vol. I) shall qualify for export benefits with certain exceptions as outlined.

The Duty Credit may be used for import of inputs or goods including capital goods, provided the same is freely importable under ITC (HS).

Exporters shall have the option to apply for benefit either under the Focus Market Scheme or under the Focus Product Scheme or under Vishesh Krishi and Gram Udyog Yojana in respect of the same exported product/s.

With the new Foreign Trade Policy, the Government of India has aimed to accelerate the growth in export of services so as to create a powerful and unique ‘Served from India’ brand.

They shall be entitled to duty credit equivalent to 10% of the foreign exchange earned by them in the preceding financial year.

Duty credit entitlement may be used for import of any capital goods including spares, office equipment and professional equipment, office furniture and consumables, provided it is part of their main line of business.

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. SEZ units may be set up for manufacture of goods and rendering of services.

Goods and services going into the SEZ area from DTA shall be treated as exports and goods coming from the SEZ area into DTA shall be treated as if these are being imported.

The Income Tax exemption previously available to 100% EOUs u/s 10B of the IT Act, till 31.03.2009 has been extended for one more year.

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs.

SEZ units may be set up for manufacture of goods and rendering of services.