Custom Benefits
Greenvissage Helps Businesses To Claim Seis Benefits For Their Service Exports. SEIS is a way for tax relief that aims to help startups raise money.
What is Custom Benefits?
India’s economy is one of the fastest growing economies in the world. As a part of economic reforms, the government has formulated many economic policies which have led to the country’s gradual economic development. Under the changes, there has been an initiative to improve the condition of exports to other countries. With this regard, the government has taken up a few actions to benefit businesses in the export trade. The primary objective is to encourage exports in order to earn foreign exchange and to keep domestic products competitive on in the global market.
Foreign Trade Policy ( FTP )
Foreign Trade Policy (FTP) notified by the Director General of Foreign Trade (‘DGFT’) from time to time, prescribes various incentives and measures to promote export of goods and services from India. Some of the popular incentive schemes relating to exports are:
- Merchandise Exports from India Scheme (‘MEIS’/’SEIS’);
- Export Promotion Capital Goods Scheme (‘EPCG’);
- Advance Authorization Scheme (‘AA’) ; and
- Duty Drawback Scheme
Manufacturer/Service exporters are eligible to avail the benefit of the above schemes. While the MEIS scheme is intended to cut down the transaction costs for exports, EPCG and AA schemes are designed to enable manufacturer exporters to import capital goods and raw material without payment of customs duties.
- This scheme has been announced under the New Foreign Trade Policy 2015-2020 and is applicable for notified goods exported to notified markets on or after 1 April 2015.
- Rewards for export of notified goods to most of the countries is payable as percentage of realized FOB value.
- Incentive ranges from 2% to 7% of the FOB value of the goods exported.
- The incentive is given in the form of duty credit scrip which can be used for payment of customs duty or can be transferred to other importers.
- Under AA Scheme, duty free import of raw materials and inputs which are required for manufacture of export products is allowed.
- Only those inputs/ raw material are allowed to be imported under AA scheme which will be actually consumed within the process of manufacture.
- The exporter is obligated to manufacture and export the finished products using the inputs/ raw materials imported duty free under AA scheme.
- Basic customs benefits Like custom duty, social welfare cess and IGST is exempted under AA scheme.
- Under EPCG Scheme, duty free import of capital goods which are required for manufacture of the export products is allowed.
- The exporter is obligated to export the goods of an amount equal to 6 times of the amount of duty saved.
- The said goods should be manufactured using the same capital goods which have been imported under EPCG scheme.
- The export obligation is required to be fulfilled in 6 years.
- Basic customs duty, social welfare cess and IGST is exempted under EPCG scheme.
Duty Drawback is a relief by way of refund of custom and excise duties paid on inputs or raw materials used in the manufacture of export goods. To entitle goods to drawback, they must be exported to a foreign port. Duty drawback provisions are given under section 74 and 75 of the Customs Act. Section 74 allows duty drawback on re-export of duty paid goods. Section 75 allows drawback on imported goods used in the manufacture of export goods.
The Duty Drawback is of two types: (i) All Industry Rate (AIR) and (ii) Brand Rate.
- The All Industry Rate (AIR) of Duty Drawback is generally fixed as a percentage of FOB price of export products.
- Where the export product has not been notified in All Industry Rate (AIR) of Duty Drawback or where the exporter considers the All Industry Rate (AIR) of Duty Drawback insufficient to fully neutralize the duties suffered by his export product, he may opt for the Brand Rate of Duty Drawback.
Drawback is not allowed when the assessee opts for Advance Authorisation Scheme. Therefore, it is advisable to analyse beneficial options before choosing any particular option.
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