Foreign Trade Policy27th August 2009 - 31st March 2014

Government of IndiaMinistry of Commerce and Industry

Department of Commerce

Website: http://dgft.gov.in

ii

iii

TO BE PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY PART-II, SECTION-3, SUB SECTION (ii)

GOVERNMENT OF INDIA

MINISTRY OF COMMERCE AND INDUSTRYDEPARTMENT OF COMMERCE

NOTIFICATION No. 1/2009-2014

NEW DELHI, THE 27th August,2009

In exercise of powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act,1992 (No.22 of 1992) read with paragraph 1.2 of the Foreign Trade Policy, 2009-2014, the Central Government hereby notifies the Foreign Trade Policy, 2009-2014 as contained in Annexure to this notification. The Policy shall come into force w.e.f. 27th August, 2009.

This issues in Public interest.

( R. S. Gujral )Director General of Foreign Trade and

Ex Officio Additional Secretary to the Government of India

(Issued from F.No. 01/94/180/Foreign Trade Policy/AM10/PC-4)

iv

v

FOREIGN TRADE POLICY 2009-14

FOREWORD

The UPA Government has assumed office at a challenging time when the entire world is facing an unprecedented economic slow-down. The year 2009 is witnessing one of the most severe global recessions in the post-war period. Countries across the world have been affected in varying degrees and all major economic indicators of industrial production, trade, capital flows, unemployment, per capita investment and consumption have taken a hit. The WTO estimates project a grim forecast that global trade is likely to decline by 9% in volume terms and the IMF estimates project a decline of over 11%. The recessionary trend has huge social implications. The World Bank estimate suggests that 53 million more people would fall into the poverty net this year and over a billion people would go chronically hungry.

Though India has not been affected to the same extent as other economies of the world, yet our exports have suffered a decline in the last 10 months due to a contraction in demand in the traditional markets of our exports. The protectionist measures being adopted by some of these countries have aggravated the problem. After four clear quarters of recession there is some sign of a turnaround and the emergence of ‘green shoots’, though I would be hesitant to hazard a guess on the nature and extent of this recovery and the time the major economies will take to return to their pre-recession growth levels.

Announcing a Foreign Trade Policy in this economic climate is indeed a daunting task. We cannot remain oblivious to declining demand in the developed world and we need to set in motion strategies and policy measures which will catalyse the growth of exports.

vi

Before defining the objectives of the new policy it would be useful to take stock of our achievements in the foreign trade over the last 5 years. The foreign trade policy announced by the UPA Government in 2004 had set two objectives, namely, (i) to double our percentage share of global merchandize trade within 5 years and (ii) use trade expansion as an effective instrument of economic growth and employment generation. Looking back, we can say with satisfaction that the UPA Government has delivered on its promise.

Agriculture and industry has shown remarkable resilience and dynamism in contributing to a healthy growth in exports.

In the last five years our exports witnessed robust growth to reach a level of US$ 168 billion in 2008-09 from US$ 63 billion in 2003-04. Our share of global merchandise trade was 0.83% in 2003; it rose to 1.45% in 2008 as per WTO estimates. Our share of global commercial services export was 1.4% in 2003; it rose to 2.8% in 2008. India’s total share in goods and services trade was 0.92% in 2003; it increased to 1.64% in 2008. On the employment front, studies have suggested that nearly 14 million jobs were created directly or indirectly as a result of augmented exports in the last five years.

The short term objective of our policy is to arrest and reverse the declining trend of exports and to provide additional support especially to those sectors which have been hit badly by recession in the developed world. We would like to set a policy objective of achieving an annual export growth of 15% with an annual export target of US$ 200 billion by March 2011. In the remaining three years of this Foreign Trade Policy i.e. upto 2014, the country should be able to come back on the high export growth path of around 25% per annum. By 2014, we expect to double India’s exports of goods and services. The long term policy objective for the Government is to double India’s share in global trade by 2020.

In order to meet these objectives, the Government would follow a mix of policy measures including fiscal incentives, institutional changes, procedural rationalization, enhanced market access across the world and diversification of export markets. Improvement in infrastructure related to exports; bringing down transaction costs, and providing full refund of all indirect taxes and

vii

levies, would be the three pillars, which will support us to achieve this target. Endeavour will be made to see that the Goods and Services Tax rebates all indirect taxes and levies on exports.

At this juncture, it is our endeavour to provide adequate confidence to our exporters to maintain their market presence even in a period of stress. A Special thrust needs to be provided to employment intensive sectors which have witnessed job losses in the wake of this recession, especially in the fields of textile, leather, handicrafts, etc.

We want to provide a stable policy environment conducive for foreign trade and we have decided to continue with the DEPB Scheme upto December 2010 and income tax benefits under Section 10(A) for IT industry and under Section 10(B) for 100% export oriented units for one additional year till 31st March 2011. Enhanced insurance coverage and exposure for exports through ECGC Schemes has been ensured till 31st March 2010. We have also taken a view to continue with the interest subvention scheme for this purpose.

We need to encourage value addition in our manufactured exports and towards this end, have stipulated a minimum 15% value addition on imported inputs under advance authorization scheme.

It is important to take an initiative to diversify our export markets and offset the inherent disadvantage for our exporters in emerging markets of Africa, Latin America, Oceania and CIS countries such as credit risks, higher trade costs etc., through appropriate policy instruments. We have endeavored to diversify products and markets through rationalization of incentive schemes including the enhancement of incentive rates which have been based on the perceived long term competitive advantage of India in a particular product group and market. New emerging markets have been given a special focus to enable competitive exports. This would of course be contingent upon availability of adequate exportable surplus for a particular product. Additional resources have been made available under the Market Development Assistance Scheme and Market Access Initiative Scheme. Incentive schemes are being rationalized to identify leading products which would catalyze the next phase of export growth.

viii

As part of our policy of market expansion, we have signed a Comprehensive Economic Partnership Agreement with South Korea which will give enhanced market access to Indian exports. We have also signed a Trade in Goods Agreement with ASEAN which will come in force from January 01, 2010, and will give enhanced market access to several items of Indian exports. These trade agreements are in line with India’s Look East Policy. We have also concluded the Mercosur Preferential Trade Agreement. It shall be our endeavour to deepen our trade engagement with other major economic groupings in the world.

The Government seeks to promote Brand India through six or more ‘Made

in India’ shows to be organized across the world every year.

In the era of global competitiveness, there is an imperative need for Indian exporters to upgrade their technology and reduce their costs. Accordingly, an important element of the Foreign Trade Policy is to help exporters for technological upgradation. Technological upgradation of exports is sought to be achieved by promoting imports of capital goods for certain sectors under EPCG at zero percent duty.

Under the present Foreign Trade Policy, Government recognizes exporters based on their export performance and they are called ‘status holders’. For technological upgradation of the export sector, these status holders will be permitted to import capital goods duty free (through Duty Credit Scrips equivalent to 1% of their FOB value of exports in the previous year), of specified product groups. This will help them to upgrade their technology and reduce cost of production.

For upgradation of export sector infrastructure, ‘Towns of Export Excellence’ and units located therein would be granted additional focused support and incentives.

The policy is committed to support the growth of project exports. A high level coordination committee is being established in the Department of Commerce to facilitate the export of manufactured goods / project exports creating synergies in the line of credit extended through EXIM Bank for new and emerging markets. This committee would have representation from the

ix

Ministry of External Affairs, Department of Economic Affairs, EXIM Bank and the Reserve Bank of India. We would like to encourage production and export of ‘green products’ through measures such as phased manufacturing programme for green vehicles, zero duty EPCG scheme and incentives for exports.

To enable support to Indian industry and exporters, especially the MSMEs, in availing their rights through trade remedy instruments under the WTO framework, we propose to set up a Directorate of Trade Remedy Measures.

In order to reduce the transaction cost and institutional bottlenecks, the e-trade project would be implemented in a time bound manner to bring all stake holders on a common platform. Additional ports/locations would be enabled on the Electronic Data Interchange over the next few years. An Inter-Ministerial Committee has been established to serve as a single window mechanism for resolution of trade related grievances.

These are difficult times and we have set an ambitious goal for ourselves. I am sure that the industry and the Government, working in tandem, will be able to ensure that the Indian exports become globally competitive and that we are able to achieve the target, which we have set for ourselves.

(Anand Sharma)Minister of Commerce & Industry

Government of IndiaNew DelhiAugust 27, 2009

x

CONTENTS

CHAPTER SUBJECT Page

GLOSSARY 1 1A LEGAL FRAMEWORK 5 1B SPECIAL FOCUS INITIATIVES 7 1C BOARD OF TRADE 15 2 GENERAL PROVISIONS REGARDING 17 IMPORTS AND EXPORTS

3 PROMOTIONAL MEASURES 29 4 DUTY EXEMPTION / REMISSION SCHEMES 45 5 EXPORT PROMOTION CAPITAL GOODS SCHEME 59 6 EXPORT ORIENTED UNITS (EOUs), ELECTRONICS 67 HARDWARE TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS (STPs) AND BIO-TECHNOLOGY PARKS (BTPs) 7 SPECIAL ECONOMIC ZONES 85 7A FREE TRADE & WAREHOUSING ZONES 85 8 DEEMED EXPORTS 87 9 DEFINITIONS 93

�

GLOSSARY (ACRONYMS)

Acronym Explanation

ACU AsianClearingUnion

AEZ AgriExportZone

ANF AayaatNiryaatForm

ARO AdvanceReleaseOrder

ASIDE AssistancetoStatesforInfrastructureDevelopmentofExports

BG BankGuarantee

BIFR BoardofIndustrialandFinancialReconstruction

BOA BoardofApproval

BOT BoardofTrade

BRC BankRealisationCertificate

BTP BiotechnologyPark

CBEC CentralBoardofExciseandCustoms

CCP CustomsClearancePermit

CEA CentralExciseAuthority

CEC CharteredEngineerCertificate

CIF Cost,Insurance&Freight

CIS CommonwealthofIndependentStates

CoD CashonDelivery

CoO CertificateofOrigin

CVD CountervailingDuty

DA DocumentagainstAcceptance

DoBT DepartmentofBioTechnology

DC DevelopmentCommissioner

DEPB DutyEntitlementPassbook

DFIA DutyFreeImportAuthorisation

DFRC DutyFreeReplenishmentCertificate

DGCI&S DirectorGeneral,CommercialIntelligence&Statistics.

DGFT DirectorGeneralofForeignTrade

DIPP DepartmentofIndustrialPolicy&Promotion

�

DoC DepartmentofCommerce

DoE DepartmentofElectronics

DoIT DepartmentofInformationTechnology

DoR DepartmentofRevenue

DoT DepartmentofTourism

DTA DomesticTariffArea

EDI ElectronicDataInterchange

EEFC ExchangeEarners’ForeignCurrency

EFC EximFacilitationCommittee

EFT ElectronicFundTransfer

EH ExportHouse

EHTP ElectronicHardwareTechnologyPark

EIC ExportInspectionCouncil

EO ExportObligation

EODC ExportObligationDischargeCertificate

EOP ExportObligationPeriod

EOU ExportOrientedUnit

EPC ExportPromotionCouncil

EPCG ExportPromotionCapitalGoods

EPO EngineeringProcessOutsourcing

FDI ForeignDirectInvestment

FIEO FederationofIndianExportOrganisation

FIRC ForeignExchangeInwardRemittanceCertificate

FMS FocusMarketScheme

FOB FreeOnBoard

FPS FocusProductScheme

FT(D&R)Act ForeignTrade(Development&Regulation)Act,�99�(��of�99�)

FTDO ForeignTradeDevelopmentOfficer

FTP ForeignTradePolicy

GATS GeneralAgreementonTradeinServices

GRC GrievanceRedressalCommittee

HACCP HazardAnalysisandCriticalControlProcess

HBPv� HandbookofProcedures(Vol.�)

�

HBPv� HandbookofProcedures(Vol.�)

ICD InlandContainerDepot

ICM IndianCommercialMission

IEC ImporterExporterCode

ISO InternationalStandardsOrganisation

ITC(HS) IndianTradeClassification (HarmonisedSystem)Classification forExport&ImportItems

ITPO IndiaTradePromotionOrganisation

LoC LineofCredit

LoI LetterofIntent

LoP LetterofPermit

LUT LegalUndertaking

MAI MarketAccessInitiative

MDA MarketDevelopmentAssistance

MEA MinistryofExternalAffairs

MoD MinistryofDefence

MoF MinistryofFinance

NC NormsCommittee

NFE NetForeignExchange

NOC NoObjectionCertificate

PRC PolicyRelaxationCommittee

PTH PremierTradingHouse

PSU PublicSectorUndertaking

R&D ResearchandDevelopment

RA RegionalAuthority

RBI ReserveBankofIndia

REP Replenishment

RCMC Registration-cum-MembershipCertificate

RSCQC RegionalSub-CommitteeonQualityComplaints

S/B ShippingBill

SEH StarExportHouse

SEICMM SoftwareEngineersInstitute’sCapabilityMaturityModel

SEZ SpecialEconomicZone

�

SFIS ServedfromIndiaScheme

SIA SecretariatforIndustrialAssistance

SION StandardInputOutputNorms

SSI SmallScaleIndustry

STE StateTradingEnterprise

STH StarTradingHouse

STP SoftwareTechnologyPark

TEE TownsofExportExcellence

TH TradingHouse

TRA TelegraphicReleaseAdvice

TRQ TariffRateQuota

VA ValueAddition

VKGUY VisheshKrishiandGramUdyogYojana

WHOGMP WorldHealthOrganisationGoodManufacturingPractices

�

CHAPTER- 1 A

LEGAL FRAMEWORK

Foreword �.� TheForewordspellsoutthebroadframework

Duration �.� TheForeignTradePolicy�009-�0��(FTP),incorporatingprovisions relating to export and import of goods andservices, shall come into force with effect from �7thAugust,�009andshallremaininforceupto��stMarch,2014unlessotherwisespecified.Allexportsandimportsupto�6thAugust�009shallbeaccordinglygovernedbytheFTP�00�-�009.

Amendment �.� Central Government reserves right in public interestto make any amendments by notification to thisPolicy in exerciseofpowers conferredbySection�ofFT(D&R)Act.

Transitional �.� AuthorisationissuedbeforecommencementofFTPshallArrangements continue to be valid for the purpose and duration for

which suchAuthorisation was issued, unless otherwisestipulated

�.� In case an export or import that is permitted freelyunder FTP is subsequently subjected to any restrictionor regulation, such export or import will ordinarily bepermittednotwithstandingsuchrestrictionorregulation,unless otherwise stipulated, provided that shipmentof export or import is made within original validitywith respect to available balance and time period ofan irrevocable commercial letter of credit, establishedbeforedateofimpositionofsuchrestriction.

However for operationalizing such irrevocablecommercial letter of credit the applicant shall haveto register the Letter of Credit and contract with theconcerned RA within �� days of the issue of any suchrestrictionorregulation.

6

7

CHAPTER- 1 B

SPECIAL FOCUS INITIATIVES

Special Focus �B.� With a view to continously increasing our percentageshare of global trade and expanding employmentopportunities, certain special focus initiatives havebeen identified/continued for Market Diversification,Technological Upgradation, Support to status holders,Agriculture,Handlooms,Handicraft,Gems&Jewellery,Leather, Marine, Electronics and IT Hardwaremanufacturing Industries, Green products, Exportsof products from North-East, Sports Goods and Toyssectors. Government of India shall make concertedefforts to promote exports in these sectors by specificsectoralstrategiesthatshallbenotifiedfromtimetotime.

FurtherSectoral Initiatives inother sectorswillalsobe

announcedfromtimetotime.

(i) Market Diversification

Weaker demand in developed economies,triggeredbyfallingassetpricesandincreasedeconomicuncertaintyhaspulleddownthegrowthofIndia’sexportsto developed countries. There are no clear signals asto when the markets in developed countries wouldrevive. To insulate Indian exports from the decline indemand from developed countries, in this Policy focusisondiversificationof Indianexports toothermarkets,speciallythoselocatedinLatinAmerica,Africa,partsofAsia andOcenia. To achieve diversification of Indianexports,followinginitiativeshavebeentakenunderthisPolicy.

(a) �6 new countries have been included within theambitofFocusMarketScheme.

(b) TheincentivesprovidedunderFocusMarketSchemehavebeenincreasedfrom�.�%to�%.

(c) Therehasbeen a significant increase in theoutlayunder ‘Market Linked Focus Product Scheme’by inclusion of more markets and products. ThisensuressupportforexportstoallcountriesinAfrica

�

andLatinAmerica.

(ii) Technological Upgradation

Tousherinthenextphaseofexportgrowth,Indianeeds to move up in the value chain of export goods.Thisobjective issought tobeachievedbyencouragingtechnologicalupgradationofourexportsector.AnumberofinitiativeshavebeentakeninthisPolicytofocusontechnologicalupgradation;suchinitiativesinclude:

(a) EPCGSchemeatzerodutyhasbeenintroducedforcertain engineering products, electronic products,basic chemicals and pharmaceuticals, apparel andtextiles, plastics, handicrafts, chemicals and alliedproductsandleatherandleatherproducts.

(b) Theexisting�%EPCGSchemehasbeenconsiderablysimplified,toeaseitsusagebytheexporters.

(c) To encourage value added manufacture export, aminimum ��% value addition on imported inputsunder Advance Authorisation Scheme has beenstipulated.

(d) A number of products including automobiles andother engineering products have been included forincentivesunderFocusProduct,andMarketLinkedFocusProductSchemes.

(e) StepstoencourageProjectExportsshallbetaken.

(iii) Support to status holders

The Government recognized ‘Status Holders’contribute approx. 60% of India’s goods exports. Toincentivise and encourage the status holders, as wellas to encourage Technological upgradation of exportproduction, additional duty credit scrip @ �% ofthe FOB of past export shall be granted for specifiedproductgroupsincludingleather,specificsubsectorsinengineering,textiles,plastics,handicraftsandjute.Thisdutycreditscripcanbeusedforimportofcapitalgoodsbythesestatusholders.Theimportedcapitalgoodsshallbesubjecttoactualusercondition.

9

(iv) Agriculture and Village Industry

(a) VisheshKrishiandGramUdyogYojana

(b) CapitalgoodsimportedunderEPCGwillbepermittedtobeinstalledanywhereinAEZ.

(c) Importofrestricteditems,suchaspanels,areallowedundervariousexportpromotionschemes.

(d) Import of inputs such as pesticides are permittedunderAdvanceAuthorisationforagroexports.

(e) New towns of export excellence with a thresholdlimitofRs150croreshallbenotified.

(f) Certain specifiedflowers, fruits andvegetables areentitledtoaspecialdutycreditscrip,inadditiontothenormalbenefitunderVKGUY.

(v) Handlooms

(a) Specific funds are earmarked under MAI / MDASchemeforpromotinghandloomexports.

(b) Dutyfreeimportentitlementofspecifiedtrimmingsandembellishmentsis�%ofFOBvalueofexportsduringpreviousfinancialyear.

c) Dutyfreeimportentitlementofhandknottedcarpetsamples is �% of FOB value of exports duringpreviousfinancialyear.

(d) Duty free import of old pieces of hand knottedcarpets on consignment basis for re-export afterrepairispermitted.

(e) New towns of export excellence with a thresholdlimitofRs150croreshallbenotified.

(f) Machinery and equipment for effluent treatmentplantsisexemptfromcustomsduty.

�0

(vi) Handicrafts

(a) Duty free import entitlement of tools, trimmingsandembellishments is�%ofFOBvalueofexportsduringpreviousfinancialyear.Entitlementisbroadbanded,andshallextendalsotomerchantexporterstiedupwithsupportingmanufacturers.

(b) HandicraftEPCisauthorized to import trimmings,embellishmentsandconsumablesonbehalfofthoseexporters forwhomdirectly importingmaynotbeviable.

(c) Specific funds are earmarked underMAI&MDASchemesforpromotingHandicraftexports.

(d) CVDisexemptedondutyfreeimportoftrimmings,embellishmentsandconsumables.

(e) New towns of export excellence with a reducedthresholdlimitofRs150croreshallbenotified.

(f) Machinery and equipment for effluent treatmentplantsareexemptfromcustomsduty.

(g) All handicraft exports would be treated as specialFocusproductsandentitledtohigherincentives.

(vii) Gems & Jewellery

(a) Import of gold of �k and above is allowed underreplenishment scheme subject to import beingaccompanied by an Assay Certificate specifyingpurity,weightandalloycontent.

(b) Duty Free Import Entitlement (based on FOBvalueof exportsduringpreviousfinancialyear)ofConsumablesandTools,for:

�. Jewellerymadeoutof:

(a) Precious metals (other than Gold &Platinum)–�%

(b) GoldandPlatinum–�%(c)RhodiumfinishedSilver–3%

��

�. CutandPolishedDiamonds–�%

(c) DutyfreeimportentitlementofcommercialsamplesshallbeRs.�00,000.

(d) Dutyfreere-importentitlementforrejectedjewelleryshallbe�%ofFOBvalueofexports.

(e) Import of Diamonds on consignment basis forCertification/Grading&re-exportbytheauthorizedoffices/agenciesofGemologicalInstituteofAmerica(GIA) in India or other approved agencies will bepermitted.

(f) PersonalcarriageofGems&Jewelleryproductsincaseofholding/participatinginoverseasexhibitionsincreasedtoUS$�millionandtoUS$�millionincaseofexportpromotiontours.

(g) Extensioninnumberofdaysforre-importofunsolditemsincaseofparticipationinanexhibitioninUSAincreasedto90days.

(h) In an endeavour to make India a diamondinternational tradinghub, it is planned to establish“DiamondBourse(s)”.

(viii) Leather and Footwear

(a) Duty free import entitlementof specified items is�% of FOB value of exports of leather garmentsduringprecedingfinancialyear.

(b) Duty free entitlement for import of trimmings,embellishments and footwear components forfootwear(leatheraswellassynthetic),gloves,travelbagsandhandbagsis�%ofFOBvalueofexportsofpreviousfinancialyear.Suchentitlementshallalsocover packing material, such as printed and non-printedshoeboxes,smallcartonsmadeofwood,tinorplasticmaterialsforpackingfootwear.

(c) Machinery and equipment for Effluent TreatmentPlantsshallbeexemptfrombasiccustomsduty.

(d) Re-export of unsuitable imported materials such

��

as raw hides & skins and wet blue leathers ispermitted.

(e) CVDisexemptedonliningandinterliningmaterialnotified at S.No 168 of Customs Notification No��/�00�dated0�.0�.�00�.

(f) CVD is exempted on raw, tanned and dressed furskinsfallingunderChapter��ofITC(HS).

(g) Re-exportofunsoldhides, skinsandsemifinishedleather shall be allowed from Public Bondedwarehouseat�0%oftheapplicableexportduty.

(ix) Marine Sector

(a) ImportsfortechnologicalupgradationunderEPCGin fisheries sector (except fishing trawlers, ships,boats and other similar items) exempted frommaintainingaverageexportobligation.

(b) Duty free import of specified specialised inputs /chemicalsandflavouringoilsisallowedtotheextentof 1% of FOB value of preceding financial year’sexport.

(c) To allow import of monofilament longline systemfor tuna fishing at a concessional rate of duty andBaitFishfortunafishingatNilduty.

(d) A self removal procedure for clearance of seafoodwaste is applicable subject to prescribed wastagenorms.

(e) Marine products are considered for VKGUYscheme.

(x) Electronics and IT Hardware Manufacturing Industries

(a) Expeditious clearance of approvals required fromDGFTshallbeensured.

(b) Exporters/AssociationswouldbeentitledtoutilizeMAI & MDA Schemes for promoting ElectronicsandITHardwareManufacturingindustryexports.

��

(xi) Sports Goods and Toys

(a) Duty free import of specified specialised inputsallowed to the extent of �% of FOB value ofprecedingfinancialyear’sexport.

(b) SportsgoodsandtoysshallbetreatedasaPrioritysectorunderMDA/MAIScheme. Specific fundswouldbeearmarkedunderMAI/MDASchemeforpromotingexportsfromthissector.

(c) ApplicationsrelatingtoSportsGoodsandToysshallbeconsideredforfasttrackclearancebyDGFT.

(d) SportsGoodsandToysaretreatedasspecialfocusproductsandentitledtohigherincentives.

(xii) Green products and technologies

Indiaaimstobecomeahubforproductionandexportofgreenproductsandtechnologies.Toachievethisobjective,specialinitiativewillbetakentopromotedevelopmentandmanufactureofsuchproductsandtechnologiesforexports.Tobeginwith,focuswouldbe on items relating to transportation, solar andwind power generation and other products as maybenotifiedwhichwillbeincentivizedunderRewardSchemesofChapter�ofFTP.

(xiii) Incentives for Exports from the North Eastern Region

Inordertogiveafilliptoexportsofproductsfromthenorth-easternStates,notifiedproductsofthisregionwould be incentivized under Reward Schemes ofChapter�ofFTP.

��

��

CHAPTER- 1 C

Board of Trade

Board of Trade �C.� BOThasaclearanddynamicroleinadvisinggovernment(BOT) onrelevantissuesconnectedwithForeignTrade.

Terms of Reference �C.� BOThasfollowingtermsofreference:

I To advise Government on Policy measures forpreparation and implementation of both short andlong term plans for increasing exports in the lightof emerging national and international economicscenarios;

II To review export performance of various sectors,identify constraints and suggest industry specificmeasurestooptimizeexportearnings;

III To examine existing institutional framework forimportsandexportsandsuggestpracticalmeasuresforfurtherstreamliningtoachievedesiredobjectives;

IV To review policy instruments and procedures forimportsandexportsandsuggeststepstorationalizeandchannelizesuchschemesforoptimumuse;

V ToexamineissueswhichareconsideredrelevantforpromotionofIndia’sforeigntrade,andtostrengtheninternational competitiveness of Indian goods andservices;and

VI To commission studies for furtherance of aboveobjectives.

Composition �C.� Commerce&IndustryMinisterwillbetheChairmanoftheBoardofTrade(BOT).Governmentshallalsonominateupto��persons,ofwhomatleast�0willbeexpertsintradepolicy.Inaddition,ChairmenofrecognizedEPCsandPresidentorSecretary-GeneralsofNationalChambersofCommercewillbeex-officiomembers.BOTwillmeetatleastonceeveryquarter.

�6

�7

CHAPTER-2

GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS

Exports and Imports �.� ExportsandImportsshallbefree,exceptwhereregulatedfree unless regulated byFTPoranyotherlawinforce.Theitemwiseexportand

importpolicyshallbe,asspecifiedinITC(HS)notifiedbyDGFT,asamendedfromtimetotime.

Import of rough diamond from Cote d’Ivoire shall beprohibitedincompliancetoParagraph6ofUNSecurityCouncilResolution(UNSCR)�6��(�00�).

Theimport/exportofroughdiamond(HSCode7�0��0,7�0���or7�0���)from/toVenezuelashallbeprohibitedin view of voluntary separation of Venezuela from theKimberley Process Certification Scheme (KPCS). NoKimberleyProcessCertificateshallbeaccepted/endorsed/issuedforimportandexportofroughdiamondsfrom/toVenezuela.

�.�.� Import/exportofarmsandrelatedmaterialfrom/toIraqshallbeprohibited.

�.�.� Directorindirectexportandimportoffollowingitems,whether or not originating in Democratic People’sRepublic of Korea (DPRK), to / from, DPRK isprohibited:

All items, materials equipment, goods and technologyincluding as set out in lists in documents S/�006/���,S/�006/���andS/�006/���(UnitedNationsSecurityCouncilDocuments)whichcouldcontributetoDPRK’snuclear-related,ballisticmissile-relatedorotherweaponsofmassdestruction-relatedprogrammes.

�.�.� Directorindirectexportandimportofallitems,materials,equipment,goodsandtechnologywhichcouldcontributetoIran’senrichment-related,reprocessingorheavywaterrelatedactivities,or todevelopmentofnuclearweapondelivery systems, as mentioned below, whether or notoriginatinginIran,to/fromIranisprohibited:

i) items, listed in INFCIRC/���/Rev�/Part I in

��

document S/�006/���, in Sections B.� to B.7 aswell asA.I and B.I except supply, sale or transferofequipmentcoveredbyB.Iwhensuchequipmentisforlightwaterreactorsandlow-enricheduraniumcoveredbyA.�.�whenitisincorporatedinassemblednuclearfuelelementsforsuchreactors;

ii) items listed in S/�006/��� except supply sale ortransferofitemscoveredby�9.A.�ofCategoryII.

Above-mentioned UN Security Council documents areaccessiblefromDGFTwebsite.

Compliance with Laws �.� Every exporter or importer shall comply with theprovisions of FT (D&R) Act, the Rules and Ordersmadethere-under,FTPandtermsandconditionsofanyAuthorisationgrantedtohim.AllimportedgoodsshallalsobesubjecttodomesticLaws,Rules,Orders,Regulations,technicalspecifications,environmentalandsafetynormsasapplicabletodomesticallyproducedgoods.Noimportor export of rough diamonds shall be permitted unlessaccompaniedbyKimberleyProcess (KP)Certificate asspecifiedbyGem&JewelleryEPC(GJEPC).

Interpretation of Policy �.� Ifanyquestionordoubtarisesinrespectofinterpretationof any provision contained in FTP, or classification ofanyiteminITC(HS)orHBP-v�orHBP-v�,orScheduleofDEPBRates(includingcontent,scopeorissueofanauthorizationthereunder)saidquestionordoubtshallbereferred toDGFTwhosedecision thereonshallbefinalandbinding.

Procedure �.� DGFT may, specify procedure to be followed for anexporter or importer or by any licensing or any othercompetent authority for purpose of implementingprovisionsofFT (D&R)Act, theRules and theOrdersmade there under and FTP. Such procedures shall bepublishedbymeansofaPublicNotice,andmay,inlikemanner,beamendedfromtimetotime.

Exemption from Policy �.� DGFTmaypasssuchordersorgrantsuchrelaxationor/ Procedure relief, as he may deem fit and proper, on grounds of

genuinehardshipandadverseimpactontrade.

DGFTmay,inpublicinterest,exemptanypersonorclassor category of persons from any provision of FTP or

�9

anyprocedureandmay,whilegrantingsuchexemption,imposesuchconditionsashemaydeemfit.Suchrequestmaybe consideredonly after consulting committees asunder:

Sl.No.

Description Committee

(i) Fixation/modificationofproductnormsunderallschemes

NormsCommittee

(ii) NexuswithCapitalGoods(CG)andbenefitsunderEPCGSchemes

EPCGCommittee

(iii) Allotherissues PolicyRelaxationCommittee(PRC)

Principles of Restriction 2.6 DGFTmay,throughanotification,adoptandenforceanymeasurenecessaryfor:-

i Protectionofpublicmorals.ii Protectionofhuman,animalorplantlifeorhealth.iii Protectionofpatents,trademarksandcopyrightsand

thepreventionofdeceptivepractices.iv Preventionofuseofprisonlabour.v Protectionofnationaltreasuresofartistic,historicor

archaeologicalvalue.vi Conservationofexhaustiblenaturalresources.vii Protectionoftradeoffissionablematerialormaterial

fromwhichtheyarederived;andviii Prevention of traffic in arms, ammunition and

implementsofwar.

Restricted Goods �.7 Anygoods,exportorimportofwhichisrestrictedunderITC(HS)maybeexportedorimportedonlyinaccordancewithanAuthorisationorintermsofapublicnoticeissuedinthisregard.

Terms and Conditions �.� EveryAuthorisationshallbevalidforprescribedperiodofof a licence / Certificate / validity and shall contain such terms and conditions asPermission / Authorisation maybespecifiedbyRAwhichmayinclude:

(a) Quantity,descriptionandvalueofgoods;(b) ActualUsercondition;(c) Exportobligation;(d) Valueadditiontobeachieved;and(e) Minimumexport/importprice.

�0

Authorisation / Licence �.9 NopersonmayclaimanAuthorizationasarightandDGFT/ Certificate / Permission orRAshallhavepowertorefusetograntorrenewthesamenot a Right inaccordancewithprovisionsofFT(D&R)Act,Rules

madethereunderandFTP.

Penalty �.�0 IfanAuthorisationholderviolatesanyconditionofsuchAuthorisationorfailstofulfillexportobligation,heshallbeliableforactioninaccordancewithFT(D&R)Act,theRulesandOrdersmadethereunder,FTPandanyotherlawfortimebeinginforce.

State Trading �.�� Any goods, import or export of which is governedthroughexclusiveorspecialprivilegesgrantedtoSTE(s),maybeimportedorexportedbySTE(s)asperconditionsspecified in ITC (HS). DGFTmay, however, grant anAuthorisationtoanyotherpersontoimportorexportanyofthesegoods.

Such STE(s) shall make any such purchases or salesinvolving imports or exports solely in accordance withcommercial considerations, including price, quality,availability, marketability, transportation and otherconditions of purchase or sale in a non discriminatorymanner and shall afford enterprises of other countriesadequate opportunity, in accordance with customarybusiness practices, to compete for participation in suchpurchasesorsales.

Importer-Exporter �.�� NoexportorimportshallbemadebyanypersonwithoutanCode (IEC) Number IECnumberunlessspecificallyexempted.AnIECnumber

shallbegrantedonapplicationbycompetentauthorityinaccordancewithprocedurespecifiedinHBPv1.

Trade with �.�� DGFTmayissueinstructionsorframeschemesasmaybeNeighbouring requiredtopromotetradeandstrengtheneconomictieswithCountries neighbouringcountries.

Transit Facility �.�� Transit of goods through India from / or to countriesadjacent to India shall be regulated in accordance withbilateral treatiesbetween India and those countries andwillbesubjecttosuchrestrictionsasmaybespecifiedbyDGFTinaccordancewithInternationalConventions.

Trade with Russia �.�� In case of trade with Russia under Debt Repaymentunder Debt- Agreement, DGFT may issue instructions or frameRepayment Agreement schemesasmayberequired,andanythingcontainedin

��

FTP,insofarasitisinconsistentwithsuchinstructionsorschemes,shallnotapply.

Actual User Condition �.�6 Capitalgoods,rawmaterials,intermediates,components,consumables,spares,parts,accessories,instrumentsandothergoods,whichareimportablewithoutanyrestriction,maybeimportedbyanyperson.

However,ifsuchimportsrequireanAuthorisation,actualuser alone may import such goods unless actual userconditionisspecificallydispensedwithbyRA.

Second Hand Goods �.�7 Allsecondhandgoods,exceptsecondhandcapitalgoods,shallberestrictedforimportsandmaybeimportedonlyinaccordancewithprovisionsofFTP,ITC(HS),HBPv�,PublicNoticeoranAuthorisationissuedinthisregard.

Import of second hand capital goods, includingrefurbished/re-conditionedsparesshallbeallowedfreely.However, second hand personal computers / laptops,photocopiermachines,airconditioners,dieselgeneratingsetswillonlybeallowedagainstalicence.

Importof re-manufacturedgoodsshallbeallowedonlyagainstalicence.

Scrap/Waste in SEZ �.�7A Any waste or scrap or remnant including any form ofmetallicwaste&scrapgeneratedduringmanufacturingorprocessingactivitiesofanSEZUnit/Developer/Co-developershallbeallowedtobedisposedinDTAfreelysubjecttopaymentofapplicableCustomsDuty.

Import of samples �.�� ImportofsamplesshallbegovernedbyHBPv�.

Import of Gifts �.�9 ImportofgiftsshallbepermittedwheresuchgoodsareotherwisefreelyimportableunderFTP.Inothercases,aCustomsClearancePermit(CCP)shallberequiredfromDGFT.

Passenger Baggage 2.20 Bonafide household goods and personal effects maybe importedaspartofpassengerbaggageasper limits,termsandconditions thereof inBaggageRulesnotifiedbyMinistryofFinance.

Samplesofsuchitemsthatareotherwisefreelyimportableunder FTP may also be imported as part of passenger

��

baggagewithoutanAuthorisation.

Exporterscomingfromabroadarealsoallowedtoimportdrawings, patterns, labels, price tags, buttons, belts,trimmingandembellishmentsrequiredforexport,aspartoftheirpassengerbaggagewithoutanAuthorisation.

Import on Export �.�� Freely exportable new or second hand capital goods,basis equipments,components,partsandaccessories,containers

meant for packing of goods for exports, jigs, fixtures,diesandmouldsmaybeimportedforexportwithoutanAuthorisationonexecutionofLUT/BGwithCustomsAuthorities.

Re-import of goods �.�� Capital goods, equipments, components, parts andrepaired abroad accessories, whether imported or indigenous, except

thoserestrictedunderITC(HS)maybesentabroadforrepairs, testing, quality improvement or upgradation orstandardizationoftechnologyandre-importedwithoutanAuthorisation.

Import of goods used �.�� Aftercompletionofprojectsabroad,projectcontractorsin projects abroad may import, without an Authorisation used goods

includingcapitalgoodsprovidedtheyhavebeenusedforatleastoneyear.

Sale on High Seas �.�� SaleofgoodsonhighseasforimportintoIndiamaybemadesubjecttoFTPoranyotherlawinforce.

Import under Lease �.�� PermissionofRAisnotrequiredforimportofcapitalgoodsFinancing underleasefinancing.

Clearance of Goods �.�6 Goodsalreadyimported/shipped/arrived,inadvance,butfrom Customs notclearedfromCustomsmayalsobeclearedagainstan

Authorisationissuedsubsequently.

Execution of BG / LUT �.�7 Wherever any duty free import is allowed or whereotherwise specifically stated, importer shall executeprescribed LUT / BG / Bond with Customs Authoritybeforeclearanceofgoods.Incaseofindigenoussourcing,Authorisationholder shall furnishLUT /BG /Bond toRAconcernedbeforesourcingmaterialfromindigenoussupplier/nominatedagencyasprescribedinHBPv�.

Private / Public Bonded �.�� Private/PublicbondedwarehousesmaybesetupinDTAWarehouses for Imports as per terms and conditions of notification issued by

��

DoR.

Anypersonmay importgoodsexceptprohibited items,arms and ammunition, hazardous waste and chemicalsandwarehousetheminsuchbondedwarehouses.

Such goods may be cleared for home consumptionin accordance with provisions of FTP and againstAuthorisation, wherever required. Customs duty asapplicableshallbepaidatthetimeofclearanceofsuchgoods.

If such goods are not cleared for home consumptionwithinaperiodofoneyearorsuchextendedperiodasthecustomauthoritiesmaypermit, importer of suchgoodsshallre-exportthegoods.

Free Exports �.�9 AllgoodsmaybeexportedwithoutanyrestrictionexcepttoextentsuchexportsareregulatedbyITC(HS)oranyotherprovisionofFTPoranyotherlawfortimebeinginforce.

DGFT may, however, specify through a public noticesuchtermsandconditionsaccordingtowhichanygoods,not included in ITC (HS),maybe exportedwithout anAuthorisation.

Export of Samples �.�0 Export of samples and Free of charge goods shall begovernedbyprovisionsgiveninHBPv�.

Export of Passenger 2.31 BonafidepersonalbaggagemaybeexportedeitheralongBaggage with passenger or, if unaccompanied, within one year

beforeorafterpassenger’sdeparturefromIndia.However,itemsmentionedasrestrictedinITC(HS)shallrequireanAuthorisation.GovernmentofIndiaofficialsproceedingabroadonofficialpostingsshall,however,bepermittedto carry alongwith their personal baggage, food items(free, restrictedorprohibited) strictly for theirpersonalconsumption.

Export of Gifts �.�� Goods, including edible items, of value not exceedingRs.�,00,000/-inalicensingyear,maybeexportedasagift.

However, items mentioned as restricted for exportsin ITC(HS)shallnotbeexportedasagift,withoutan

��

Authorisation.

Export of Spares �.�� Warranty spares (whether indigenous or imported) ofplant, equipment, machinery, automobiles or any othergoods,(exceptthoserestrictedunderITC(HS))maybeexportedalongwithmainequipmentorsubsequentlybutwithincontractedwarrantyperiodofsuchgoodssubjecttoapprovalofRBI.

Third Party Exports 2.34 Third party exports, as defined in Chapter 9 shall beallowedunderFTP.

Export of Imported �.�� Goodsimported,inaccordancewithFTP,maybeexportedGoods insameorsubstantiallysameformwithoutanAuthorisation

provided that item to be imported or exported is notrestrictedforimportorexportinITC(HS).

Exportsofsuchgoodsimportedagainstpaymentinfreelyconvertiblecurrencywouldbepermittedagainstpaymentinfreelyconvertiblecurrency.

�.�6 Goods, including those mentioned as restricted forimport(exceptprohibiteditems)maybeimportedunderCustomsBondforexportinfreelyconvertiblecurrencywithout an Authorisation provided that item is freelyexportable without any conditionality / requirement ofLicence/permissionasmayberequiredunderITC(HS)ScheduleII.

2.36A Hides,SkinsandsemifinishedleathermaybeimportedinthePublicBondedwarehouseforthepurposeofDTAsaleandtheunsolditemsthereofcanbere-exportedfromsuchbondedwarehousesat�0%oftheapplicableexportduty. However, this facility shall not be allowed forimportunderPrivateBondedwarehouse.

Export of Replacement �.�7 Goods or parts thereof on being exported and foundGoods defective / damaged or otherwise unfit for usemay be

replacedfreeofchargeby theexporterandsuchgoodsshall be allowed clearance by Customs authorities,provided that replacement goods are not mentioned asrestricteditemsforexportsinITC(HS).

Export of Repaired �.�� Goodsorparts,exceptrestrictedunderITC(HS)thereof,Goods on being exported and found defective, damaged or

��

otherwiseunfit for usemaybe imported for repair andsubsequentre-export.

Such goods shall be allowed clearance withoutan Authorisation and in accordance with customsnotification.

Private Bonded �.�9 PrivatebondedwarehousesexclusivelyforexportsmayWarehouses for Exports be set up in DTA as per terms and conditions of

notificationsissuedbyDoR.

Such warehouses shall be entitled to procure goodsfromdomesticmanufacturerswithout paymentof duty.Suppliesmade by a domestic supplier to such notifiedwarehousesshallbetreatedasphysicalexportsprovidedpaymentsaremadeinfreeforeignexchange.

Denomination of Export �.�0 All export contracts and invoices shall bedenominatedContracts eitherinfreelyconvertiblecurrencyorIndianrupeesbut

export proceeds shall be realised in freely convertiblecurrency.

However, export proceeds against specific exportsmayalsoberealizedinrupees,provideditisthroughafreelyconvertibleVostroaccountofanonresidentbanksituatedinanycountryotherthanamembercountryofACUorNepal or Bhutan.Additionally, rupee payment throughVostroaccountmustbeagainstpaymentinfreeforeigncurrencybybuyerinhisnon-residentbankaccount.Freeforeign exchange remittedbybuyer tohisnon-residentbank(afterdeductingthebankservicecharges)onaccountof this transactionwouldbe takenas export realizationunderexportpromotionschemesofFTP.

Contracts [for which payments are received throughAsian Clearing Union (ACU)] shall be denominated inACUDollar.CentralGovernmentmayrelaxprovisionsof thisparagraph inappropriatecases.ExportcontractsandInvoicescanbedenominatedinIndianrupeesagainstEXIMBank/GovernmentofIndialineofcredit.

Realisation of Export �.�� IfanexporterfailstorealiseexportproceedswithintimeProceeds specified by RBI, he shall, without prejudice to any

liabilityor penaltyunder any law in force, be liable toactioninaccordancewithprovisionsofFT(D&R)Act,RulesandOrdersmadethereunderandFTP.

�6

Free movement of �.�� Consignments of items meant for exports shall not beexport goods withheld / delayed for any reason by any agency of

Central / State Government. In case of any doubt,authorities concernedmayask for anundertaking fromexporter.

No seizure of Stock �.��.� Noseizureofstockshallbemadebyanyagencysoastodisruptmanufacturingactivity anddelivery scheduleofexports.Inexceptionalcases,concernedagencymayseizethestockonbasisofprimafacieevidence.However,suchseizureshouldbeliftedwithin7days.

Export Promotion �.�� BasicobjectiveofExportPromotionCouncils(EPCs)isCouncils (EPC) to promote and develop Indian exports. Each Council

is responsible for promotion of a particular group ofproducts,projectsandservicesasgiveninHBP-v�.

Registration -cum- �.�� Anyperson,applyingfor:Membership Certificate(RCMC) (i) anAuthorisation to import / export, [except items

listedasrestricteditemsinITC(HS)]or

(ii) anyotherbenefitorconcessionunderFTP

shallberequiredtofurnishRCMCgrantedbycompetentauthorityinaccordancewithprocedurespecifiedinHBP-v1unlessspecificallyexemptedunderFTP.

CertificateofRegistrationasExporterofSpices(CRES)issuedbySpicesBoardshallbetreatedasRegistration-Cum-MembershipCertificate (RCMC) for thepurposesunderthisPolicy.

Trade Facilitation �.�� It is endeavor of Government to work towards greaterthrough EDI Initiatives simplification, standardization and harmonization of

trade documents using international best practices. Asa step in this direction, DGFT shall move towards anautomatedenvironmentforelectronicfiling,retrievalandauthentication of documents based on agreed protocolsand message exchange with other community partnersincludingCustomsandBanks.

DGCI&S Commercial �.��.� ToenableuserstomakecommercialdecisionsinamoreTrade Data professionalmanner,DGCI&Stradedatashallbemade

available with a minimum time lag in a query basedstructuredformatonacommercialcriteria.

�7

Fiscal Incentives �.��.� WithaviewtopromoteuseofInformationTechnology,to promote EDI DGFTwillprovidefiscalincentivestousercommunity.Initiatives adoption Deductions inApplicationFeewouldbeadmissible for

applications signeddigitallyor / andwhere applicationfeeispaidelectronicallythroughEFT(ElectronicFundTransfer).DetailsareenumeratedinHBPv�.

Regularization of EO 2.46 With aview toproviding assistance tofirmswhohavedefault and settlement of defaultedunderFTPforreasonsbeyondtheircontrolascustoms duty and interest alsofacilitatingmerger,acquisitionandrehabilitationofthrough Settlement sick units, it has been decided to empower SettlementCommission Commission in Central Board of Excise and

Customs to decide such cases also with effect from0�.0�.�00�.

Easing of 2.47 PendingfinalisationofSingleCommonDocument(SCD)Documentation forinternationaltrade,GovernmentDepartmentsdealingRequirement withexportsandimportswillhonourAuthorisationissued

byotherGovernmentdepartmentsbasedonverificationofexportdocumentsLikeshippingbill,bankrealizationcertificate, Packing list, bill of lading etc. andwill notinsistuponfreshsubmissionofthesedocuments.

Exemption / �.�� ForallgoodsandserviceswhichareexportedfromunitsRemission of Service inDTAandunitsinEOU/EHTP/STP/BTPexemption/Tax in DTA remission of service tax levied and related to exports,

shallbeallowed,asperprescribedprocedureinChapter�ofHBPv�.

Exemption from �.��.� UnitsinSEZshallbeexemptedfromservicetax.Service Tax in SEZ

Exemption from �.��.� ForallgoodsandservicesexportedfromIndia,servicesService Tax on Services received/renderedabroad,whereeverpossible,shallbereceived abroad exemptedfromservicetax. GRIEVANCE REDRESSAL

DGFT as a facilitator of �.�9 DGFThasacommitment to functionasa facilitatorofexports / imports exportsandimports.Focusisongoodgovernance,which

dependson clean, transparent and accountabledeliverysystems.

Citizen’s Charter �.�9.� DGFT has in place a Citizen’s Charter, giving timeschedulesforprovidingservicestoclients,anddetailsofgrievancecommitteesatdifferentlevels.

��

Grievance Redressal �.�9.� In order to facilitate speedy redressal of grievances ofCommittee (GRC) tradeandindustry,anewgrievanceredressalmechanism

hasbeenputinplaceintheformofGRCbyaGovernmentResolution.

TheGovernmentiscommittedtoresolvingalloutstandingproblemsanddisputespertaining topastpolicyperiodsthroughGRCsetupon�7.�0.�00�,forcondoningdelays,regularizing breaches by exporters in bonafide cases,resolvingdisputesoverentitlements,grantingextensionsforutilizationofAuthorisations.

Export of perishable �.�0 Toreducetransactionandhandlingcosts,asinglewindowagricultural products system to facilitate export of perishable agricultural

producehasbeen introduced. The systemwill involvecreation of multi-functional nodal agencies to beaccreditedbyAgriculturalandProcessedFoodProductsExport Development Authority (APEDA), NewDelhi. The detailed procedures have been notified atAppendix�0ofHBPv�.

�9

CHAPTER – 3

PROMOTIONAL MEASURES

PROMOTIONAL MEASURES IN DEPARTMENT OF COMMERCE

Assistance to States �.� Scheme forAssistance toStates forDevelopingExportfor Developing Export InfrastructureandAlliedActivities(ASIDE)isformulatedInfrastructure and to involve the States in the export effort by providingAllied Activities (ASIDE) assistance to the States Governments for creating

appropriateinfrastructureforthedevelopmentandgrowthofexports.TheSchemeisadministeredbyDepartmentofCommerce(DoC).

The objective of scheme is to establish a mechanismfor involving the State Governments to participate infundingofinfrastructurecriticalforgrowthofexportsbyprovidingexportperformancelinkedfinancialassistancetothem.

Theactivitiesaimedatdevelopmentofinfrastructureforexports can be funded from the scheme provided suchactivities have overwhelming export content and theirlinkage with exports is full established. The specificpurposesforwhichfundsallocatedundertheSchemecanbesanctionedandutilizedareasfollows:

■ CreationofnewExportPromotionIndustrialParks/Zones(SEZs/AgriBusinessZones)andaugmentingfacilitiesintheexistingones.

■ Setting up of electronics and other relatedinfrastructureinexportconclave.

■ Equity participation in infrastructure projectsincludingthesettingupofSEZs.

■ Meeting requirements of capital outlay of EPIPs/EPZs/SEZs.

■ Developmentofcomplementaryinfrastructuresuchas,roadsconnectingtheproductioncentreswiththeports, setting up of Inland Container Depots andContainerFreightStations.

■ Stabilizing power supply through additionaltransformers and islanding of export productioncentreetc.

�0

■ Development of minor ports and jetties to serveexportpurpose.

■ AssistanceforsettingupCommonEffluentTreatmentfacilitiesand

■ AnyotheractivityasmaybenotifiedbyDoC.

DetailsofASIDESchemeareavailableat: http://www.commerce.nic.in or http://www.commerce.

gov.in.

Market Access Initiative �.� Under MAI scheme, Financial assistance is provided(MAI) for export promotion activities on focus country, focus

product basis. Financial assistance is available forExportPromotionCouncils (EPCs), IndustryandTradeAssociations (ITAs), Agencies of State Government,Indian Commercial Missions (ICMs) abroad and othernational level institutions/eligible entities as may benotified.

A whole range of activities can be funded under MAIscheme.Theseinclude,amongstothers,i. Marketstudies/surveys,ii. Settingupofshowroom/warehouse,iii. Participationininternationaltradefairs,iv. DisplaysinInternationaldepartmentalstores,v. Publicitycampaigns,vi. Brandpromotion,vii. Reimbursement of registration charges for

pharmaceuticalsandexpensesforcarryingoutclinicaltrialsetc.,infulfillmentofstatutoryrequirementsinthebuyercountry,

viii.Testingchargesforengineeringproductsabroad,ix. Assistance for contestingAntiDumping litigations

etc.

Each of these export promotion activities can receivefinancial assistance from Government ranging from��%to�00%oftotalcostdependinguponactivityandimplementingagency.Fulltextofguidelinesisavailableathttp://commerce.nic.in.

Market Development 3.3 Under MDA Scheme, financial assistance is providedAssistance (MDA) for a rangeof export promotion activities implemented

by EPCs and Trade Promotion Organizations on thebasis of approved annual action plans. The scheme isadministered by DOC. Assistance includes, amongst

��

others,participationin:

i. Trade Fairs and Buyer Seller meets abroad or inIndia,and

ii. Exportpromotionsseminars.iii. Financial assistance with travel grant is available

to exporters traveling to focus areas, viz., LatinAmerica, Africa, CIS region, ASEAN countries,AustraliaandNewZealand.Inotherareas,financialassistancewithouttravelgrantisavailable.

MDAassistanceisavailableforexportshavinganannual

export turnover as prescribed in MDA guidelines. Fulltextofguidelinesisavailableathttp://commerce.nic.in.

Meeting expenses for �.� DOC provides for reimbursement of charges/expensesstatutory compliances in forfulfillingstatutoryrequirementsinthebuyercountry,buyer country for Trade including registration charges for product registrationRelated Matters forpharmaceuticals,bio-technologyandagro-chemicals

productsonrecommendationofEPCs.Financialassistanceisalsoprovidedforcontestinglitigation(s)intheforeigncountryconcerningrestrictions/antidumpingdutiesetc.on particular product(s) of Indian origin, as providedunder the Market Access Initiative (MAI) Scheme ofDOC.

Towns of Export �.� AnumberoftownshaveemergedasdynamicindustrialExcellence (TEE) clusterscontributinghandsomelytoIndia’sexports.Itis

necessarytograntrecognitiontotheseindustrialclusterswithaview tomaximizing theirpotentialandenablingthem to move higher in the value chain and tap newmarkets.

SelectedtownsproducinggoodsofRs.7�0CroreormorewillbenotifiedasTEEbasedonpotentialforgrowthinexports. However for TEE in Handloom, Handicraft,AgricultureandFisheriessector,thresholdlimitwouldbeRs��0Crores.

(i) Recognized associations of units will be providedfinancialassistanceunderMAIscheme,onprioritybasis, forexportpromotionprojects formarketing,capacitybuildingandtechnologicalservices.

(ii) Common Service Providers in these areas shall beentitledforEPCGscheme.

(iii) TheprojectsreceivedfromTEEsshallbeaccorded

��

priority by SLEPC for financial assistance underASIDE.

Notified Towns (TEEs) are listed in Appendix 7 ofHBPv�.

Brand Promotion and �.6 IBEF (originally called India Brand Equity Fund andQuality laterrenamedasIndiaBrandEquityFoundation)wasset

upbytheMinistryofCommerceon��thJuly,�996,withtheprimaryobjectivetopromoteandcreateinternationalawareness of the “Made in India” label in marketsoverseas. IBEF aims to promote India as a businessopportunity by creating positive economic perceptionsofIndiagloballyaswellaseffectivelypresenttheIndiabusinessperspectiveand leveragebusinesspartnershipsinaglobalisedmarket-place.

DOCprovidesfundsforcapacitybuildingforup-gradationof quality to national level Institutions and EPCs toorganizetrainingprogrammesfortheskillimprovementof the exporters for quality up-gradation, reduction inrejection, product improvement etc. as provided undertheMarketAccessInitiative(MAI)SchemeofDOC.

Test Houses �.7 Central Government will assist in modernization andupgradationoftesthousesandlaboratoriestobringthematparwithinternationalstandards.

PROMOTIONAL MEASURES IN DGFT

Quality Complaints / �.� Regional Sub-Committee on Quality ComplaintsDisputes (RSCQC)setupatRegionalOfficesof thisDirectorate

shallinvestigatequalitycomplaintsreceivedfromforeignbuyers.Guidelinesforsettlementofqualitycomplaints,inparticular,andsuchothercomplaints, ingeneral,aregiveninAppendix-�6ofHBPv�.

Trade Disputes affecting �.9 IfitcomestoDGFT’snoticeorhehasreasontobelieveTrade Relations thatanexportorimporthasbeenmadeinamannerthat

(i) isgravelyprejudicialtotraderelationsofIndiawithanyothercountry;and/or

(ii) is gravely prejudicial to interest of other personsengagedinexportsorimports;and/or

(iii) hasbroughtdisreputetothecountry;

��

DGFTmaytakeactionagainstsuchexporterorimporterinaccordancewithFT(D&R)Act,RulesandOrdersmadethere-underandFTP.

3.10 EXPORT AND TRADING HOUSES

Eligibility for Export �.�0.� Merchant as well as Manufacturer Exporters, Serviceand Trading Houses Providers, Export Oriented Units (EOUs) and UnitsStatus locatedinSpecialEconomicZones(SEZs),AgriExport

Zones (AEZs), Electronic Hardware Technology Parks(EHTPs), Software Technology Parks (STPs) and Bio-TechnologyParks(BTPs)shallbeeligibleforstatus.

Status Category �.�0.� ApplicantshallbecategorizeddependingonhistotalFOB(FOR-fordeemedexports)exportperformanceduringcurrent plus previous three years (taken together) uponexceeding limit below. For Export House (EH) Status,exportperformanceisnecessaryinatleasttwooutoffouryears(i.e.,currentpluspreviousthreeyears).

StatusCategory ExportPerformanceFOB/FORValue(RupeesinCrores)

ExportHouse(EH) �0StarExportHouse(SEH) �00TradingHouse(TH) �00StarTradingHouse(STH) ��00PremierTradingHouse(PTH) 7�00

Double Weightage and �.�0.� (i) Exporters in Small Scale Industry (SSI) / Tinyother Conditions for Sector/CottageSector,UnitsregisteredwithKVICs/Grant of Status KVIBs,UnitslocatedinNorthEasternStates,Sikkim

andJammu&Kashmir,Unitsexportinghandloom/handicrafts/handknottedorsilkcarpets,exportersexportingtocountriesinLatinAmerica/CIS/sub-SaharanAfricaaslistedinAppendix-9,UnitshavingISO9000(series)/ISO��000(series)/WHOGMP/HACCP/SEICMMlevel-IIandabovestatusgrantedbyagencieslistedinAppendix-6ofHBPv�,exportsof services and exports of agro products shall beentitled for double weightage on exports made forgrantofstatus.DoubleWeightageshallbeadmissibleto Merchant as well as Manufacturer Exporters.However,ashipmentcangetdoubleweightageonlyonceinanyoneofabovecategories.

��

(ii) Transferofexportperformancefromonetoanotherisnotpermitted.Thereforedisclaimersystemshallnotbeallowedforcountingofexportturnover.

(iii) Exportsmadeonre-exportbasisshallnotbecountedforrecognition.

(iv) Exports made by subsidiary of a limited companyshall be counted towards export performance oflimited company for recognition only if limitedcompanyhasamajorityshareholdinginsubsidiarycompany.

Privileges of Export and �.�0.� AStatusHoldershallbeeligibleforprivilegesasunder:Trading House StatusHolders (i) Authorization and Customs Clearances for both

importsandexportsonself-declarationbasis;

(ii) FixationofInput-Outputnormsonprioritywithin60days;

(iii) Exemption from compulsory negotiation ofdocuments through banks. Remittance / Receipts,however, would be received through bankingchannels;

(iv) �00% retention of foreign exchange in EEFCaccount;

(v) ExemptionfromfurnishingofBGinSchemesunderFTP;

(vi) SEHs and above shall be permitted to establishExportWarehouses,asperDoRguidelines.

(vii)Forstatusholders,adecisiononconferringofACPStatusshallbecommunicatedbyCustomswithin�0daysfromreceiptofapplicationwithCustoms.

(viii)Asanoption,forPremierTradingHouse(PTH),theaveragelevelofexportsunderEPCGSchemeshallbethearithmeticmeanofexportperformanceinlast�years,insteadof�years.

(ix) StatusHoldersofspecifiedsectorsshallbeeligibleforStatusHolderIncentiveScripunderPara�.�6ofFTP.

��

(x) StatusHoldersofAgri.Sector(Chapter�to��)shallbe eligible forAgri. Infrastructure Incentive ScripunderVKGUY-Para�.��.�ofFTP.

3.11 SERVICES EXPORTS

Services Exports �.��.� Servicesincludeall�6�tradableservicescoveredunderGeneralAgreementonTradeinServices(GATS)wherepayment for such services is received in free foreignexchange.A listofservices isgiven inAppendix�0ofHBPv�.

AllprovisionsofthisPolicyshallapplymutatismutandistoexportofservicesastheyapplytogoods.

Registration cum �.��.� Software exporters shall register themselves withMembership Certificate ElectronicsandSoftwareEPC.Exportersof15specific(RCMC) for Service services listed in Sl. No. �� ofAppendix � of HBPv�Providers are required to register themselves with Services EPC.

Other service exporters shall register themselves withFederationofIndianExportOrganisations(FIEO).

Common Facility Centres �.��.� Government shall promote establishment of CommonFacilityCentresforusebyhome-basedserviceproviders,particularly in areas like Engineering & ArchitecturalDesign, Multi-media operations, Software developersetc., inStateandDistrict level towns, todrawinavastmultitude of home-based professionals into servicesexportarena.

REWARD / INCENTIVE SCHEMES IN DGFT

3.12 SERVED FROM INDIA SCHEME (SFIS)

Objective �.��.� Objectiveistoaccelerategrowthinexportofservicessoastocreateapowerfulandunique‘ServedFromIndia’brand,instantlyrecognizedandrespectedworldover.

Eligibility �.��.� All Indian Service Providers, of services listed inAppendix�0ofHBPv�,whohavefreeforeignexchangeearning of at leastRs. 10Lakhs in preceding financialyear/currentfinancialyearshallqualifyforDutyCreditScrip.

�6

For Individual IndianServiceProviders,minimum freeforeignexchangeearningswouldbeRs�Lakhs.

Ineligible Services and �.��.� ServicesandServiceProvidersaslistedinPara�.6.�ofService Providers HBPv1shallnotbeentitledforbenefitsundertheSFIS

scheme.

Entitlement �.��.� All Service Providers shall be entitled to Duty CreditScripequivalentto�0%offreeforeignexchangeearnedduringcurrentfinancialyear.

Eligible Remittances �.��.� Free foreign exchange earned through InternationalCreditCardsandotherinstrumentsaspermittedbyRBIforrenderingofserviceshallalsobetakenintoaccountforcomputationofDutyCreditScrip.

Imports Allowed �.��.6 DutyCreditscripmaybeusedforimportofanycapitalgoodsincludingspares,officeequipmentandprofessionalequipment, office furniture and consumables; that areotherwisefreelyimportableand/orrestrictedunderITC(HS).Importsshallrelatetoanyservicesectorbusinessofapplicant.

Utilization of Duty Credit scrip earned shall not bepermitted for payment of duty in case of import ofvehicles,evenifsuchvehiclesarefreelyimportableunderITC(HS).

In case of hotels, clubs having residential facilityof minimum �0 rooms, golf resorts and stand-alonerestaurants having catering facilities, Duty Credit scripmay also be used for import of consumables includingfooditemsandalcoholicbeverages.

Non Transferability �.��.7 Entitlement / goods (imported / procured) shall be nontransferable(exceptwithingroupcompanyandmanagedhotels)andbesubjecttoActualUsercondition.

Procurement from �.��.� Utilization of Duty Credit Scrip shall be permitted forDomestic Sources paymentofexcisedutyintermsofDoRnotificationissued

in this behalf for procurement from domestic sources,of itemspermitted for imports underSFISDutyCreditScrip.

�7

3.13 VISHESH KRISHI AND GRAM UDYOG YOJANA (VKGUY) (SPECIAL AGRICULTURE AND VILLAGE INDUSTRY SCHEME)

Objective �.��.� ObjectiveofVKGUYistopromoteexportsof:

(i) Agricultural Produce and their value addedproducts;

(ii) Minor Forest Produce and their value addedvariants;

(iii)GramUdyogProducts;(iv)ForestBasedProducts;and(v) OtherProducts,asnotifiedfromtimetotime.

Such products shall be listed in Appendix �7A ofHBPv�.

Entitlement 3.13.2 Duty Credit Scrip benefits are granted with an aim tocompensate high transport costs, and to offset otherdisadvantages.

Exporters, of products notified in Appendix 37A ofHBPv�,shallbeentitledforDutyCreditScripequivalentto�%ofFOBvalueofexports(infreeforeignexchange)forexportsmadefrom�7.�.�009onwards.

However,forexportsmadew.e.f�7.�.�009,someFlowers,Fruits,Vegetablesandotherproducts,aslistedinTable�ofAppendix�7Ashallbeentitledtoanadditionaldutycredit scrip equivalent to�%ofFOBvalueof exports;over and above the �% or �% VKGUY reduced rateentitlementavailableasperPara�.��.�below.

Applicability of 3.13.3 DutyCreditScripbenefitsunderVKGUYschemeshallReduced Rate be granted only at a reduced rate of �% of FOB value

ofexportsinsuchcaseswhereexporterhasalsoavailedbenefitsof:

(i) Drawbackatrateshigherthan�%;and/or

(ii) Specific DEPB rate (i.e. other thanMiscellaneousCategory–Sr.Nos.��C&��DofProductGroup90);and/or

��

(iii) Advance Authorization or Duty Free ImportAuthorizationImportofinputs(otherthancatalysts,consumablesandpackingmaterials)fortheexportedproductforwhichDutyCreditScripunderVKGUYisbeingclaimed.

Agri. Infrastructure �.��.� For exports made during a particular year, all StatusIncentive Scrip Holders (havingstatus recognition for thecurrentyear)

exporting products covered under ITC HS Chapters �to��,shallbe incentivizedwithdutycreditscripequalto�0%ofFOBvalueofagriculturalexports(includingVKGUY benefits entitled under Policy Para 3.13.2)providedthatthetotalbenefitsforallstatusholdersputtogetherdoesnotexceedRs�00Cr(i.e.Rs�0Crforeachhalf year) and the conditions specified inPara 3.7.2 ofHBPv1aresatisfied.

Zonal Office, CLA, New Delhi shall be the licensingofficeforgrantofthebenefittoallstatusholders.

The following capital goods / equipments shall bepermittedforimport:

(i) Coldstorageunits(includingControlledAtmosphere(CA)andModifiedAtmosphere(MA)Stores);Pre-coolingUnitsandMotherStorageUnitsforOnions,etc.;

(ii) Pack Houses (including facilities for handling,grading,sortingandpackagingetc.);

(iii) ReeferVan/Containers;and

(iv) OtherCapitalGoods/EquipmentsasmaybenotifiedinAppendix�7F.

Imported capital goods/equipment shall be utilized forstorage,packingetc.(asin(ii)above)andtransportationof agricultural products (including agro-processedperishableproducts).

This additional benefit shall be subject to actual userconditionandhencenon-transferable.

However, for import of Cold Chain Equipment thisIncentiveScripshallbefreelytransferableamongstStatus

�9

Holders.

3.14 FOCUS MARKET SCHEME (FMS)

Objective �.��.� Objective is to offset high freight cost and otherexternalities toselect internationalmarketswithaviewto enhance India’s export competitiveness in thesecountries.

Entitlement 3.14.2 Exporters of all products to notified countries (as inAppendix �7C of HBPv�) shall be entitled for DutyCreditScripequivalentto�%ofFOBvalueofexports(infreeforeignexchange)forexportsmadefrom�7.�.�009onwards.

Ineligible Exports �.��.� Thefollowingcategoriesofexportproducts/sectorsshallCategories / Sectors for beineligibleforDutyCreditScrip,underFMSscheme:FMS

a) SuppliesmadetoSEZunits;b) ServiceExports;c) Diamondsandotherprecious,semipreciousstones;d) Gold,silver,platinumandotherpreciousmetals in

anyform,includingplainandstuddedJewellery;e) OresandConcentrates,ofalltypesandinallforms;f) Cereals,ofalltypes;g) Sugar,ofalltypesandinallforms;h) Crude /PetroleumOil&Crude /Petroleumbased

ProductscoveredunderITCHScodes�709to�7��,ofalltypesandinallforms;and

i) Export of Milk and Milk Products covered underITCHSCodes0�0�to0�06,�90��00�,�90��0�0,��0�&��0�.

3.15 FOCUS PRODUCT SCHEME (FPS)

Objective �.��.� Objectiveistoincentiviseexportofsuchproductswhichhavehighexportintensity/employmentpotential,soastooffsetinfrastructureinefficienciesandotherassociatedcostsinvolvedinmarketingoftheseproducts.

Entitlement 3.15.2 Exports of notified products (as in Appendix 37D ofHBPv�) to all countries (including SEZ units) shall beentitledforDutyCreditscripequivalent to�%ofFOBvalue of exports (in free foreign exchange) for exportsmadefrom�7.�.�009onwards.

�0

However, Special Focus Product(s) /sector(s), coveredunder Table � and Table � ofAppendix �7D, shall begrantedDutyCreditScripequivalentto�%ofFOBvalueof exports (in free foreign exchange) for exports madefrom�7.�.�009onwards.

�.��.� Market Linked Focus Products Scrip (MLFPS):

Export of Products/Sectors of high export intensity/employment potential (which are not covered underpresentFPSList)wouldbe incentivizedat�%ofFOBvalue of exports (in free foreign exchange) under FPSwhenexportedtotheLinkedMarkets(countries),whichare not covered in the present FMS list, as notifiedin Appendix �7D of HBPv�, for exports made from�7.�.�009onwards.

3.16 Status Holders Incentive Scrip

�.�6.� WithanobjectivetopromoteinvestmentinupgradationoftechnologyofsomespecifiedsectorsaslistedinPara�.�6.�below,StatusHoldersshallbeentitledtoincentivescrip@�%ofFOBvalueofexportsmadeduring�009-10andduring2010-11,ofthesespecifiedsectors,intheformofdutycredit.Thisshallbeoverandaboveanydutycreditscripclaimed/availedunderthischapter.

�.�6.� Status Holders availing Technology Upgradation FundScheme (TUFS) benefits (under Ministry of Textiles)during a particular year shall not be eligible for StatusHoldersIncentiveScripforexportsofthatyear.

�.�6.� TheStatusHoldersIncentiveScripshallbewithActualUserConditionandshallbeusedfor importsofcapitalgoods(asdefinedinFTP)relatingtothesectorsspecifiedinPara�.�6.�below.

�.�6.� The Status Holders of the following Sectors shall beeligibleforthisStatusHoldersIncentiveScrip:1. LeatherSector(excludingfinishedleather);�. TextilesandJuteSector;�. Handicrafts;�. Engineering Sector (excluding Iron & Steel, Non-

ferrous Metals in primary or intermediate forms,Automobiles & two wheelers, nuclear reactors &

��

partsandShips,BoatsandFloatingStructures;�. Plastics;and6. BasicChemicals(excludingPharmaProducts).

3.17 Common Provisions of Duty Credit Scrips, except where specifically provided for Special Provisions

‘ �.�7.� Government reserves the right in public interest, tospecify export products or services or exports to suchcountries,whichshallnotbeeligibleforcomputationofentitlement.

FurtherGovernmentreservestherighttoimpose/changetherate/ceilingonDutyCreditScripunderthischapter.

Similarly, Government may also notify goods (inAppendix�7BofHBPv�),whichshallnotbeallowedforimportunderDutyCreditScrips.

Ineligible Exports �.�7.� ForVKGUY,FMS,FPS(includingMLFPS)andStatusCategories /Sectors HoldersIncentiveScrip,thefollowingexportscategories

/sectors shall be ineligible for Duty Credit Scripentitlement:

(i) EOUs/EHTPs /BTPswhoareavailingdirect taxbenefits/exemption;

(ii) Exportof importedgoodscoveredunderPara�.��ofFTP;

(iii) Exportsthroughtransshipment,meaningtherebythatexportsoriginatinginthirdcountrybuttransshippedthroughIndia;

(iv) DeemedExports;

(v) ExportsmadebySEZunitsorSEZproductsexportedthroughDTAunits;and

(vi) Items,whicharerestrictedorprohibitedforexportunderSchedule-�ofExportPolicyinITC(HS).

��

Counting of Commission 3.17.3 For computation of Duty Credit Scrip Benefits, FOBin FOB value of Exports ValueofExports(infreeforeignexchange)shallinclude(in free foreign exchange) upto��.�%ForeignAgencyCommission.

Free Transferability �.�7.� DutyCreditScripanditemsimportedagainstitwouldbefreelytransferable.

However,DutyCreditScripunderSFIS(Para�.��)andunderStatusHoldersIncentiveScrip(Para�.�6)shallnotbefreelytransferable.

Imports Allowed �.�7.� Duty CreditScripmaybeused for import of inputs orgoods including capital goods, provided same is freelyimportableand/orrestrictedunderITC(HS).However,importofitemslistedinAppendix�7BofHBPv�shallnotbepermittedtobedebited.

DutyCreditScripsunderChapter�ofFTPcanalsobeutilizedforpaymentofdutyagainstimportsunderEPCGschemeprovidedtheitemisimportableagainstthescrip.

CENVAT / Drawback �.�7.6 Additional customs duty/excise duty paid in cash orthroughdebitunderDutyCreditscripshallbeadjustedasCENVATCreditorDutyDrawbackasperDoRrules,exceptunderSFIS.

TRA Facility �.�7.7 UtilizationofDutyCreditScripforimportsfromaportother than port of registration shall be allowed underTelegraphic ReleaseAdvice (TRA) facility as per DoRnotification.

Exclusivity of Entitlement 3.17.8 For a shipment, Duty Credit Scrip benefit under anyoneoftheschemescoveredinthisChaptercanalonebeclaimed,atexporter’soption.

Import under Lease �.�7.9 Utilization of Duty Credit Scrip shall be permitted forfinancing paymentofdutyincaseofimportofcapitalgoodsunder

leasefinancingintermsofprovisioninPara2.25ofFTP.

Transfer of Export �.�7.�0 Transfer of export performance from one to anotherPerformance shallnotbepermitted.Thus,ashipmentbillcontaining

name of applicant shall be counted in exportperformance / turnover of applicant only if exportproceedsfromoverseasarerealized inapplicant’sbankaccountandthisshallbeevidencedfromBRC/FIRC.

��

However, for VKGUY, FMS and FPS (includingMLFPS),benefitscanbeclaimedeitherbythesupportingmanufacturer(alongwithdisclaimerfromthecompany/firmwhohasrealizedtheforeignexchangedirectlyfromoverseas)orbythecompany/firmwhohasrealizedtheforeignexchangedirectlyfromoverseas.

Facility of Payment of �.�7.�� Duty Credit Scrips can also be used / debited towardsCustoms Duties in case paymentofCustomsDutiesincaseofEOdefaultsunderof EO defaults Authorizations issued under Chapters � and � of this

Policy.However,penalty/interestshallberequiredtobepaidincash.

��

��

CHAPTER-4

DUTY EXEMPTION & REMISSION SCHEMES

Duty Exemption and �.� DutyexemptionschemesenabledutyfreeimportofinputsRemission Schemes required for export production. Duty Exemption

Schemesconsistof(a)AdvanceAuthorisationschemeand (b) Duty Free Import Authorisation (DFIA)scheme.ADutyRemissionSchemeenablespostexportreplenishment / remission of duty on inputs used inexport product. Duty Remission Schemes consist of(a) Duty Entitlement Passbook (DEPB) Scheme and(b)DutyDrawback(DBK)Scheme.

Re-import of exported �.�.� Goods exported underAdvanceAuthorisation / DFIA /goods under Duty DEPBmaybere-importedinsameorsubstantiallysameExemption / Remission formsubjecttoDoRspecifiedconditions.Scheme

Value Addition �.�.� Value addition (VA) for the purpose of this Chapter(ExceptforGemsandJewellerySector)shallbe:-

A-BVA = -----------x�00,where BA =FOBvalueofexportrealised/FORvalueofsupply

received.B =CIFvalueofinputscoveredbyauthorisation,plus

anyotherimportedmaterialsusedonwhichbenefitofDBKisclaimed.

ADVANCE AUTHORISATION SCHEME

Advance Authorisation �.�.� AnAdvanceAuthorisation is issued to allow duty freeimport of inputs, which are physically incorporated inexportproduct(makingnormalallowanceforwastage).Inaddition,fuel,oil,energy,catalystswhichareconsumed/utilisedtoobtainexportproduct,mayalsobeallowed.DGFT, by means of Public Notice, may exclude anyproduct(s)frompurviewofAdvanceAuthorisation.

Dutyfreeimportofmandatorysparesupto�0%ofCIFvalueofAuthorisationwhicharerequiredtobeexported/supplied with resultant product are allowed underAdvance Authorisation. Advance Authorisations are

�6

issued for inputs and export items given under SION.ThesecanalsobeissuedonthebasisofAdhocnormsorselfdeclarednormsasperpara�.7ofHBPv�.

Advance Authorisation can be issued either to amanufacturer exporter or merchant exporter tied tosupportingmanufacturer(s)for:

i) Physicalexports(includingexportstoSEZ);and/orii) Intermediatesupplies;and/oriii) Supply of goods to the categories mentioned in

paragraph�.�(b),(c),(d),(e),(f),(g),(i)and(j)ofFTP;

iv) supplyof‘stores’onboardofforeigngoingvessel/aircraft subject to condition that there is specificSIONinrespectofitem(s)supplied.

In addition, in respect of supply of goods to specifiedprojectsmentionedinparagraph�.�(d),(e),(f),(g)and(j)ofFTP,anAdvanceAuthorisationcanalsobeavailedbysub-contractortosuchprojectprovidednameofsub-contractor(s)appearsinmaincontract.

SuchAuthorisationcanalsobeissuedforsuppliesmadetoUnitedNationsOrganisationsorunderAidProgrammeoftheUnitedNationsorothermultilateralagenciesandwhicharepaidforinfreeforeignexchange.

However,AdvanceAuthorizationforimportofrawsugar,canbeissuedeithertoamanufacturerexporterormerchantexportertiedtosupportingmanufacturer(s).Exportscanalso be made by procurement of white sugar from anyotherfactory(ies).Thisprovisionshallbeapplicableforexportsfrom�7.�.�009.

�.�.� AdvanceAuthorisationsareexemptedfrompaymentofbasic customs duty, additional customs duty, educationcess, anti- dumping duty and safeguard duty, if any.However,importsforsuppliescoveredunderparagraph�.� (h) & (i) will not be exempted from payment ofapplicableanti-dumpingandsafeguardduty,ifany.

�.�.� Advance Authorisation and / or materials importedthereunderwillbewithactualusercondition.Itwillnotbetransferableevenaftercompletionofexportobligation.However,Authorisationholderwillhaveoptiontodispose

�7

offproductmanufacturedoutof duty free inputsonceexportobligationiscompleted.IncasewhereCENVATcreditfacilityoninputshavebeenavailedfortheexportedgoods, even after completion of export obligation, thegoods importedagainstAdvanceAuthorisation shallbeutilizedonlyinthemanufactureofdutiablegoodswhetherwithin the same factory or outside (by a supportingmanufacturer), for which the authorisation holder shallproduceacertificatefromeitherthejurisdictionalCentralExciseSupdt.orCharteredAccountant,attheoptionoftheexporter,atthetimeoffilingapplicationforEODCtoRAconcerned.However,theactualuserconditionshallnotbeapplicableincaseofrawsugartobeimportedfrom�7.�.�009,till�0.09.�009underAdvanceAuthorizationScheme.

Further the manufacturing wastes/scrap, as allowed,canbedisposedoffwiththepaymentofapplicabledutybeforefulfilmentofexportobligation.

�.�.6 Advance Authorisations necessitate exports with aminimumvalueadditionof��%,exceptforitemsinGems&Jewellerysector,forwhichvalueadditionwouldbeasperparagraph�A.�.�ofHBPv.�.ExportstoSEZUnits/supplies toDevelopers /Co-Developers, irrespectiveofcurrencyofrealization,wouldalsobecovered.

Forphysicalexportsforwhichpaymentsarenotreceivedin freely convertible currency, same shall be subject tovalueadditionasspecifiedinAppendix-11ofHBPv1.

IncaseofAuthorisationforimportofTea,minimumvalueadditionunderAdvanceAuthorisationshallbe�0%.

Similarly, in case of spices {covered by Chapter 9 ofITC(HS)},dutyfreeimportofspicesshallbepermittedonlyforvalueadditionpurposeslikecrushing/grinding/sterilizationorformanufactureofoilsandoleoresinsandnotforsimplecleaning,grading,re-packingetc.

�.�.7 AdvanceAuthorisationshallbeissuedinaccordancewithPolicy and procedure in force on Authorisation issuedate.

ValidityperiodofAdvanceAuthorisationforimportshallbeasprescribedinHBPv�.

��

Free of Cost Supply by �.�.� FacilityofAdvanceAuthorisationshallalsobeavailableForeign Buyer where some or all inputs are supplied free of cost to

exporterbyforeignbuyer.

Insuchcases,forcalculationofvalueaddition,notionalvalueoffreeofcostinputsalongwithvalueofotherduty-free inputs shall be taken into consideration. However,ifallinputsaresuppliedfreeofcost,exportershallalsohaveoptiontofollowprovisionprescribedbyDoR.

Export Obligation 4.1.9 PeriodforfulfillmentofexportobligationunderAdvanceAuthorisationshallbeasprescribedinHBPv�.

Provision for BIFR 4.1.9A Anyfirm / company registeredwithBIFRor anyfirm/units companyacquiringaunit,whichisunderBIFRshallbe

allowed Export Obligation Period (EOP) extension asperrehabilitationpackageprepared,subject toapprovalofBIFRor5yearsifnotspecified,withoutpaymentofcompositionfee.

Above provisions apply also to SSI units as perrehabilitationschemeofconcernedStategovernment.

Advance Authorisation �.�.�0 Advance Authorisation can also be issued for annualfor Annual Requirement requirement.

Status Certificate holder and all other categories ofexportershavingpastexportperformance(inprecedingtwoyears)shallbeentitledforAdvanceAuthorisationforAnnualRequirement.

EntitlementintermsofCIFvalueofimportsshallbeupto�00%oftheFOBvalueofphysicalexportand/orFORvalue of deemed export in preceding licensing year orRs�crore,whicheverishigher.

Advance Release Orders �.�.�� Holder of Advance Authorisation, Advance(ARO) and Invalidation Authorisation forAnnual Requirement and Duty FreeLetter Import Authorisation intending to source inputs from

indigenous sources / State Trading Enterprises, in lieuofdirectimport,hasoptiontosourcethemeitheragainstAdvance Release Order (ARO) or Invalidation letterdenominated in free foreign exchange / Indian rupees.However,suppliesmaybeobtainedagainstAuthorisationfrom EOU / EHTP / BTP / STP / SEZ units, withoutconversionintoAROorInvalidationletter.

�9

Transferee of DFIA shall also be eligible for ARO /invalidationletterfacility.

ValidityperiodofAROshallbeasprescribedinHBPv�.

Back-to-Back Inland �.�.�� HolderofAdvanceAuthorisation,AdvanceAuthorisationLetter of Credit for Annual Requirement and DFIA may, instead of

applying for an ARO or Invalidation letter, avail ofthe facility of Back-to-Back Inland Letter of Credit inaccordancewithprocedurespecifiedinHBPv1.

Prohibited Items �.�.�� ProhibiteditemsofimportsmentionedinITC(HS)shallnot be imported underAdvanceAuthorisation / DFIA.Further items reserved for imports by STEs cannot beimportedagainstAdvanceAuthorisation/DFIA.HoweverthoseitemscanbeprocuredfromSTEsagainstAROorInvalidationletter.

STEs are also allowed to sell goods on High Sea SalebasistoholdersofAdvanceAuthorisation/DFIAholder.

Inaddition,STEsarepermitted to issue“NoObjectionCertificate(NOC)”forimportbyadvanceAuthorisation/DFIA holder. Authorisation Holder would be requiredto file Quarterly Returns of imports effected againstsuch NOC to concerned STE and STE would submithalf-yearly importfiguresofsuch imports toconcernedadministrative Department for monitoring with a copyendorsedtoDGFT.

Similarly prohibited items of exports mentionedin ITC(HS) shall not be exported under AdvanceAuthorisation/DFIAscheme.ExportofrestricteditemsshallbesubjecttoallconditionalitiesorrequirementsofExportAuthorisationorpermission,asmayberequired,underScheduleIIofITC(HS).

Admissibility of �.�.�� IncaseofanAdvanceAuthorisation,drawbackshallbeDrawback available for any duty paid material, whether imported

orindigenous,usedingoodsexported,asperdrawbackrate fixed byDoR,Ministry of Finance (Directorate ofDrawback). Drawback allowed shall be mentioned inAuthorisation.

�0

DUTY FREE IMPORT AUTHORISATION (DFIA) SCHEME

Scheme �.�.� DFIAisissuedtoallowdutyfreeimportofinputs,fuel,oil, energy sources, catalyst which are required forproductionofexportproduct.DGFT,bymeansofPublicNotice, may exclude any product(s) from purview ofDFIA.Thisschemeisinforcefrom�stMay,�006.

Entitlement �.�.� Provisionsofparagraph�.�.�shallbeapplicableincaseofDFIA.However,theseAuthorisationsshallbeissuedonly forproducts forwhichStandard Input andOutputNorms(SION)havebeennotified.

IncaseofpostexportDFIA,amerchantexporter shallbe required to mention only name(s) and address(s)of manufacturer(s) of the export product(s). Applicantis required to file application to concernedRA beforeeffectingexportsunderDFIA.

Pre-exportAuthorisationshallbeissuedwithactualuserconditionandshallbeexemptedfrompaymentofbasiccustoms duty, additional customs duty / excise duty,educationcess,anti-dumpingdutyandsafeguardduty,ifany.

IncaseofactualuserDFIAandwhereCENVATcreditfacility on inputs have been availed for the exportedgoods, even after completion of export obligation, thegoodsimportedagainstsuchDFIAshallbeutilizedinthemanufactureofdutiablegoodswhetherwithinthesamefactoryoroutside(byasupportingmanufacturer).

Import items �.�.� Provisionsofparagraphs�.�.��,�.�.��,�.�.��and�.�.��ofFTPshallbeapplicableforDFIAholder.

Value Addition �.�.� A minimum �0% value addition shall be required forissuanceofsuchauthorisation,exceptforitemsingemsandjewellerysector,forwhichvalueadditionwouldbeasperparagraph�A.�.�ofHBPv�.ItemsforwhichhighervalueadditionisprescribedunderAdvanceAuthorisationScheme,shallbeapplicable.

Export Obligation 4.2.5 ProcedureandtimeperiodrelatedtofulfillmentofExportObligationhavebeenlaiddowninChapter�ofHBPv�.

��

Transferability 4.2.6 Once export obligation has been fulfilled, request fortransferabilityofAuthorisationorinputsimportedagainstitmaybemadebeforeconcernedRA.Once,transferabilityisendorsed,AuthorisationholdermaytransferDFIAordutyfreeinputs,exceptfuelandanyotheritem(s)notifiedbyDGFT.However,forfuel,importentitlementmaybetransferredonly tocompanieswhichhavebeengrantedauthorisationtomarketfuelbyMinistryofPetroleumandNaturalGas.

Once transferability is endorsed, imports / domesticprocurementagainstauthorisationortransferofimportedinputs/domesticallyprocuredinputsshallbesubjecttopaymentof applicable additional customsduty / exciseduty.Whileendorsingtransferability,authorisationwouldbear a note as to liability of such additional customsduty / excise duty. However, in case where CENVATfacilityhasnotbeenavailed,exemptionfromadditionalcustomsduty/excisedutywouldbeavailableevenafterendorsementoftransferabilityonDFIA.

Wherever SIONs prescribe actual user condition andin case of Acetic Anhydride, Ephedrine and Pseudo-Ephedrine,DFIAshallbeissuedwithactualuserconditionfortheseinputsandnotransferabilityshallbeallowedfortheseinputsevenafterfulfillmentofexportobligation.

However, for authorizations issued prior to �.�.�007,exemptionfromAdditionalCustomsDuty/ExciseDutyshallcontinuetobeavailableevenafterendorsementoftransferabilityasprovidedinFTP(RE-�006).

CENVAT Facility �.�.7 CENVATcreditfacilityshallbeavailableforinputseitherimportedorprocuredindigenously.

DUTY ENTITLEMENT PASSBOOK (DEPB) SCHEME

Duty Entitlement �.� ObjectiveofDEPBistoneutraliseincidenceofcustomsPassbook (DEPB) duty on import content of export product. ComponentScheme ofcustomsdutyonfuel(appearingasconsumableinthe

SION)shallalsobefactoredintheDEPBrate.ComponentofSpecialAdditionalDuty shall alsobeallowedunderDEPB(asbrandrate)incaseofnon-availmentofCENVATcredit.Neutralisationshallbeprovidedbywayofgrantofdutycreditagainstexportproduct.

��

4.3.1 Anexportermayapplyforcredit,atspecifiedpercentageof FOB value of exports, made in freely convertiblecurrency.IncaseofsupplybyaDTAunittoaSEZunit/SEZ Developer/Co-Developer, an exporter may applyforcreditforexportsmadeinfreelyconvertiblecurrencyorpaymentmadefromforeigncurrencyaccountofSEZUnit/SEZ Developer/Co-Developer. In addition, theexportershallalsobeentitledforDEPBbenefit incasepayment is made in Indian Rupees by SEZ Developer/Co-Developerforsuppliesreceivedw.e.f�0.�.�006.

Credit shall be available against such export productsandatsuchratesasmaybespecifiedbyDGFTbywayofpublicnotice.CreditmaybeutilizedforpaymentofCustomsDutyonfreelyimportableitemsand/orrestricteditems.DEPBScripscanalsobeutilizedforpaymentofdutyagainstimportsunderEPCGScheme.Further,DEPBScrips can also be used / debited towards payment ofCustomsDutyincaseofEOdefaultsforAuthorizationsissuedunderChapters�and�of thisPolicy.However,penalty/interestshallberequiredtobepaidincash.

ProhibiteditemsofexportsmentionedinITC(HS)Book(as amended from time to time) shall not be entitledfor DEPB credit except for the exports effected undertransitional facility, wherever allowed, in terms ofparagraph�.�ofFTP.

�.�.� DEPBholdershallhaveoptiontopayadditionalcustomsdutyincashaswell.

Validity �.�.� ValidityperiodofDEPBforimportshallbeasprescribedinHBPv�.

Transferability �.�.� DEPB and / or items imported against it are freelytransferable. Transfer of DEPB shall however be forimport at specified port, which shall be the port fromwhereexportshavebeenmade.ImportsfromaportotherthantheportofexportshallbeallowedunderTRAfacilityaspertermsandconditionsofDoRnotification.

Applicability of �.�.� Additional customs duty / Excise Duty and SpecialDrawback Additional Duty paid in cash or through debit under

DEPBmayalsobeadjustedasCENVATCreditorDutyDrawbackasperDoRrules.

��

GEMS AND JEWELLERY

Scheme for Gems �A Exporters of gems and Jewellery can import / procureand Jewellery dutyfreeinputsformanufacturing.

Replenishment �A.� Exporters may obtain Replenishment (REP)Authorisation Authorisations fromRA in accordancewith procedure

specifiedinHBPv1.

�A.�.� Replenishment authorisation may also be issued forconsumables&toolsasperparagraph�A.��ofHBPv�.

Import of Diamonds for 4A.2 Theauthorizedoffices/agenciesinIndiaofGemologicalCertification/ Grading & InstituteofAmerica(GIA)oranyotheragencyapprovedre-export inthisregard,shallbepermittedtoimportdiamondsto

theirlaboratoriesforthepurposeofcertification/gradingreportsbythemwithaconditionthatthesameshouldbere-exportedwith thecertification/grading reports issuedby themwithout any import duty, asper theprocedurelaiddowninHBPv�.

Schemes for Gold/ �A.� Exportersofgold/silver/platinumjewelleryandarticlesSilver/ Platinum thereof may import their essential inputs such as gold,Jewellery silver, platinum, mountings, findings, rough gems,

preciousandsemi-preciousstones,syntheticstonesandunprocessedpearlsetc.inaccordancewiththeprocedurespecifiedinthisbehalf.

Nominated Agencies �A.� Nominated agencies are MMTC Ltd, Handicraftand Handloom Export Corporation (HHEC), StateTradingCorporation (STC), theProject andEquipmentCorporation(PEC)ofIndiaLtd,STCLLtd,MSTCLtd,DiamondIndiaLimited(DIL),Gems&JewelleryExportPromotion Council (G&J EPC)), Star Trading House(onlyforGems&Jewellerysector)andPremierTradingHouse under Paragraph �.�0.� of FTP and any otheragencyauthorisedbyRBI.Exporters(exceptEOUsandunits inSEZ)mayobtaingold / silver / platinum fromnominatedagency(s).

Procedureforimportofpreciousmetalbytheseagencies(other than those authorized by RBI and the Gems &JewelleryunitsoperatingunderEOUandSEZschemes)andthemonitoringmechanismthereofshallbeaspertheprovisionslaiddowninHBPv�inthisregard.

��

AbankauthorisedbyRBIisallowedexportofgoldscrapfor refining and import standard gold bars as per RBIguidelines.

Items of Export �A.� Following items, if exported, would be eligible forfacilities:(a) Goldjewellery,includingpartlyprocessedjewellery

and articles including medallions and coins(excluding legal tender coins), whether plain orstudded,containinggoldof�caratsandabove;

(b) Silverjewelleryincludingpartlyprocessedjewellery,silverware, silver strips and articles includingmedallionsandcoins (excluding legal tendercoinsand any engineering goods) containing more than�0%silverbyweight;

(c) Platinum jewellery including partly processedjewelleryandarticlesincludingmedallionsandcoins(excluding legal tender coins and any engineeringgoods) containing more than �0% platinum byweight.

Value Addition �A.6 Value Addition (VA) for gems and jewellery sectorshallbeasperparagraph�A.�.�ofHBPv�.Itwouldbecalculatedasunder:

A–BVA=-----------x�00,whereB

A = FOB value of the export realised / FOR value ofsupplyreceived.

B = Value of inputs (including domestically procured)such as gold / silver / platinum content in exportproductplusadmissiblewastagealongwithvalueofotheritemssuchasgemstoneetc.Wherevergoldhasbeenobtainedonloanbasis,valueshallalsoincludeinterest paid in free foreign exchange to foreignsupplier.

Wastage Norms �A.7 Wastageormanufacturinglossforgold/silver/platinumjewellery shall be admissible as per paragraph �A.� ofHBPv�.

Export against Supply �A.� Whereexportordersareplacedonnominatedagencies/by Foreign Buyer statusholder / exportersof threeyears standinghaving

��

an annual average turnover of Rs. Five Crores duringprecedingthreelicensingyears,foreignbuyermaysupplyin advanceand freeof charge,gold / silver / platinum,alloys,findingsandmountingsofgold/silver/platinumformanufactureandexport.

Such supplies can alsobe in advance andmay involvesemi-finishedjewelleryincludingfindings/mountings/components for repairs / re-makeandexport subject tominimumvalueadditionof�0%.However,ifsoimportedsemifinishedgold/silver/platinumjewelleryisexportedas studded jewellery, value addition of ��% shall beachieved.Insuchcasesofexport,wastageof�%maybepermitted.

Exportsmaybemadebynominatedagenciesdirectlyorthrough their associates or by status holder / exporter.Import and Export of findings shall be on net to netbasis.

Export Against Supply �A.9 Exportermayobtaingold/silver/platinumasaninputby Nominated Agencies forexportproductsfromnominatedagenciesinadvance

or as replenishment after exports in accordance withspecifiedprocedure.

Export Against Advance �A.�0 AnAdvanceAuthorisationmaybegrantedfordutyfreeAuthorisation importof:

(a) Goldoffinenessnotlessthan0.995andmountings,sockets,framesandfindingsof8caratsandabove;

(b) Silveroffinenessnotlessthan0.995andmountings,sockets, frames and findings containingmore than�0%silverbyweight;

(c) Platinum of fineness not less than 0.900 andmountings,sockets,framesandfindingscontainingmorethan�0%platinumbyweight.

�A.�� Such authorisations shall carry an export obligation to

befulfilledasperprocedurespecifiedinparagraph4AofHBPv�.Valueadditionshallbeasperparagraph�A.�.�ofHBPv.�.

AdvanceAuthorisationholdermayobtaingold / silver/platinumfromnominatedagenciesinlieuofdirectimport.

�6

Gem Replenishment �A.�� Gem Replenishment (Gem & Jewellery REP)Authorisation Authorisationmaybeissuedasgiveninparagraph�A.�,

�A.9and�A.�0above.

In case of plain or studded gold / silver / platinumjewelleryandarticles,valueofsuchAuthorisationsshallbedeterminedwithreferencetorealisationinexcessofprescribedminimumVA.

Such Gem REP Authorisations shall be freelytransferable.

Gem REP Rate and �A.�� Replenishment Rate and item of import will be asItem prescribedinAppendix��BofHBPv�.

Export Promotion �A.�� Nominated agencies and their associates, with theTours/Export of approvalofDepartmentofCommerce,andothers,withBranded Jewellery the approval of Gem & Jewellery EPC (GJEPC), may

export gold / silver / platinum jewellery and articlesthereofforexhibitionsabroad.

Personal carriage of gold / silver / platinum jewellery,precious, semi-precious stones, beads and articles andexportofbrandedjewelleryisalsopermitted,subjecttoconditionsasinHBPv�.

Personal Carriage of �A.�� Personal carriage of gems and jewellery export parcelsExport / Import Parcels by foreign bound passengers and import parcels by an

Indianimporter/foreignnationalmaybepermittedasinHBPv�.

Export by Post 4A.16 IncaseofexportsthroughForeignPostOffice(includingvia Speed Post), value of jewellery parcels shall notexceedUS$7�000and�0kg.byweight.

Diamond & Jewellery �A.�7 Firmsandcompaniesdealinginpurchase/saleofroughDollar Accounts or cut and polished diamonds/precious metal jewellery

plain,minakariand/orstuddedwith/withoutdiamondand/or other stones, with a track record of at leasttwo years in import or export of diamonds / colouredgemstones/ diamond and coloured gemstones studdedjewellery /plaingold jewellery, andhavinganaverageannualturnoverofRs.�croresoraboveduringprecedingthree licensingyears,mayalso carryout theirbusinessthroughdesignatedDiamondDollarAccounts(DDA).

�7

Dollarsinsuchaccountsavailablefrombankfinanceand/orexportproceedsshallbeusedonlyfor:

(i) Import/purchaseofroughdiamondsfromoverseas/localsources;

(ii) Purchase of cut and polished diamonds, colouredgemstones and plain gold jewellery from localsources;

(iii) Import/purchaseofgoldfromoverseas/nominatedagencies and repayment of dollar loans from thebank;and

(iv) Transfer to RupeeAccount of exporter. Details ofthisDDASchemearegiveninHBPv�.

AnonDDAholder is alsopermitted to supply cut andpolished diamonds to DDA holder, receive payment indollars and convert same into Rupees within 7 days.Cut andpolisheddiamondsandcolouredgemstones sosuppliedbynon-DDAholderwillalsobecountedtowardsdischargeofhisexportobligationand/orentitlehimtoreplenishmentAuthorisation.

�A.�� GemsandJewelleryexportersshallbeallowedtoexportcut and polished precious and semi-precious stones forthe treatment and re-import as per Customs rules andregulations. In case of re-export, the exporter shall beentitledfordutydrawbackasperrules.

Re-import of rejected �A.�9 Gems&Jewelleryexportersshallbeallowedtore-importjewellery rejected precious metal jewellery as per para �A.�� of

HBPv�.

Export on consignment �A.�0 Gems&Jewelleryexportersshallbeallowed toexportbasis diamond,gemstones& jewelleryon consignmentbasis

asperHBPv�andCustomsrulesandregulations.

��

�9

CHAPTER-5

EXPORT PROMOTION CAPITAL GOODS (EPCG) SCHEME

Zero duty EPCG Scheme �.� ZerodutyEPCGschemeallowsimportofcapitalgoodsforpreproduction,productionandpostproduction(includingCKD/SKDthereofaswellascomputersoftwaresystems)at zero Customs duty, subject to an export obligationequivalent to 6 times of duty saved on capital goodsimportedunderEPCGscheme,tobefulfilledin6yearsreckonedfromAuthorizationissue-date.

Theschemewillbeavailableforexportersofengineering

&electronicproducts,basicchemicals&pharmaceuticals,apparels & textiles, plastics, handicrafts, chemicals &alliedproductsandleather&leatherproducts;subjecttoexclusionsasprovidedinHBPv�.

Validityperiodforimportofcapitalgoodsandprovision

for extension in export obligation period will be asseparatelyprovided in theHBPv�.Allotherprovisionspertainingtoconcessional�%dutyEPCGschemeunderthisChapter,totheextenttheyarenotinconsistentwiththeaboveprovisionsofzerodutyEPCGscheme,shallbeapplicabletothezerodutyEPCGschemealso.ThezerodutyEPCGschemewillbeinoperationtill��.�.�0��.

Concessional 3% Duty �.� Concessional �% duty EPCG scheme allows import ofEPCG Scheme capital goods for pre production, production and post

production (including CKD/SKD thereof as well ascomputersoftwaresystems)at�%Customsduty,subjectto an export obligation equivalent to � times of dutysavedoncapitalgoodsimportedunderEPCGscheme,tobefulfilledin8yearsreckonedfromAuthorizationissue-date.

Incaseofagrounits,andunitsincottageortinysector,import of capital goods at �% Customs duty shall beallowed subject to fulfillment of export obligationequivalent to 6 times of duty saved on capital goodsimported,in��yearsfromAuthorizationissue-date.

ForSSIunits,importofcapitalgoodsat�%Customsdutyshallbeallowed,subjecttofulfillmentofexportobligation

60

equivalentto6timesofdutysavedoncapitalgoods,in�yearsfromAuthorizationissue-date,providedthelandedcifvalueofsuchimportedcapitalgoodsundertheschemedoesnotexceedRs.�0lakhsandtotalinvestmentinplantand machinery after such imports does not exceed SSIlimit.

However,inrespectofEPCGAuthorizationwithadutysavedamountofRs.�00croresormore,exportobligationshallbefulfilledin12years.

In case CVD is paid in cash on imports under EPCG,incidenceofCVDwouldnotbetakenforcomputationofnetdutysaved,providedthesameisnotCENVATed.

Capitalgoodsshallincludespares(includingrefurbished/reconditioned spares), tools, jigs, fixtures, dies andmoulds.

Second hand capital goods, without any restriction onage,mayalsobeimportedunderEPCGscheme.

However,importofmotorcars,sportsutilityvehicles/allpurposevehicles shallbeallowedonly tohotels, travelagents, tour operators or tour transport operators andcompaniesowning/operatinggolf resorts, subject to theconditionthat:

(i) total foreign exchange earning from hotel, travel& tourism and golf tourism sectors in current andprecedingthree licensingyears isRs.�.�croresormore.

(ii) ‘duty saved’ amount on all EPCG Authorizationsissuedinalicensingyearforimportofmotorcars,sportsutilityvehicles/allpurposevehiclesshallnotexceed �0% of average foreign exchange earningsfromhotel,travel&tourismandgolftourismsectorsinprecedingthreelicensingyears.

(iii) vehicles imported shall be so registered that thevehicle isused for touristpurposeonly.Acopyofthe Registration certificate should be submitted toconcernedRAasaconfirmationofimportofvehicle.However,partsofmotorcars,sportsutilityvehicles/all purposevehicles suchas chassis etc. cannotbe

6�

importedundertheEPCGScheme.

Import of Restricted items of imports mentioned underITC(HS)shallonlybeallowedunderEPCGSchemeafterapprovalfromEFCatHeadquarters.

�.�A Spares (including refurbished/reconditioned spares),

moulds, dies, jigs, fixtures, tools, refractory for initialliningandcatalystforinitialcharge;forexistingplantandmachinery(importedearlier,underEPCGorotherwise),shallbeallowedtobeimportedundertheEPCGschemesubjecttoanexportobligationequivalentto�0%ofthenormalexportobligationprescribedinpara�.�and�.�above (for importofcapitalgoods), tobe fulfilled in8years (6 years for zero duty EPCG scheme), reckonedfromAuthorization issue date. This would however besubjecttotheconditionthatthec.i.f.valueofimportoftheabovesparesetc.willbelimitedto�0%ofthevalueofplantandmachineryimportedundertheEPCGscheme.In caseof plant andmachinerynot importedunder theEPCG scheme, c.i.f. value of import of the spares etc.willbelimitedto�0%ofthebookvalueoftheplantandmachinery.

EPCG for Projects �.�B AnEPCGAuthorizationcanalsobeissuedforimportofcapitalgoodsunderSchemeforprojectImportsnotifiedbytheCentralBoardofExciseandCustomsunderS.No.441 of Customs Exemption Notification No. 21/2002dated0�.0�.�00�

ExportobligationforsuchEPCGAuthorizationswouldbeeighttimes(6timesforzerodutyEPCGscheme)ofdutysaved.DutysavedwouldbedifferencebetweentheeffectivedutyunderaforesaidCustomsNotificationandconcessionaldutyundertheEPCGScheme.

EPCG for Retail Sector �.�C To create modern infrastructure in retail sector,concessionaldutybenefitsunderEPCGschemeshallbeextendedforimportofcapitalgoodsrequiredbyretailershavingminimumareaof�000sq.meters.Suchretailershallfulfillexportobligationi.e.8timesofdutysaved,in�years.

Eligibility �.� EPCG scheme covers manufacturer exporters with orwithoutsupportingmanufacturer(s)/vendor(s),merchantexporterstiedtosupportingmanufacturer(s)andservice

6�

providers.

Export Promotion Capital Goods (EPCG) Schemealso covers a service provider who is designated /certified as a Common Service Provider (CSP) by theDGFT, Department of Commerce or State IndustrialInfrastructuralCorporationinaTownofExportExcellencesubjecttoprovisionsofForeignTradePolicy/HandbookofProcedureswiththefollowingconditions:-

(i) EPCGlicencetobegiventotheCSPshouldhaveaclearendorsementgivingthedetailsoftheusersandthequantumofExportObligation(EO)whicheachuserwouldfulfill;

(ii) Such exportswill not count towards fulfillment ofotherspecificexportobligations;and

(iii) EachoneoftheusersoftheCSPapartfromtheCSPshouldfurnish�00%bankGuarantee(BG)equivalenttotheirportionofdutyforegoneapportionedintermsofquantumofEOtobedischargedbythemandtheB.G.willbeenforcedintheeventoftheobligationnotbeingfulfilled.

Conditions for import of �.� Importofcapitalgoods shallbe subject toActualUserCapital Goods conditiontillexportobligationiscompleted.

Export obligation 5.5 Followingconditionsshallapplytothefulfillmentoftheexportobligation:-

(i) ExportObligationshallbefulfilledbyexportofgoodsmanufactured/servicesrenderedbytheapplicant.

Export obligation under the scheme shall be, overandabove,theaveragelevelofexportsachievedbyhim in the preceding three licensing years for thesameandsimilarproductswithintheoverallexportobligationperiodincludingextendedperiod,ifany;except forcategoriesmentioned inparagraph�.7.6of HBP v�. Such average would be the arithmeticmeanofexportperformance in the last threeyearsfor the same and similar products provided thatPremierTradingHouse(PTH)shallhaveoptionoffixingaverage levelofexportsbasedonarithmeticmean of export performance in the last five years

6�

insteadofthreeyears.

Upto50%ExportObligationmayalsobefulfilledbyexportsofothergood(s)manufacturedorservice(s)provided by the same firm / company, or groupcompany / managed hotel, which has the EPCGauthorization.However,EPCGauthorizationissuedpriorto�.�.�00�willbegovernedbyearlierpolicyprovisions.

However,insuchcases,additionalexportobligation

imposed shall be over and above average exportsachievedbytheunit /company/groupcompany/managedhotelinprecedingthreeyearsforboththeoriginal and the substitute product(s) / service(s),despiteexemptionsinPara�.7.6ofHBPv�.

(ii) Shipments under Advance Authorization, DFRC,DFIA, DEPB or Drawback scheme, or incentiveschemesunderChapter�ofFTP;wouldalsocountforfulfillmentofEPCGexportobligation.

(iii) ExportobligationcanalsobefulfilledbythesupplyITA-IitemstoDTA,providedrealizationis infreeforeignexchange.

(iv) Exportsshallbephysicalexports.However,deemedexports as specified in paragraph 8.2 (a), (b), (d)(f), (g)&(j)ofFTPshallalsobecounted towardsfulfillment of export obligation, alongwith usualbenefitsavailableunderparagraph8.3ofFTP.

Royalty payments received in freely convertiblecurrency and foreign exchange received for R&Dservices shall also be counted for discharge underEPCG. Payment received in rupee terms for porthandlingservices,intermsofChapter9ofFTPshallalsobecountedforexportobligationdischarge.

Provision for BIFR units 5.5.1 Any firm/ company registered with BIFR or any firm/

company acquiring a unit, which is under BIFR, maybeallowedEOextension, asper rehabilitationpackageprepared by operating agency and approved by BIFR/RehabilitationDepartmentofStateGovernment,upto��yearsifnotspecified.

6�

Above provisions apply also to SSI units as perrehabilitationschemeofconcernedStategovernment.

EPCG for agro units �.�.� LUT/Bond or ��% BG ( as applicable) may be givenforEPCGAuthorizationgrantedtounitsinAgriExportZonesprovidedEPCGAuthorizationistakenforexportofprimaryagriculturalproduct(s)notifiedinAppendix8ortheirvalueaddedvariants.

Indigenous Sourcing of �.6 A person holding an EPCG Authorization may sourceCapital Goods and capital goods from a domestic manufacturer. Suchbenefitsto Domestic domestic manufacturer shall be eligible for deemedSupplier exportbenefitunderparagraph8.3ofFTP.Suchdomestic

sourcing shall also be permitted from EOUs and thesesupplies shall be counted for purpose of fulfillment ofpositiveNFEbysaidEOUasprovidedinPara6.9(a)ofFTP.

Fixation of Export �.7 In case of direct imports, export obligation shall beObligation reckoned with reference to actual duty saved amount.

Incaseofdomesticsourcing,exportobligationshallbereckonedwithreferencetonotionalCustomsdutiessavedonFORvalue.

Technological �.� EPCGAuthorization holders can opt forTechnologicalUpgradation of existing Upgradation of existing capital good imported underEPCG machinery EPCGAuthorization.

Conditions governing Technological Up-gradation ofexistingcapitalgoodsareasunder:

(i) MinimumtimeperiodforapplyingforTechnologicalUp-gradation of existing capital goods importedunder EPCG is � years from Authorization issue-date.

(ii) Minimum exports made under old capital goodsmustbe�0%oftotalexportobligationimposedonfirstEPCGAuthorization.

(iii) Exportobligationwouldbe re-fixedsuch that totalexport obligation mandated for both capital goodswouldbesumtotalof6timesofdutysavedonboththecapitalgoods,tobefulfilledin8yearsfromnewauthorizationissue-date.

6�

(iv) Facility for technological up-gradation shall beavailableonlyonceandtheminimumimportstobemadeshallbeatleast�0%oftheexistinginvestmentinplantandmachinerybyapplicant.

(v) Capital Goods to be imported must be new andtechnologicallysuperiortoearlierCG.

Incentives for Fast �.9 To incentivize fast track companies with a view toTrack Companies accelerateexports,incaseswhereAuthorizationholder

hasfulfilled75%ormoreof specificexportobligationand�00%ofAverageExportObligationtilldate,ifany,inhalforlessthanhalftheoriginalexportobligationperiodspecified,remainingexportobligationshallbecondonedandtheAuthorizationredeemedbyRAconcerned.

HowevernobenefitsunderPara5.12ofHBPv1shallbe

availableinsuchcases.

66

67

CHAPTER-6

EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS

(STPs) AND BIO-TECHNOLOGY PARKS (BTPs).

Eligibility 6.� Units undertaking to export their entire production ofgoods and services (except permissible sales in DTA),may be set up under the Export Oriented Unit (EOU)Scheme,ElectronicsHardwareTechnologyPark(EHTP)Scheme, Software Technology Park (STP) Scheme orBio-TechnologyPark(BTP)Schemeformanufactureofgoods, including repair, re-making, reconditioning, re-engineeringandrenderingofservices.Tradingunitsarenotcoveredundertheseschemes.

Export and Import of 6.� (a) AnEOU /EHTP /STP /BTPunitmayexport allGoods kinds of goods and services except items that are

prohibitedinITC(HS).ExportofSpecialChemicals,Organisms,Materials,EquipmentandTechnologies(SCOMET) shall be subject to fulfillment of theconditionsindicatedinITC(HS).

Procurementandsupplyofexportpromotionmateriallike brochure / literature, pamphlets, hoardings,catalogues,postersetc.uptoamaximumvaluelimitof�.�%ofFOBvalueofpreviousyearsexportsshallalsobeallowed.

(b) AnEOU/EHTP/STP/BTPunitmayimportand/

or procure, from DTA or bonded warehouses inDTA/internationalexhibitionheldinIndia,withoutpaymentofduty,alltypesofgoods,includingcapitalgoods, required for itsactivities,provided theyarenotprohibiteditemsofimportintheITC(HS).Anypermissionrequiredforimportunderanyotherlawshall be applicable. Units shall also be permittedto import goods including capital goods requiredforapprovedactivity,freeofcostoronloan/leasefromclients.Importofcapitalgoodswillbeonaselfcertificationbasis.Goodsimportedbyaunitshallbewithactualuserconditionandshallbeutilized forexportproduction.

(c) State Trading regime shall not apply to EOU

6�

manufacturingunits.However,inrespectofChromeOre/Chromeconcentrate,StateTradingRegimeasstipulated in export policy of these items, will beapplicabletoEOUs.

(d) EOU/EHTP/STP/BTPunitsmayimport/procure

fromDTA,withoutpaymentofduty,certainspecifiedgoodsforcreatingacentralfacility.SoftwareEOU/DTA units may use such facility for export ofsoftware.

(e) AnEOUengagedinagriculture,animalhusbandry,

aquaculture, floriculture, horticulture, pisciculture,viticulture,poultryorsericulturemaybepermittedto remove specified goods in connection with itsactivitiesforuseoutsidebondedarea.

(f) Gems and jewellery EOUs may source gold /silver/ platinum through nominated agencies onloan/outrightpurchasebasis.Unitsobtaininggold/silver/platinumfromnominatedagencies,eitheronloan basis or outright purchase basis shall exportgold/silver/platinumwithin90daysfromdateofrelease.

(g) EOU/EHTP/STP/BTPunits,otherthanservice

units, may export to Russian Federation in IndianRupeesagainstrepaymentofStateCredit/EscrowRupeeAccountofbuyersubjecttoRBIclearance,ifany.

(h) Procurement and export of spares / components,

upto�%ofFOBvalueofexports,maybeallowedtosameconsignee/buyeroftheexportarticle,subjecttotheconditionthatitshallnotcountforNFEanddirecttaxbenefits.

(i) BoA may allow, on a case to case basis, requestsofEOU/EHTP/STP/BTPunitsinsectorsotherthanGems&Jewellery,forconsolidationofgoodsrelated tomanufacturedarticles andexport thereofalongwithmanufacturedarticle. Suchgoodsmaybeallowedtobeimported/procuredfromDTAbyEOUwithoutpaymentofduty,totheextentof�%FOB value of such manufactured articles exportedby the unit in precedingfinancial year. Details of

69

procured/importedgoodsandarticlesmanufacturedby theEOUwill be listed separately in the exportdocuments. In such cases, value of procured /imported goods will not be taken into account forcalculationofNFE,DTAsaleentitlement&profitsaccruing out of such procured / imported goodswill not be eligible for income tax benefits. Suchprocured/ imported goods shall not be allowed tobe sold inDTA. BoAmay also specify anyotherconditions.

Second Hand Capital 6.� Secondhandcapitalgoods,withoutanyagelimit,mayGoods alsobeimporteddutyfree. Leasing of Capital Goods 6.� a) AnEOU/EHTP/STP/BTPunitmay,onthebasis

of a firm contract between parties, source capitalgoods from a domestic / foreign leasing companywithoutpaymentofcustoms/exciseduty.Insuchacase,EOU/EHTP/STP/BTPunitanddomestic/foreignleasingcompanyshalljointlyfiledocumentsto enable import / procurement of capital goodswithoutpaymentofduty.

b) AnEOU/EHTP/BTP/STPunitmaysellcapital

goodsandleasebackthesamefromaNonBankingFinancialCompany(NBFC),subjecttothefollowingconditions:

i) The unit should obtain permission from the

jurisdictionalDeputy/AssistantCommissionerofCustomsorCentralExcise,forenteringintotransactionof‘SaleandLeaseBackofAssets’,andsubmitfulldetailsofthegoodstobesoldandleasedbackandthedetailsofNBFC;

ii) The goods sold and leased back shall not be

removedfromtheunit’spremises; iii) TheunitshouldbeNFEpositiveatthetimewhen

it enters into sale and lease back transactionwithNBFC;

iv) A joint undertaking by the unit and NBFC

shouldbegiventopaydutyongoodsincaseofviolationorcontraventionofanyprovisionofthenotificationunderwhichthesegoodswere

70

importedorprocured,readwithCustomsAct,�96�orCentralExciseAct,�9��,andthatthelienonthegoodsshallremainwiththeCustoms/Central Excise Department, which will havefirst charge over the said goods for recoveryofsumduefromtheunittoGovernmentunderprovision of Section ���(b) of the CustomsAct,�96�readwiththeCustoms(AttachmentofPropertyofDefaultersforRecoveryofGovt.Dues)Rules,�99�.

Net Foreign Exchange 6.� EOU / EHTP / STP / BTP unit shall be a positive netEarnings foreign exchange earner except for sector specific

provision of Appendix ��-I-C of HBP v�, where ahigher value addition shall be required. NFE earningsshallbecalculatedcumulativelyinblocksoffiveyears,startingfromcommencementofproduction. Wheneveraunitisunabletoexportduetoprohibition/restrictionimposedonexportofanyproductmentionedinLoP,thefive year block period for calculation ofNFE earningsmay be suitably extended by BoA. BoA may alsoconsiderextensionofblockperiodbyanotheroneyear,forcalculationofNFE,oncase tocasebasis, for thoseunits which complete � years block period in between�0.09.�00�and�0.09.�009,keepinginviewthedeclineinexports in thatparticularunit,due toeconomicslowdownonly.

Letter of Permission / 6.6 (a) Onapproval,aLetterofPermission (LoP) /LetterLetter of Intent and Legal of Intent (LoI) shall be issuedbyDC / designatedUndertaking; officertoEOU/EHTP/STP/BTPunit.LoP/LoIInvestment Criteria shall have an initial validity of � years, by which

time unit should have commenced production.Its validity may be extended further up to � yearsby competent authority. However, proposals forextension beyond six years shall be considered inexceptional circumstances, on a case-to-case basisby BoA. Once unit commences production, LoP/LoI issued shall be valid for a period of � yearsfor its activities. This period may be extendedfurther by DC for a period of � years at a time.

(b) LoP/LoIissuedtoEOU/EHTP/STP/BTPunits

by concerned authority, subject to compliance ofprovisioninpara6.�above,wouldbeconstruedasanAuthorisationforallpurposes.

7�

(c) Unit shall execute an LUT with DC concerned.FailuretoensurepositiveNFEortoabidebyanyofthetermsandconditionsofLoP/LoI/IL/LUTshallrendertheunitliabletopenalactionunderprovisionsof the FT (D&R)Act and Rules and Orders madethereunder, without prejudice to action under anyother law / rules and cancellation or revocation ofLoP/LoI/IL.

(d) Only projects having a minimum investment of

Rs.�Croreinplant&machineryshallbeconsideredforestablishmentasEOUs.However,thisshallnotapplytoexistingunitsandunitsinEHTP/STP/BTP,Handicrafts/Agriculture/Floriculture/Aquaculture/Animal Husbandry / Information Technology,Services,BrassHardwareandHandmadejewellerysectors.BoAmayalsoallowestablishmentofEOUswithalowerinvestmentcriteria.

Application & Approvals 6.7 (a) Applications for setting up of units under EOU

scheme,otherthanproposalsforsettingupofunitsin services sector (except R&D, software and ITenabledservices,oranyotherserviceactivityasmaybedelegatedbyBoA),shallbeapprovedorrejectedbytheUnitsApprovalCommitteewithin��daysaspercriteriaindicatedinHBPv�.

(b) Inothercases,approvalmaybegrantedbyBoAset

upforthispurposeasindicatedinHBPv�. (c) Proposals for setting up EOU requiring industrial

licence may be granted approval by DC afterclearanceofproposalbyBoAandDIPPwithin��days.

(d) Applications for conversion into an EOU / EHTP/

STP/BTPunitfromexistingDTAunits,havinganinvestmentofRs.�0croresandaboveinplantandmachinery or exporting Rs. �0 crores and aboveannually,shallbeplacedbeforeBoAforadecision.

DTA Sale of Finished 6.� Entire production of EOU / EHTP / STP / BTP unitsProducts / Rejects / Waste shallbeexportedsubjecttofollowing:/Scrap/Remnants and by-products (a) Units,otherthangemsandjewelleryunits,maysell

7�

goods upto �0% of FOB value of exports, subjectto fulfilment of positive NFE, on payment ofconcessionalduties.WithinentitlementofDTAsale,unitmaysellinDTA,itsproductssimilartogoodswhichareexportedorexpectedtobeexportedfromunits.However,unitswhicharemanufacturingandexportingmorethanoneproductcansellanyoftheseproductsintoDTA,upto90%ofFOBvalueofexportofthespecificproducts,subjecttotheconditionthattotalDTAsaledoesnotexceedtheoverallentitlementof �0% of FOB value of exports for the unit, asstipulatedabove.NoDTAsaleatconcessionaldutyshallbepermissibleinrespectofmotorcars,alcoholicliquors, books, tea (except instant tea), pepper &pepperproducts,marbleandsuchotheritemsasmaybenotifiedfromtimetotime.SuchDTAsaleshallalsonotbepermissibletounitsengagedinactivitiesofpackaging/labeling/segregation/refrigeration/compacting / micronisation / pulverization /granulation / conversion of monohydrate form ofchemical to anhydrous form or vice-versa. SalesmadetoaunitinSEZshallalsobetakenintoaccountfor purposeof arriving atFOBvalueof export byEOUprovidedpaymentforsuchsalesaremadefromForeignExchangeAccountofSEZunit.SaletoDTAwouldalsobesubjecttomandatoryrequirementofregistration of pharmaceutical products (includingbulkdrugs).AnamountequaltoAntiDumpingdutyunder section 9A of the Customs TariffAct, �97�leviable at the timeof import, shall bepayableonthe goods used for the purpose of manufacture orprocessingofthegoodsclearedintoDTAfromtheunit.

(b) Forservices, includingsoftwareunits,sale inDTA

inanymode,includingonlinedatacommunication,shall alsobepermissibleup to�0%ofFOBvalueofexportsand/or�0%offoreignexchangeearned,wherepaymentofsuchservicesisreceivedinforeignexchange.

(c) Gemsandjewelleryunitsmaysellupto�0%ofFOB

valueofexportsoftheprecedingyearinDTA,subjecttofulfillmentofpositiveNFE.Inrespectofsaleofplain jewellery, recipient shall pay concessionalrate of duty as applicable to sale from nominated

7�

agencies.Inrespectofstuddedjewellery,dutyshallbepayableasapplicable.

(d) UnlessspecificallyprohibitedinLoP,rejectswithinanoveralllimitof�0%maybesoldinDTAonpaymentofdutiesasapplicabletosaleundersub-para6.�(a)on prior intimation to Customs authorities. SuchsalesshallbecountedagainstDTAsaleentitlement.Saleofrejectsupto�%ofFOBvalueofexportsshallnotbesubjecttoachievementofNFE.

(e) Scrap /waste / remnants arisingout of production

process or in connection therewith may be sold inDTA,asperSIONnotifiedunderDutyExemptionScheme, on payment of concessional duties asapplicable, within overall ceiling of �0% of FOBvalue of exports. Such sales of scrap / waste /remnants shall not be subject to achievement ofpositive NFE. In respect of items not covered bynorms,DCmayfixad-hocnormsforaperiodofsixmonthsandwithinthisperiod,normsshouldbefixedbyNormsCommittee.Ad-hocnormswillcontinuetillsuchtimenormsarefixedbyNormsCommittee.Saleofwaste/scrap/remnantsbyunitsnotentitledtoDTAsale,orsalesbeyondDTAsaleentitlement,shallbeonpaymentof fullduties.Scrap /waste /remnantsmayalsobeexported.

(f) There shall benoduties / taxeson scrap /waste /

remnants,incasesamearedestroyedwithpermissionofCustomsauthorities.

(g) By-productsincludedinLoPmayalsobesoldinDTA

subjecttoachievementofpositiveNFE,onpaymentof applicable duties, within the overall entitlementofsub-para6.�(a).Saleofby-productsbyunitsnotentitledtoDTAsales,orbeyondentitlementsofsub-para6.�(a),shallalsobepermissibleonpaymentoffullduties.

(h) EOU /EHTP / STP /BTP unitsmay sell finished

products, except pepper and pepper products andmarble, which are freely importable under FTP inDTA, under intimation to DC, against payment offull duties, provided they have achieved positiveNFE.AnamountequaltoAntiDumpingdutyunder

7�

section9AoftheCustomsTariffAct,�97�leviableatthetimeofimport,shallbepayableonthegoodsusedforthepurposeofmanufactureorprocessingofthegoodsclearedintoDTAfromtheunit.

(i) Incaseofunitsmanufacturingelectronicshardwareandsoftware,NFEandDTAsaleentitlementshallbereckonedseparatelyforhardwareandsoftware.

(j) IncaseofDTAsaleofgoodsmanufacturedbyEOU/

EHTP/STP/BTP,wherebasicdutyandCVDisnil,suchgoodsmaybeconsideredasnon-excisableforpaymentofduty.

(k) In case of new EOUs, advance DTA sale will be

allowednotexceeding�0%ofitsestimatedexportsforfirstyear,exceptpharmaceuticalunitswherethiswillbebasedon itsestimatedexports forfirst twoyears.

(l) Units in Textile and Granite sectors shall have anoptiontosellgoodsintoDTAintermsofsub-paras6.�(a),(d),(e),(g)and(k)above,onpaymentofanamountequaltoaggregateofdutiesofexciseleviableundersection�of theCentralExciseAct,�9��orunderanyotherlawforthetimebeinginforce,onlikegoodsproducedormanufacturedinIndiaotherthan in anEOU, subject to the condition that theyhavenot useddutypaid imported inputs in excessof�%oftheFOBvalueofexportsoftheprecedingyear and they have achieved positive NFE. Oncethisoptionisexercised,theunitwillnotbeallowedtoimportanydutyfreeinputsforanypurpose.

Other Supplies in DTA 6.9 Following supplies effected from EOU / EHTP / STP/BTP units to DTA will be counted for fulfillment ofpositiveNFE:

(a) Supplies effected in DTA to holders of Advance

Authorisation / Advance Authorisation for annualrequirement/DFIAunderdutyexemption/remissionscheme / EPCG scheme. However, printing sectorEOUs (or any other sector thatmaybe notified inHBPv�),cannotsupplygoods,wherebasiccustomsdutyandCVDisnilorexemptedotherwise,toholdersofAdvanceAuthorisation /AdvanceAuthorization

7�

forannualrequirement. (b) Supplieseffected inDTAagainst foreignexchange

remittancereceivedfromoverseas.

(c) Supplies tootherEOU/EHTP/STP/BTP/SEZunits,provided thatsuchgoodsarepermissible forprocurementintermsofpara6.�ofFTP.

(d) Suppliesmade tobondedwarehouses setupunder

FTPand/orundersection6�ofCustomsActandfreetradeandwarehousingzones,wherepaymentisreceivedinforeignexchange.

(e) Suppliesofgoodsandservicestosuchorganizations

whichareentitledfordutyfreeimportofsuchitemsintermsofgeneralexemptionnotificationissuedbyMoF,asmaybeprovidedinHBPv�.

(f) Supplies of Information Technology Agreement

(ITA -1) items and notified zero duty telecom /electronicsitems.

(g) Supplies of items like tags, labels, printed bags,

stickers, belts, buttons or hangers to DTA unit forexport.

(h) SupplyofLPGproducedinanEOUrefinerytoPublic

Sector domestic oil companies for being suppliedto household domestic consumers at subsidizedpricesunder thePublicDistributionSystem (PDS)KeroseneandDomesticLPGSubsidyScheme,�00�,asnotifiedbytheMinistryofPetroleumandNaturalGasvidenotificationNo.E-20029/18/2001-PPdated��.0�.�00�(hereinafterreferredtoasPDSScheme)subjecttothefollowingconditions:-

(a) Only supply of such quantity of LPG would

beeligibleforwhichMinistryofPetroleumandNaturalGasdeclinespermissionforexportandrequirestheLPGtobeclearedinDTA;and

(b) TheMinistryofFinancebyanotificationhas

permitteddutyfreeimportsofLPGforsupplyundertheaforesaidPDSScheme.

76

Export through others 6.�0 An EOU / EHTP / STP / BTP unit may export goodsmanufactured/softwaredevelopedbyitthroughanotherexporter or any other EOU / EHTP / STP / SEZ unitsubjecttoconditionsmentionedinpara6.��ofHBPv�.

Entitlement for supplies 6.�� (a) Supplies from DTA to EOU / EHTP / STP / BTPfrom the DTA unitswillberegardedas“deemedexports”andDTA

supplier shall be eligible for relevant entitlementsunderchapter�ofFTP,besidesdischargeofexportobligation, ifany,on thesupplier.Notwithstandingthe above, EOU / EHTP / STP / BTP units shall,on production of a suitable disclaimer from DTAsupplier, be eligible for obtaining entitlementsspecifiedinchapter8ofFTP.Forclaimingdeemedexportdutydrawback,theyshallgetbrandratesfixedbyDCwhereverAllIndustryRatesofDrawbackarenotavailable.

(b) Suppliers of precious and semi-precious stones,

syntheticstonesandprocessedpearlsfromDTAtoEOU shall be eligible for grant of ReplenishmentAuthorisations at rates and for items mentioned inHBPv�.

(c) Inaddition,EOU/EHTP/STP/BTPunitsshallbe

entitledtofollowing:-

(i) ReimbursementofCentralSalesTax(CST)ongoodsmanufacturedinIndia.

Simple interest @ 6% per annum will bepayable on delay in refund of CST, if thecaseisnotsettledwithin�0daysofreceiptofcompleteapplication(asinparagraph9.�0.�ofHBPv�).

(ii) Exemption from payment of Central Excise

Duty on goods procured from DTA on goodsmanufacturedinIndia.

(iii) Reimbursementofdutypaidon fuelprocured

from domestic oil companies / Depots ofdomesticoilPublicSectorUndertakingsasperdrawbackratenotifiedbyDGFTfromtimetotime. Reimbursement of additional duty ofexcise levied on fuel under the FinanceActs

77

wouldalsobeadmissible. (iv) CENVATCreditonservicetaxpaid.

Other Entitlements 6.�� OtherentitlementsofEOU/EHTP/STP/BTPunitsareasunder:

(a) ExemptionfromIncomeTaxasperSection�0Aand

�0BofIncomeTaxAct. (b) Exemptionfromindustriallicensingformanufacture

ofitemsreservedforSSIsector. (c) Exportproceedswillberealizedwithin��months. (d) Unitswill be allowed to retain�00%of its export

earningintheEEFCaccount. (e) Unitwillnotberequiredtofurnishbankguarantee

atthetimeofimportorgoingforjobworkinDTA,whereunithas (i) aturnoverofRs.�croresorabove; (ii) unit is in existence for at least three years;

and

(iii) Theunit:

(a) has achieved positive NFE / exportobligationwhereverapplicable;

(b) hasnotbeenissuedashowcausenoticeoraconfirmeddemand,duringthepreceding�years,ongroundsotherthanproceduralviolations, under the penal provisionof the Customs Act, the Central ExciseAct, the Foreign Trade (Development &Regulation) Act, the Foreign ExchangeManagement Act, the Finance Act, �99�covering Service Tax or any alliedActsor the rules made thereunder, on accountoffraud/collusion/willfulmis-statement/ suppression of facts or contraventionofanyoftheprovisionsthereof;

7�

(f) �00%FDIinvestmentpermittedthroughautomaticroutesimilartoSEZunits.

(g) Units shall pay duty on the goods produced ormanufactured and cleared into DTA on monthlybasisinthemannerprescribedintheCentralExciseRules.

Inter Unit Transfer 6.�� (a) Transfer of manufactured goods from one EOU /EHTP /STP /BTPunit toanotherEOU /EHTP /STP /BTPunit isallowedwithprior intimation toconcerned DC and Customs authorities, followingprocedureofin-bondmovementofgoods.Transferof manufactured goods shall also be allowed fromEOU/EHTP/STP/BTPunittoaSEZdeveloperorunit followingprocedureprescribed inSEZRules,�006.

(b) Capitalgoodsmaybe transferredorgivenon loan

tootherEOU/EHTP/STP/BTP/SEZunits,withprior intimation to concerned DC and Customsauthorities.

(c) GoodssuppliedbyoneunitofEOU/EHTP/STP

/ BTP to another unit shall be treated as importedgoodsforsecondunitforpaymentofduty,onDTAsalebysecondunit.

Sub-Contracting 6.�� (a) (i) EOU / EHTP / STP / BTP units, includinggemsand jewelleryunits,mayon thebasisofannual permission from Customs authorities,subcontract production processes to DTAthrough job work which may also involvechangeofformornatureofgoods,throughjobworkbyunitsinDTA.

(ii) Theseunitsmaysubcontractupto�0%ofoverall

production of previous year in value terms inDTAwithpermissionofCustomsauthorities.

(b) (i) EOU may, with annual permission from

Customs authorities, undertake job work forexport, on behalf of DTA exporter, providedthatgoodsareexporteddirectlyfromEOUandexport document shall jointly be in name ofDTA/EOU.Forsuchexports,DTAunitswill

79

beentitledforrefundofdutypaidoninputsbywayofbrandrateofdutydrawback.

(ii) Duty free import of goods for execution of

exportorderplacedonEOUbyforeignsupplieron jobwork basis, would be allowed subjectto condition that no DTA clearance shall beallowed.

(iii) Subcontracting of both production and

production processes may also be undertakenwithoutanylimitthroughotherEOU/EHTP/STP/BTP/SEZunits,onthebasisofrecordsmaintainedinunit.

(iv) EOU/EHTP/STP/BTPunitsmaysubcontract

part of production process abroad and sendintermediate products abroad as mentionedin LoP. No permission would be requiredwhen goods are sought to be exported fromsubcontractor premises abroad. When goodsaresoughttobebroughtback,priorintimationtoconcernedDCandCustomsauthoritiesshallbegiven.

(c) Scrap/waste/remnantsgeneratedthroughjobwork

mayeitherbeclearedfromjobworker’spremisesonpaymentofapplicabledutyontransactionvalueordestroyed inpresenceofCustoms /CentralExciseauthoritiesorreturnedtounit.Destructionshallnotapply to gold, silver, platinum, diamond, preciousandsemipreciousstones.

(d) Sub-contracting / exchangebygemsand jewellery

EOUsthroughotherEOUsorSEZunitsorunitsinDTA, shall be as per procedure indicated in HBPv�.

Sale of Unutilized 6.�� (a) IncaseanEOU/EHTP/STP/BTPunitisunableMaterial toutilizegoodsandservices,importedorprocured

fromDTA,itmaybe

(i) transferred to another EOU / EHTP / STP /BTP/SEZunit;or

(ii) disposedoffinDTAwithapprovalofCustoms

�0

authoritiesonpaymentofapplicabledutiesandsubmissionofimportauthorization;or

(iii) exported. Such transfer from EOU / EHTP /

STP/BTPunittoanothersuchunitwouldbetreatedasimportforreceivingunit.

(b) Capitalgoodsandsparesthathavebecomeobsolete/

surplus,mayeitherbeexported,transferredtoanotherEOU / EHTP / STP / BTP / SEZ unit or disposedoffinDTAonpaymentofapplicableduties.Benefitof depreciation, as applicable, will be availableincaseofdisposal inDTAonlywhen theunithasachieved positive NFE taking into considerationthedepreciationallowed.Nodutyshallbepayablein case capital goods, raw material, consumables,spares,goodsmanufactured,processedorpackaged,andscrap/waste/remnants/rejectsaredestroyedwithinunitafterintimationtoCustomsauthoritiesordestroyedoutsideunitwithpermissionofCustomsauthorities. Destruction as stated above shall notapply to gold, silver, platinum, diamond, preciousandsemipreciousstones.

(c) Incaseoftextilesector,disposalofleftovermaterial

/fabricsupto�%ofcifvalueorquantityofimport,whicheverislower,onpaymentofdutyontransactionvalue, may be allowed, subject to certification ofCentral Excise / Customs officers that these areleftoveritems.

(d) Disposalofusedpackingmaterialwillbeallowedon

paymentofdutyontransactionvalue.

Reconditioning / Repair 6.�6 EOU / EHTP / STP / BTP units may be set up withand Re-engineering approval of BoA to carry out reconditioning, repair,

remaking,testing,calibration,qualityimprovement,up-gradationoftechnologyandre-engineeringactivitiesforexportinforeigncurrency.Provisionsofparagraphs6.�,6.9,6.�0,6.��,6.��ofFTPandpara6.��ofHBPv�shallnot,however,applytosuchactivities.

Replacement / Repair 6.�7 (a) GeneralprovisionsofFTPrelatingtoexport/importof imported / Indigenous of replacement / repair of goodswould also applyGoods equallytoEOU/EHTP/STP/BTPunits.Casesnot

coveredbytheseprovisionsshallbeconsideredon

��

meritsbyDC. (b) GoodssoldinDTAandnotacceptedforanyreasons,

maybebroughtbackforrepair/replacement,underintimation to concerned jurisdictional Customs /CentralExciseauthorities.

(c) Goods or parts thereof, on being imported /

indigenously procured and found defective orotherwiseunfitforuseorwhichhavebeendamagedorbecomedefectivesubsequently,maybereturnedandreplacementobtainedordestroyed.Intheeventof replacement, goods may be brought back fromforeignsuppliersortheirauthorizedagentsinIndiaor indigenous suppliers. The unit can take free ofcost replacement (duty paid) from the authorizedagents in India of foreign suppliers, provided thedefectivepartisre-exportedordestroyed.However,destruction shall not apply to precious and semipreciousstonesandpreciousmetals.

Exit from EOU Scheme 6.�� (a) WithapprovalofDC,anEOUmayoptoutofscheme.SuchexitshallbesubjecttopaymentofExciseandCustomsdutiesandindustrialpolicyinforce.

(b) Ifunithasnotachievedobligations,itshallalsobe

liabletopenaltyatthetimeofexit. (c) In the event of a gems and jewellery unit ceasing

itsoperation,goldandotherpreciousmetals,alloys,gemsandothermaterialsavailableformanufactureof jewellery, shall be handed over to an agencynominatedbyDoC,atpricetobedeterminedbythatagency.

(d) An EOU / EHTP / STP / BTP unit may also be

permitted by DC to exit from the scheme at anytime on payment of duty on capital goods underthe prevailing EPCG Scheme for DTA Units.Thiswillbe subject to fulfillmentofpositiveNFEcriteriaunderEOUscheme,eligibilitycriteriaunderEPCGschemeandstandardconditionsindicatedinHBPv�.

(e) Unit proposing to exit out of EOU scheme shall

intimate DC and Customs and Central Excise

��

authoritiesinwriting.Unitshallassessdutyliabilityarising out of debonding and submit details ofsuch assessment to Customs and Central Exciseauthorities.CustomsandCentralExciseauthoritiesshallconfirmdutyliabilitiesonprioritybasis,subjectto thecondition that theunithasachievedpositiveNFE, taking into consideration the depreciationallowed.Afterpaymentofdutyandclearanceofalldues, unit shall obtain “NoDuesCertificate” fromCustomsandCentralExciseauthorities.Onthebasisof“NoDuesCertificate”soissuedbytheCustomsand Central Excise authorities, unit shall apply toDCforfinaldebonding.

In case there is no proceeding pending underFT(D&R)Act,DCshallissuefinaldebondingorderwithin a period of 7 working days. Between “NoDues Certificate” issued by Customs and CentralExciseauthoritiesandfinaldebondingorderbyDC,unitshallnotbeentitledtoclaimanyexemptionforprocurement of capital goods or inputs. However,unit can claim Advance Authorisation / DEPB /Duty Drawback. Since the duty calculations anddues are disputed and take a long time, a BG /Bond/InstallmentprocessesbackedbyBGshallbeprovidedforexpeditingtheexitprocess.

(f) In cases where a unit is initially established as

DTA unit with machines procured from abroadafter payment of applicable import duty, or fromdomesticmarketafterpaymentofexciseduty,andunitissubsequentlyconvertedtoEOU,insuchcasesremovalofsuchcapitalgoodstoDTAafterdebondingwould be without payment of duty. Similarly, incaseswhereaDTAunitimportedcapitalgoodsunderEPCGSchemeandaftercompletelyfulfillingexportobligationgetsconvertedintoEOU,unitwouldnotbe charged customs duty on capital goods at thetimeofremovalofsuchcapitalgoodsinDTAwhendebonding.

(g) An EOU / EHTP / STP / BTP unit may also be

permittedbyDCtoexitunderAdvanceAuthorizationasaonetimeoption.ThiswillbesubjecttofulfillmentofpositiveNFEcriteria.

��

Conversion 6.�9 (a) ExistingDTAunitsmay also apply for conversionintoanEOU/EHTP/STP/BTPunit,andIncomeTax benefits under Section 10A and 10B will beavailableforplant,machineryandequipmentalreadyinstalled.

(b) Existing EHTP / STP units may also apply for

conversion/mergertoEOUandvice-versa.Insuchcases,unitswillremaininbondandavailexemptionsindutiesandtaxesasapplicable.

Monitoring of NFE 6.�0 PerformanceofEOU/EHTP/STP/BTPunitsshallbemonitoredbyUnitsApprovalCommitteeasperguidelinesinHBPv�.

Export through 6.�� EOU/EHTP/STP/BTParepermittedto:Exhibitions / ExportPromotion Tours / (i) Exportgoodsforholding/participatinginexhibitionsshowrooms abroad / abroadwithpermissionofDC.Duty Free Shops

(ii) Personalcarriageofgold/silver/platinumjewellery,precious,semi-preciousstones,beadsandarticles.

(iii) Exportgoodsfordisplay/saleinpermittedshopssetupabroad.

(iv) Display/sellinpermittedshopssetupabroad,orinshowroomsoftheirdistributors/agents.

(v) Set up showrooms / retail outlets at InternationalAirports.

Personal Carriage of 6.�� Import / export through personal carriage of gems andImport / Export Parcels jewellery items may be undertaken as per Customsincluding through Foreign procedure. However, export proceeds shall be realizedbound Passengers through normal banking channel. Import / export

throughpersonalcarriagebyunits,otherthangemsandjewelleryunits,shallbeallowedprovidedgoodsarenotincommercialquantity.AnauthorizedpersonofGems&JewelleryEOUmayalsoimportgoldinprimaryform,upto10Kgsinafinancialyearthroughpersonalcarriage,asperguidelinesprescribedbyRBIandDoR.

Export / Import by Post 6.�� Goodsincludingfreesamples,maybeexported/imported/ Courier by airfreight or through foreign post office or through

courier,asperCustomsprocedure.

��

Administration of 6.�� DetailsofadministrationofEOUsandpowersofDCareEOUs/ Powers of DC giveninHBPv�. Revival of Sick Units. 6.�� Subject to a unit being declared sick by appropriate

authority,proposalsforrevivaloftheunitoritstakeovermaybeconsideredbyBoA.

Approval of EHTP / STP 6.�6 IncaseofunitsunderEHTP /STPschemes,necessary

approval / permission under relevant paragraphs ofthis Chapter shall be granted by officer designated byMinistryofCommunicationandInformationTechnology,Department of InformationTechnology, instead of DC,and by Inter-Ministerial Standing Committee (IMSC)insteadofBoA.

Approval of BTP 6.27 Bio-TechnologyParks(BTP)wouldbenotifiedbyDGFT

on recommendations of Department of Biotechnology.IncaseofunitsinBTP,necessaryapproval/permissionunderrelevantprovisionsofthischapterwillbegrantedbydesignatedofficerofDepartmentofBiotechnology.

��

CHAPTER-7

SPECIAL ECONOMIC ZONES

The policy relating to Special Economic Zones is governed by SEZ Act 2005, and the Rules framed thereunder.

CHAPTER-7 A

FREE TRADE & WAREHOUSING ZONES

The policy relating to Free Trade and Warehousing Zones is governed by SEZ Act 2005, and the Rules framed thereunder.

�6

�7

CHAPTER –8

DEEMED EXPORTS

Deemed Exports �.� “Deemed Exports” refer to those transactions in whichgoods supplied do not leave country, and payment forsuchsuppliesisreceivedeitherinIndianrupeesorinfreeforeignexchange.

Categories of Supply �.� Followingcategoriesofsupplyofgoodsbymain/sub-

contractorsshallberegardedas“DeemedExports”underFTP,providedgoodsaremanufacturedinIndia:

(a) Supply of goods against Advance Authorisation /

Advance Authorisation for annual requirement /DFIA;

(b) SupplyofgoodstoEOU/STP/EHTP/BTP; (c) Supply of capital goods to EPCG Authorisation

holders; (d) Supplyofgoodstoprojectsfinancedbymultilateralor

bilateralAgencies/FundsasnotifiedbyDepartmentofEconomicAffairs(DEA),MoFunderInternationalCompetitive Bidding (ICB) in accordance withproceduresof thoseAgencies /Funds,where legalagreements provide for tender evaluation withoutincludingcustomsduty;

Supply and installation of goods and equipment(singleresponsibilityofturnkeycontracts)toprojectsfinancedbymultilateralorbilateralAgencies/FundsasnotifiedbyDEA,MoFunderICB,inaccordancewith procedures of thoseAgencies / Funds, whichbids may have been invited and evaluated on thebasisofDeliveredDutyPaid(DDP)pricesforgoodsmanufacturedabroad;

(e) Supplyofcapitalgoods,includinginunassembled/

disassembledconditionaswellasplants,machinery,accessories, tools, dies and such goods which areusedforinstallationpurposestillstageofcommercialproduction,andsparestoextentof�0%ofFORvaluetofertilizerplants;

��

(f) SupplyofgoodstoanyprojectorpurposeinrespectofwhichtheMoF,byanotification,permitsimportofsuchgoodsatzerocustomsduty;

(g) Supplyofgoodstopowerprojectsandrefineriesnotcoveredin(f)above;

(h) Supply of marine freight containers by �00%EOU (Domestic freight containers-manufacturers)provided said containers are exported out of Indiawithin6monthsorsuchfurtherperiodaspermittedbycustoms;

(i) SupplytoprojectsfundedbyUNAgencies;and (j) Supplyofgoodstonuclearpowerprojectsthrough

competitivebiddingasopposedtoICB. Benefits of deemed exports shall be available under

paragraphs(d),(e),(f)and(g)onlyifthesupplyismadeunderprocedureofICB.

Benefits for Deemed �.� Deemedexportsshallbeeligibleforany/alloffollowingExports benefits in respectofmanufactureand supplyofgoods

qualifying as deemed exports subject to terms andconditionsasinHBPv�:-

(a) AdvanceAuthorisation/AdvanceAuthorisationfor

annualrequirement/DFIA. (b) DeemedExportDrawback. (c) Exemptionfromterminalexcisedutywheresupplies

are made against ICB. In other cases, refund ofterminalexcisedutywillbegiven.ExemptionfromTED shall also be available for supplies made byanAdvanceAuthorisationholdertoamanufacturerholding another Advance Authorization if suchmanufacturer, in turn,supplies theproduct(s) toanultimateexporter.

Benefits to the Supplier �.�.� (i) In respect of supplies made against AdvanceAuthorisation / DFIA in terms of paragraph �.�(a)of FTP, supplier shall be entitled to AdvanceAuthorisation/DFIAforintermediatesupplies.

�9

(ii) IfsuppliesaremadeagainstAdvanceReleaseOrder(ARO) or Back to Back Letter of Credit issuedagainstAdvanceAuthorisation / DFIA in terms ofparagraphs�.�.��and�.�.��ofFTP,suppliersshallbeentitledtobenefitslistedinparagraphs8.3(b)and(c)ofFTP,whicheverisapplicable.

�.�.� In respect of supply of goods to EOU / EHTP / STP /

BTPintermsofparagraph�.�(b)ofFTP,suppliershallbeentitledtobenefitslistedinparagraphs8.3(a),(b)and(c)ofFTP,whicheverisapplicable.

�.�.� In respect of supplies made under paragraph �.�(c) of

FTP, supplier shall be entitled to the benefits listed inparagraphs�.�(a),(b)and(c)ofthePolicy,whicheverisapplicable.

�.�.� (i) Inrespectofsuppliesmadeunderparagraphs�.�(d),

(f)and(g)ofFTP,suppliershallbeentitledtobenefitslistedinparagraphs�.�(a),(b)and(c),whicheverisapplicable.

(ii) Inrespectofsuppliesmentionedinparagraph�.�(d),

suppliestoprojectsfundedbysuchAgenciesalone,asmaybenotifiedbyDEA,MoF,shallbeeligiblefordeemedexportbenefits.AlistofsuchAgencies/FundsisgiveninAppendix��ofHBPv�.

(iii)Benefits of deemed exports under para 8.2(f) of

FTPshallbeapplicable inrespectof items, importofwhich isallowedbyDoRatzerocustomsduty,subject to fulfillment of conditions specifiedunderNotificationNo. 21/2002-Customs dated 1.3.2002,asamendedfromtimetotime.

(iv) SupplyofCapitalgoodsandsparesupto�0%ofFOR

valueofcapitalgoodstopowerprojectsintermsofparagraph�.�(g),shallbeentitledfordeemedexportbenefits provided the ICB procedures have beenfollowed at Independent Power Producer (IPP) /EngineeringandProcurementContract(EPC)stage.Benefitofdeemedexportsshallalsobeavailableforrenovation/modernizationofpowerplants.Suppliershallbeeligibleforbenefitslistedinparagraph8.3(a)and (b)ofFTP,whichever is applicable.However,supplyofgoodsrequiredforsettingupofanymega

90

power project as specified in S.No. 400 of DoRNotificationNo. 21/2002-Customs dated 1.3.2002,as amended, shall be eligible for deemed exportbenefits asmentioned in paragraph 8.3(a), (b) and(c) of FTP, whichever is applicable, if such megapowerprojectcomplieswiththethresholdgenerationcapacityspecifiedtherein,inCustomsNotification.

(v) Supplies under paragraph �.�(g) of FTP to new

refineriesbeingsetupduringNinthPlanperiodandspilledovertoTenthPlanperiod,shallbeentitledfordeemedexportbenefitsinrespectofgoodsmentionedinlist17specifiedinS.No.228ofNotificationNo.��/�00�-Customsdated�.�.�00�,asamendedfromtime to time.Suppliershallbeeligible forbenefitslistedinparagraphs�.�(a)and(b)ofFTP,whicheverisapplicable.

�.�.� Inrespectofsuppliesmadeunderparagraph�.�(e)ofFTP,suppliershallbeeligibleforbenefitslistedinparagraph8.3(a)and(b)ofFTP,whicheverisapplicable.BenefitofdeemedexportsshallbeavailableinrespectofsuppliesofcapitalgoodsandsparestoFertilizerPlantswhicharesetuporexpanded/revamped/retrofitted/modernizedduringNinthPlanperiod.BenefitofdeemedexportsshallalsobeavailableonsuppliesmadetoFertilizersPlants,whichhavestartedinthe�th/9thPlanperiodsandspilledoverto�0thPlanperiod.

�.�.6 Supplies of goods to projects funded by UNAgencies

coveredunderpara8.2(i)ofFTPareeligibleforbenefitslisted inparagraph�.�(a) and (b) ofFTP,whichever isapplicable.

�.�.7 In respect of supplies made to Nuclear Power Projects

underpara�.�(j)ofFTP,thesupplierwouldbeeligibleforbenefitsgiveninpara8.3(a),(b)and(c)ofFTP,whicheveris applicable. Supply of only those goods required forsetting up any Nuclear Power Project specified in list43 at S.No. 401 of Notification No. 21/2002-Customsdated �.�.�00�, as amended from time to time, havingacapacityof440MWormoreascertifiedbyanofficernot below rank of Joint Secretary to Government ofIndiainDepartmentofAtomicEnergy,shallbeentitledfordeemedexportbenefitsincaseswhereprocedureofcompetitivebidding(andnotICB)hasbeenfollowed.

9�

Eligibility for refund of �.� Supplyofgoodswill be eligible for refundof terminalterminal excise duty / excise duty in terms of para �.�(c) of FTP, provideddrawback recipientofgoodsdoesnotavailCENVATcredit/rebate

on such goods. Similarly, supplies will be eligible fordeemedexportdrawbackintermsofpara�.�(b)ofFTPonCentralExcisepaidoninputs/components,providedCENVATcreditfacility/rebatehasnotbeenavailedbyapplicant. Such supplies will however be eligible fordeemedexportdrawbackoncustomsdutypaidoninputs/components.

�.�.� Simple interest @ 6% per annum will be payable on

delayinrefundofdutydrawbackandterminalexcisedutyunder deemed export scheme, if the case is not settledwithin�0daysofreceiptofcompleteapplication(asinparagraph9.�0.�ofHBPv�).

Supplies to be made �.6.� In all cases of deemed exports, supplies shall be madeby the main / directly to designated Projects / Agencies / Units /sub-contractor Advance Authorisation / EPCG Authorisation

holders. Sub-contractor may, however, make suppliesto main contractor instead of supplying directlyto designated projects / Agencies. Such suppliesshall be eligible for deemed export benefits as perprocedure laid down in paragraph �.� of HBP v�.

�.6.� SuppliesmadebyanIndiansub-contractorofanIndian

or foreign main contractor directly to the designatedprojects / Agencies, shall also be eligible for deemedexportbenefitsprovidedsub-contractorisindicatedeitheroriginallyor subsequently in thecontract,andpaymentcertificate is issuedbyproject authority in thenameofsub-contractorasinAppendix��CofHBPv�.

9�

9�

CHAPTER-9

DEFINITIONS

9.� For purpose of FTP, unless context otherwise requires,followingwordsandexpressionsshallhavethefollowingmeaningsattachedtothem.

9.� “Accessory”or“Attachment”meansapart,sub-assemblyorassemblythatcontributestoefficiencyoreffectivenessof a piece of equipment without changing its basicfunctions.

9.� “Act”meansForeignTrade(DevelopmentandRegulation)Act,�99�(No.��of�99�)[FT(D&R)Act].

9.� “ActualUser”meansanactualuserwhomaybeeitherindustrialornon-industrial.

9.� “Actual User (Industrial)” means a person who utilisesimportedgoodsformanufacturinginhisownindustrialunit or manufacturing for his own use in another unitincludingajobbingunit.

9.6 “Actual User (Non-Industrial)” means a person whoutilisestheimportedgoodsforhisownusein(i) any commercial establishment carrying on any

business,tradeorprofession;or(ii) any laboratory, Scientific or Research and

Development(R&D)institution,universityorothereducationalinstitutionorhospital;or

(iii) anyserviceindustry.

9.7 “AEZ” means Agricultural Export Zones notified byDGFTinAppendix�ofHBPv�.

9.8 “Appeal”isanapplicationfiledundersection15oftheAct and includes such applications preferred by DGFTofficials in government interest against decision bydesignatedadjudicating/appellateauthorities.

9.9 “Applicant”meanspersononwhosebehalfanapplicationismadeandshall,wherevercontextsorequires,includespersonsigningtheapplication.

9�

9.9.� “Authorisation” means a permission as included inSection�(g)ofFT(D&R)ActtoimportorexportasperprovisionsofFTP.

9.10 “BoA”meanstheBoardofApprovalasnotifiedbyDoC.

9.11 “BTP”meansBiotechnologyParkasnotifiedbyDGFTonrecommendationofDepartmentofBiotechnology.

9.�� “CapitalGoods”meansanyplant,machinery,equipmentoraccessoriesrequiredformanufactureorproduction,eitherdirectlyorindirectly,ofgoodsorforrenderingservices,includingthoserequiredforreplacement,modernisation,technologicalupgradationorexpansion.Italsoincludespackaging machinery and equipment, refractories forinitial lining,refrigerationequipment,powergeneratingsets,machinetools,catalystsforinitialcharge,equipmentand instruments for testing, research and development,qualityandpollutioncontrol.Capitalgoodsmaybeforuse in manufacturing, mining, agriculture, aquaculture,animalhusbandry,floriculture,horticulture,pisciculture,poultry, sericultureandviticultureaswell as foruse inservicessector.

9.�� “CompetentAuthority”meansanauthoritycompetenttoexerciseanypowerortodischargeanydutyorfunctionundertheActortheRulesandOrdersmadethereunderorunderFTP.

9.�� “Component”meansoneofthepartsofasub-assemblyorassemblyofwhichamanufacturedproductismadeupandintowhichitmayberesolved.Acomponentincludesanaccessoryorattachmenttoanothercomponent.

9.�� “Consumables” means any item, which participates inorisrequiredforamanufacturingprocess,butdoesnotnecessarily form part of end-product. Items, which aresubstantiallyortotallyconsumedduringamanufacturingprocess,willbedeemedtobeconsumables.

9.�6 “ConsumerGoods”meansanyconsumptiongoods,whichcandirectlysatisfyhumanneedswithoutfurtherprocessingandincludesconsumerdurablesandaccessoriesthereof.

9.�7 “Counter Trade” means any arrangement under whichexports/imports from/to India are balanced either by

9�

directimports/exportsfromimporting/exportingcountryor througha thirdcountryunderaTradeAgreementorotherwise. Exports/Imports under Counter Trade maybe carried out through Escrow Account, Buy Backarrangements, Barter trade or any similar arrangement.Balancingofexportsandimportscouldwhollyorpartlybeincash,goodsand/orservices.

9.�� “Developer”meansapersonorbodyofpersons,company,firmandsuchotherprivateorgovernmentundertaking,who develops, builds, designs, organises, promotes,finances,operates,maintainsormanagesapartorwholeofinfrastructureandotherfacilitiesinSEZasapprovedbyCentralGovernmentandalsoincludesaco-developer.

9.�9 “Development Commissioner” means DevelopmentCommissionerofSEZ.

9.20 “DFRC”meansDutyFreeReplenishmentCertificate(asgiveninFTP�00�-09).

9.�� “DomesticTariffArea (DTA)”meansareawithin IndiawhichisoutsideSEZsandEOU/EHTP/STP/BTP.

9.�� “Drawback” in relation to any goods manufactured inIndia and exported, means rebate of duty chargeableon any imported material or excisable material usedin manufacture of such goods in India. Goods includeimported spares, if supplied with capital goodsmanufacturedinIndia.

9.�� “EHTP”meansElectronicHardwareTechnologyPark.

9.�� “EOU”meansExportOrientedUnit forwhichanLOPhasbeenissuedbyDevelopmentCommissioner.

9.�� “Excisable goods” means any goods produced ormanufactured in India and subject to a duty of exciseunderCentralExciseandSaltAct�9��(�of�9��).

9.�6 “Exporter” means a person who exports or intendsto export and holds an IEC number, unless otherwisespecificallyexempted.

9.�7 “ExportObligation”meansobligationtoexportproductor products covered byAuthorisation or permission in

96

termsofquantity,valueorboth,asmaybeprescribedorspecifiedbyRegionalorcompetentauthority.

9.27.1 “FTP”means theForeignTradePolicywhich specifiespolicy for exports and imports under section � of theAct.

9.�� “GroupCompany”meanstwoormoreenterpriseswhich,directlyorindirectly,areinapositionto—

(i) exercisetwenty-sixpercent,ormoreofvotingrightsinotherenterprise;or

(ii) appointmorethanfiftypercent,ofmembersofboardofdirectorsintheotherenterprise.

For group companies to claim benefits or have theirexports counted for benefits to be claimed by anothermemberofgroup,thegroupcompanyshouldhavebeeninexistenceat least�yearsprior todateofapplicationunderanyofexportpromotionschemesnotifiedinFTP.

9.�9 “HBP v�” means the Handbook of Procedures (Vol.�)and “HBP v�” means Handbook of Procedures (Vol.�)publishedunderprovisionsofparagraph�.�ofFTP.

9.�0 “Importer” means a person who imports or intendsto import and holds an IEC number, unless otherwisespecificallyexempted.

9.�� “Infrastructure facilities” means industrial, commercialand social infrastructure or any other facility fordevelopmentofSEZasnotified.

9.32 “ITC(HS)”meansITC(HS)ClassificationsofExportandImportItemsBook.

9.�� “Jobbing” means processing or working upon of rawmaterialsorsemi-finishedgoodssuppliedtojobworker,soastocompleteapartofprocessresultinginmanufactureorfinishingofanarticleoranyoperationwhichisessentialforaforesaidprocess.

9.�� “LicensingYear”meansperiodbeginningonthe�stAprilofayearandendingon��stMarchoffollowingyear.

97

9.�� “ManagedHotel”meanshotelsmanagedbyathreestarorabovehotel/hotelchainunderanoperatingmanagementcontract for a duration of at least three years betweenoperating hotel/ hotel chain and hotel being managed.Management contract must necessarily cover the entiregamutofoperations/managementofmanagedhotel.

9.�6 “Manufacture” means to make, produce, fabricate,assemble, process or bring into existence, by hand orby machine, a new product having a distinctive name,character or use and shall include processes such asrefrigeration, re-packing, polishing, labelling, Re-conditioning repair, remaking, refurbishing, testing,calibration,re-engineering.Manufacture,forthepurposeofFTP,shallalsoincludeagriculture,aquaculture,animalhusbandry,floriculture,horticulture,pisciculture,poultry,sericulture,viticultureandmining.

9.�7 “Manufacturer Exporter” means a person who exportsgoods manufactured by him or intends to export suchgoods.

9.38 “MAI”meansMarketAccessInitiativeSchemenotifiedbyDepartmentofCommerce.

9.�9 “MerchantExporter”meansapersonengagedintradingactivityandexportingorintendingtoexportgoods.

9.�0 “NC” means the Norms Committee in the DirectorateGeneral of Foreign Trade, for recommending grant ofAuthorisations under Duty Exemption Scheme and forrecommending Input Output norms and value additionnormstobenotifiedbyDGFT.

9.�� “NFE”meansNetForeignExchange.

9.42 “Notification”meansanotificationpublishedinOfficialGazette.

9.�� “Order” means an Order made by Central GovernmentundertheAct.

9.�� “Part”meansanelementofasub-assemblyorassemblynotnormallyusefulbyitself,andnotamenabletofurtherdisassemblyformaintenancepurposes.Apartmaybeacomponent,spareoranaccessory.

9�

9.45 “Person”includesanindividual,firm,society,company,corporationoranyotherlegalpersonincludingtheDGFTofficials.

9.�6 “Policy”meansFTP�009-�0��asamendedfromtimetotime.

9.�7 “Prescribed”meansprescribedundertheActortheRulesorOrdersmadethereunderorunderFTP.

9.�� “PublicNotice”meansanoticepublishedunderprovisionsofparagraph�.�ofFTP.

9.�9 “Rawmaterial”means:

(i) basicmaterialswhichareneededformanufactureofgoods,butwhicharestillinaraw,natural,unrefinedorunmanufacturedstate;and

(ii) foramanufacturer,anymaterialsorgoodswhicharerequiredforhismanufacturingprocess,whethertheyhaveactuallybeenpreviouslymanufacturedor areprocessedorarestillinarawornaturalstate.

9.�9.� “RegionalAuthority”meansauthoritycompetenttograntanAuthorisationundertheAct/Order.

9.50 “Registration-Cum-Membership Certificate” (RCMC)meanscertificateofregistrationandmembershipgrantedby an Export Promotion Council/Commodity Board/DevelopmentAuthorityorothercompetentauthorityasprescribedinFTPorHBPv�.

9.�� “Rules”meansRulesmadebyCentralGovernmentunderSection�9oftheAct.

9.�� “Services” include all tradable services covered underGeneralAgreementonTradeinServicesandearningfreeforeignexchange.

9.�� “ServiceProvider”meansapersonproviding

(i) Supply of a ‘service’ from India to any othercountry;

99

(ii) Supplyofa‘service’fromIndiatoserviceconsumerofanyothercountryinIndia;and

(iii) Supplyofa‘service’fromIndiathroughcommercialor physical presence in territory of any othercountry.

(iv) Supplyofa‘service’inIndiarelatingtoexportspaidinfreeforeignexchangeorinIndianRupeeswhichareotherwiseconsideredashavingbeingpaidforinfreeforeignexchangebyRBI.

9.54 “SEZ”meansSpecialEconomicZonenotifiedbyMinistryofCommerce&Industry,DepartmentofCommerce.

9.�� “Ships”meanalltypesofvesselsusedforseabornetradeorcoastaltrade,andshallincludesecondhandvessels.

9.56 “SION”meansStandardInputOutputNormsnotifiedbyDGFTinHBPv�/approvedbyBoardofApproval.

9.�7 “Spares” means a part or a sub-assembly or assemblyfor substitution, that is ready to replace an identical orsimilarpartorsub-assemblyorassembly.Sparesincludeacomponentoranaccessory.

9.58 “Specified”meansspecifiedbyorundertheprovisionsofthisPolicythroughNotification/PublicNotice.

9.�9 “Statusholder”meansanexporterrecognizedasExportHouse/Trading House etc. by DGFT/DevelopmentCommissioner.

9.�9.� “Stores”meansgoodsforuseinavesseloraircraftandincludesfuelandsparesandotherarticlesofequipment,whetherornotforimmediatefitting.

9.60 “STP”meansSoftwareTechnologyPark

9.6� “Supporting Manufacturer” means any person whomanufacturesanyproductorpart/accessories/componentsofthatproduct.Nameofsupportingmanufactureraswellastheexportermustbeendorsedonexportdocuments.

9.6� “Third-partyexports”meansexportsmadebyanexporteror manufacturer on behalf of another exporter(s). In

�00

such cases, export documents such as shipping billsshall indicate name of both manufacturing exporter/manufacturer and third party exporter(s). BRC, GRdeclaration, export order and invoice should be in thenameofthirdpartyexporter.

9.63 “TransactionValue” isasdefined inCustomsValuationRulesofDepartmentofRevenue.

9.64 “Wild Animal” means any wild animal as defined inSection�(�6)ofWildlife(Protection)Act,�97�.