Export

Incentives in
India
Module 2
Dr.KK

Export Promotion Measures in India

Export-import policy 1992-97 brought about
many fundamental changes in Indias external
trade policy.
It gradually laid the foundation of
globalisation of Indian economy by initialising
liberalisation and making Indian industries to
face competition from foreign MNCs.
Until 1992, Indian markets were highly
protected and the Indian govt used to give
many incentives to the Indian exporters.
But, many of these incentives were withdrawn
by 1992-97 and subsequent policies

Import facilities for Exporters

As per latest Foreign Trade Policy 2009-14, import of
goods is permissible under following special schemes
designed for encouraging exports:
1. Export Promotion Capital Goods Scheme (EPCG)
To enable manufacturer exporter to import machinery and
other capital goods for export production at concessional
or no customs duties at all. Subject to export obligation.
2. Advance Authorisation Scheme:
To allow free import of inputs which are physically
incorporated in export product. Fuel, oil, energy sources,
catalysts used for obtaining export product also allowed.
Duty free import of mandatory spares up to 10% of CIF
value
3. Duty free import authorisation (DFIA) Scheme:
To allow duty free import of inputs, fuel, oil, energy
sources, catalyst required for production of export
products. Only for products for which Standard Input and
Output Norms have been notified.

Duty Remission Schemes

1. Duty Entitlement Passbook Scheme(DEPB):
to neutralise incidence of customs duty on import
content of export product. Exporter can apply for
credit as a specified % of FOB value of exports.
Such credit may be utilised for payment of
customs duty on freely importable items and / or
restricted items and also on imports under EPCG
Scheme.
2. Duty Drawback (DBK) Scheme: administered by
Directorate of Drawback, Ministry of Finance.
Under this scheme, exporter is entitled to claim:
. Customs duty paid on import of raw materials,
components and consumables
. Central excise duty paid on indigenous raw
materials, components and consumables used in
manufacture of exportable goods

3.Excise duty refund: Export goods are totally

exempted from excise duty. Clearance to be
obtained for 1) Export under rebate.2) Export
under bond
4. Central Sales Tax Exemption: registered
exporters can claim exemption from sales tax for
sales made in course of exports out of the territory
of India. Exporter may also buy goods from dealer
or manufacturer for the purpose of exports without
payment of sales tax by issuing Form H.
5.Exemption from Service Tax: Service tax is
leviable only on taxable services supplied within
India. Exportable services are exempted from ST.
6. Octroi exemption: Octroi is a duty paid on
manufactured goods, when they enter the
municipal limits of a city or town. Export goods are
exempted from octroi.

Fiscal Incentives
Exemption from Income Tax : To
enable exporters to plough back their
earnings and promote exports, the govt
of India has given tax exemption to
exporters as per provisions of the
Income Tax Act,1961.
Ten year tax holiday for new industries
in Free Trade Zones.,Electronic
Hardware Tech Parks, Software Tech
Parks, and Special Economic Zones (SEZ)
15 year tax holiday for new SEZ units
Ten year tax holiday for new 100%

Marketing Assistance
1. Market development assistance (MDA):
allowed to delegations travelling abroad for
market survey sponsored by Export Promotion
Councils, Commodity Boards and other
organisations such as Federation of Indian
Export Organisations. 25%-60% of actual
expenses incurred is granted. Also allowed on
export publicity, including exhibitions and
service contracts abroad.
2. Market access initiative(MAI): formulated on
focus product focus country approach to
evolve specific market and specific product
through market survey/ studies. Financial
assistance is provided for marketing projects
abroad, capability building, statutory
compliances, etc.

Supply of Raw Materials

1. Industrial raw materials assistance centres
(IRMAC): a subsidiary of STC. They import
raw materials in bulk and supply them to
registered exporters against a valid import
licence. Enables exporters to get timely
supply of raw materials at reasonable
prices
2. Back-to Back Inland Letter of Credit:
introduced by EXIM policy 1992-97. B-B LC
is one, which can be opened in favour of
local suppliers of raw materials or goods for
export on credit basis. It is a kind of preshipment finance procured by exporter for
processing of export order.

Institutional Measures
Govt of India has established a number of
organisations to promote and expand export
trade. These are:
1. Indian Institute of Foreign Trade : to provide
training
2. Indian Institute of Packaging : to upgrade
packing stds
3. Export Promotion Councils : to do export
promotion activities
4. Export Inspection Council : to upgrade quality
stds
5. Export Credit Guarantee Corp: to protect
exporters against payment risks
6. Indian Council of Arbitration : to settle and solve
disputes between importers and exporters

Duty Drawback (DBK)

A duty refund Scheme administered by
Directorate of Drawback in Ministry of
Finance.
Duty Drawback composed of customs
duty and excise duty paid on raw
materials, components and consumables
used in manufacture of goods meant for
export , which is refunded.
Duty Drawback is allowed as per:
a) The Customs Act, 1962
b)The Central Excise and Salt Act, 1944
c) Customs and Central Excise Duty
Drawback Rules, 1995.

Classifications of DBK
The rates of drawback are divided into 3 categories:
1. The All Industry Rates: Expressed as a % of
FOB value of goods exported. Applicable to all
exporters in general. Rates published yearly.
2. Brand rates: Where Central Govt has not
notified All Industry Rate, for any export
product, any manufacturer or exporter of
such goods may apply to Central Govt for
determination of Brand Rate for specific
product.
3. Special Brand Rate: Meant for specific
manufacturers and applicable only to
manufacturers for whom those rates are
fixed.

Eligibility for DBK

1. Raw materials and other inputs

used in the process of
manufacturing goods for export
purpose
2. Materials used in manufacturing
of raw materials to be used in
manufacturing goods for export
purpose
3. Materials used for packing
manufactured goods
4. Irrevocable wastage in the
production process

Procedure for claiming duty drawback

1. Claiming advance DBK: The amount of
drawback is released after the execution of
an export order. To avoid blockage of
finance, govt on request allows a provisional
rate of drawback. Which is 75% of amount
claimed. This amount will be adjusted
towards final amount fixed by directorate.
2. Execution of a bond: Exporter has to
execute a bond in favour of customs
authorities for the amount fixed by the
Directorate but not exceeding the full
amount claimed as a drawback. Such bond is
a safeguard for the govt in case of excess
payment or non- sanctioning of DBK.

3. Submission of Green Shipping bill:

A triplicate copy of shipping bill automatically
becomes an application for the claim of DBK. An
exporter should prepare and file Drawback
Shipping Bill also known as Green Shipping Bill in
order to claim drawback. Such claim should be
supported by:
a) Copy of export contract or LC as the case may be
b) Copy of packing list
c) Copy of ARE-I form, where applicable
d) Insurance certificate, where necessary
e) Copy of communication regarding rate of DBK where
exporter is granted a Special Brand Rate
4.

Issue of refund cheque:

After verification, cheque is issued to
exporters bank after adjusting any advance
payments made, with intimation to exporter

Deemed Exports
Deemed exports are transactions in
which goods supplied do not leave
the country and payment for such
goods is made in India by the
recipient of goods in Indian rupees.
Products of import substitution are
entitled to deemed export benefits.
This is based on the theory that
foreign exchange saved is foreign
exchange earned.

Categories of Deemed export supplies

1. Supply of goods against Advance License,
Advance authorisation or Duty free import
authorisation
2. Supply of goods to: Export Oriented
Units(EOUs), Software Technology Parks,
Electronic Hardware Technology parks, Biotechnology parks
3. Supply of capital goods to holders of licenses
under the EPCG scheme.
4. Supply of goods to projects financed by
multilateral or bilateral agencies/ funds
notified by Dept of Economic Affairs
5. Supply of capital goods and spares to fertiliser
plants used for installation purposes till the
stage of commercial production

6. Supply of goods to any project or

purpose in respect of which MOF
permits import of such goods at
zero customs duty
7. Supply of goods to units in power
or refineries sector duly approved
by MOF
8. Supply of marine freight
containers by 100% EOU provided
they are exported out of India
within 6 months or permitted
period
9. Supply to projects funded by UN

Export Promotion Capital Goods (EPCG) Scheme

Introduced by the ExportImport(EXIM)policy of 1992-97 to

enable manufacturer exporter to
import machinery and other capital
goods for export production at
concessional or no customs duties
at all.
This facility is subject to export
obligation exporter is required to
guarantee exports of certain
minimum value, which is in
multiple of the value of capital

Zero duty EPCG scheme

Allows for pre-production,
production and post-production
at zero customs duty, subject to
an export obligation equal to 6
times of duty saved on capital
goods imported under EPCG
scheme, to be fulfilled in 6 years
from date of authorisation.
Scheme available for exporters
of engineering and electronic
products, basic chemicals and
pharmaceuticals, apparels and

Concessional 3% duty EPCG scheme

Allows import of capital goods for preproduction, production and postproduction at 3% customs duty, subject
to an export obligation equal to 8 times
of duty saved on capital goods imported
under EPCG sceme, to be fulfilled in 8
years from authorisation date.
For agro units and cottage and tiny
sector, 6 times of duty saved . 12 years
from date of authorisation
For SSI units, 6 times /8 years
If duty saved is 100 crore or more, export
obligation shall be fulfilled in 12 years

Eligible capital goods

1. Capital goods like spares, tools,
jigs, fixtures, dyes and moulds
2. Second hand capital goods,
without restriction of age
3. Import of motor cars, sports utility
vehicles, all purpose vehicles
allowed only to hotels, travel
agents, tour operators or tour
transport operators and companies
owning or operating golf resorts