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KPMG FLASH NEWS

KPMG in India

2 April 2015

Highlights of Foreign Trade Policy 2015-20

Scrip and goods imported/locally procured


against the scrip are freely transferable

Benefit of MEIS also extended to SEZ units


except for Free Trade Warehousing Zone units

The exports made up to 31 March 2015 and


scrips applied for or issued on the basis of these
exports will be governed by the provisions of the
earlier relevant schemes.

Background
The long awaited Foreign Trade Policy 2015-20 (the
FTP or the policy) has been announced by the
government.
The highlights of the policy are summarised below.

Title come here


Merchandise Export from India Scheme

Service Exports from India Scheme (SEIS)

Title come here

SEIS replaces the Served from India Scheme


(SFIS) and extends the benefit of duty exempted
scrip to service providers located in India and
providing notified services in a specified mode
outside India

Service provider with minimum net foreign


exchange earnings of USD15,000 in the
preceding financial year (earlier INR10 lakh of
foreign exchange earnings) is eligible for benefit
under the scheme

Service providers will be issued SEIS scrip of


5 per cent or 3 per cent (depending on the
category of service) of net foreign exchange
earned. Earlier SFIS scheme provided scrip of
10 per cent of net foreign exchange earned

Benefit of SEIS is extended to SEZ units.


However, it appears by oversight the export by
SEZ units continues to be part of ineligible
exports for the scheme. We understand that the
intention of the government is to extend the
benefit to SEZ units

Title
come here
(MEIS)

Existing multiple schemes like Focus Product


Scheme, Focus Market Scheme, Market Linked
Title
come
here
Focus
Product
Scheme, etc. have been consolidated
and replaced by a single MEIS
Notified goods like; dairy products, vegetables,
confectionary, pharmaceutical products, capital
goods, etc. exported on and after 1 April 2015 to
notified markets/countries are provided a benefit
ranging from 2 per cent to 5 per cent of FOB value of
exports or FOB value realised, whichever is less

Benefit also extended to export of goods through


courier or foreign post office using e-commerce up to
FOB value of INR25,000

MEIS scrip can be inter alia used for payment of


customs duty, excise duty and service tax

Additional customs duty, excise duty and service tax


paid through cash or debit to scrip available as
CENVAT credit or drawback. Basic customs duty
paid in cash or through debit in scrip eligible for
drawback

2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

Unit Approval Committee/Inter Ministerial


Standing Committee (IMSC) to consider sharing
of infrastructural facilities among EOUs/ STPs on
a case to case basis and on recommendation to
BoA. However, sharing of facilities between
EOUs/STPs and SEZs shall not be permitted

Subject to approval by IMSC, STP unit can set up


for undertaking re-conditioning, repair, remaking,
testing, etc. for exports subject to conditions

Export Promotion Capital Goods Scheme


(EPCG)

Simplified procedure to be provided to fast track


debonding/exit of the STP units who have not
availed duty exemption benefit

Facility to set up a warehouse outside the


premises and near a port of export permitted,
subject to conditions

EOUs having a physical export turnover of INR10


crore or more allowed fast track clearances on
their procurement.

Benefits of SEIS are similar to MEIS (including


availment of CENVAT credit and drawback) and
these scrips and the goods imported or locally
procured are freely transferable

The exports made up to 31 March 2015 and scrips


applied for during the same period will be governed
by the provisions of SFIS.

In case of import of capital goods under EPCG


scheme, export obligation of six times of duty saved
is required to be met. Reduced export obligation
(25 per cent less than normal export obligation) in
case of local sourcing of capital goods has now been
prescribed
Exporter registered with the excise authorities has
now the option to furnish an installation certificate
confirming receipt of capital goods from a Chartered
Engineer subject to conditions
Installation certificate is normally required to be
submitted within six months of the completion of the
imports. Licensing authority can now extend the
period of furnishing the installation certificate by
another 12 months
Specified guidelines for maintenance of average
export obligation and specified export obligation
notified in case of exit of an EOU or SEZ unit under
the EPCG scheme.

Export Oriented Unit (EOU)/Software


Technology Park (STP) scheme

Extension of one year in achieving net foreign


exchange earnings to be granted by Board of
Approval (BoA) on a case to case basis under
specific circumstances
Letter of Permission will now have initial validity of
two years (earlier three years) for implementation of
project and commencement of production. Further,
extension of one year (earlier three years) on a case
to case basis allowed

Miscellaneous

Exemption under Duty Free Import Authorisation


Scheme now restricted to basic customs duty as
against complete exemption from customs duty
earlier. However, additional customs duty will be
available as CENVAT credit subject to conditions

Eligibility criteria for grant of status to an


exporter, revised. Deemed export will now be
considered for determining export performance.
Additional facilitation in terms of self-certification,
export promotion, etc. extended

Export obligation period for exports of defence,


military store, aerospace, and SCOMET items,
etc. under Advance Authorisation extended to 24
months (earlier 18 months)

Recovery and penal proceedings in case of misdeclaration/mis-representation of facts to claim


deemed export benefits notified

Trade facilitation measures to reduce transaction


costs and document handling introduced in terms
of on-line application filing, online inter-ministerial
consultation, physical record maintenance,
submission of multiple documents, etc.

2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

Our comments

In this FTP, focus has been on simplicity and stability.


Further, the policy on one hand seeks to realign multiple
schemes with the objective of reducing the complexities,
on the other hand it wants to promote increased use of
technology to reduce the transaction cost and manual
compliances.
By extending benefits under EPCG on domestic
procurements and offering them to more products under
MEIS, the policy seeks to further incentivise the exports.
While the measures proposed in the policy are not
radical, they appear to be in the right direction.
Source: Foreign Trade Policy 2015-20 notified on 1 April
2015

2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.

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2015 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (KPMG International), a Swiss entity. All rights reserved.