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INTERNATIONAL BUSINESS

DUTY EXEMPTION SCHEME

AND TAX CONCESSIONS

Duty Exemption Scheme

Duty exemption scheme is an important

instrument for boosting exports.

The duty exemption scheme enables import

of inputs required for export production.

DUTY EXEMPTION SCHEME

DUTY FREE LICENCE DUTY ENTITLEMENT PASSBOOK

ADVANCE LICENCE

ADVANCE INTERMEDIATE LICENCE

SPECIAL IMPREST LICENCE

Duty Free Licence Advance licence Advance intermediate licence Special imprest licence

Advance Licence An advance licence is issued under duty exemption

scheme to allow import of inputs which are physically

incorporated in the export product.

Advance licence is granted to merchant exporter or export

manufactures for the import of input required for the

manufacture of goods without the payment of basic

customs duty with a corresponding export obligation based

on the value and quantity of export product.

Advance licence can be issued for :

1) Physical exports

2) Intermediate supplies

3) Deemed exports

An Advance Licence contains:

The names and description of items to be imported and

exported/supplied.

The quantity of each item to be imported or wherever the

quantity cannot be indicated, the value of the item shall be

indicated.

The aggregate CIF value of imports.

The FOB/FOR value and quantity of exports/supplies.

Conditions:

Manufacture exporter.

Merchant exporter, where the exporter

agrees to the endorsement of names of

supporting manufacturers on the relevant

duty exemption entitlement certificate.

Advance Intermediate Licence It is granted to manufacturer exporter for the

import of inputs required in the manufacture

of the goods to be supplied to the ultimate

exporter holding an advance licence/special

impress licence.

Special Imprest Licence

It is granted to the manufacturer/exporter for

the import of the inputs required in the

manufacture of goods to be supplied to EOUs /

EPZs / STPs / EHTPs for supply of capital

goods to the holders of licence under zero duty

EPCG scheme.

Duty Entitlement Pass Book

DEPB (Duty Entitlement Pass Book ) is an

export incentive scheme of Indian

government provided to Exporters in India.

Notified on 1/4/1997,

DEPB Scheme consisted of (a) Post-export

DEPB and (b) Pre-export DEPB.

The pre-export DEPB scheme was abolished w.e.f.

1/4/2000.

Under the post-export DEPB, which is issued after exports,

the exporter is given a duty entitlement Pass Book Scheme

at a pre-determined credit on the FOB value.

DEPB rates allows import of any items except the items

which are otherwise restricted for imports.

Diamond Gem & Jewellery Export

Promotion Schemes Exporters of gem and jewellery are eligible to

import their input by obtaining Reple (REP)

license and Diamond imprest licence for the

licensing authorities.

Tax concession Complete or partial exemption from taxes enjoyed by legal

and physical persons.

Tax concessions are established by the state In the socialist countries factors like form of ownership ,size

and source of income and personal tax paying category are taken into account in determining tax concessions.

Tax concessions are established to stimulate particular type

of production or manufacturing

Sales Tax/VAT Exemption

VAT at zero rate and full credit of input tax is

also available to a dealer directly selling to an

exporter provided the same goods are

actually exported

The exporter needs to provide the following documents as evidence of goods exported:

Copy of export contract or order from a foreign buyer

Copy of the customs clearance certificate

Copy of the commercial invoice issued to the foreign buyer

Copy of Bill of Lading/Air-Way Bill

Proof of payment from the foreign purchaser or letter of credit

Excise Exemption Excise is a tax on production or manufacture of

goods. It is a duty levied on the production of goods

and the liability of payment of excise duty arises

immediately upon manufacture of goods. In India,

excise duty is governed by the provisions of the

Central Excise Act, 1944.

Income Tax Concessions

Under Section 10A of the Income Tax Act,

1961 undertaking operating from a Special

Economic Zone (SEZ ) that manufactures

articles/things or computer software are

eligible for deduction of export profits.

For undertaking commencing operation from

the notified Special Economic Zones (SEZs) on

or after 1st April, 2002, the tax holiday is

available for a total period of seven assessment

years, comprising of a deduction of 100% of

export for five years followed by deduction of

50% of export profits for subsequent two years.

Import Concessions

The Government of India has several

schemes in place that allow the exporters to

import inputs/ capital goods at concessional

rates of import duty.

The schemes are discussed below:

Export Promotion Capital Goods Scheme

(EPCG)

Duty Free Import Authorisation Scheme

Duty Exemption Passbook Scheme (DEPB)

Duty Free Import Authorization Scheme

Conclusion

Reference

International Trade &Financial Environment

-M.K.Bhat

International Business

-Francis Cherunilam