Indian Fiscal Budget 1997-98: EXIM POLICY 1997-2002


DUTY EXEMPTION SCHEME

 

Duty Exemption Scheme

Duty Free ssories, mandatory spares (not exceeding 5% of the cif value of the duty free licence), and packing material (hereinafter referred to as "inputs") may be permitted against a Duty Free Licence.

 

Advance Licence.

7.3 An Advance Licence is granted to a merchant-exporter or manufacturer-exporter for the import of inputs required for the manufacture of goods without payment of basic customs duty. However, such inputs shall be subject to the payment of add itional customs duty equal to the excise duty at the time of import. The said additional customs duty shall be adjusted in the following manner:

(a) If the importer uses the inputs for production of export goods, which are otherwise liable to a d uty of excise and eligible for Modvat, he may avail of Modvat credit in respect of the additional customs duty so paid, immediately upon the said inputs entering his factory;

(b) If the importer uses the inputs for production of export goods, whi ch are otherwise not excisable or not dutiable or not eligible for Modvat benefit, he may claim drawback in respect of the additional customs duty so paid at the time of export of goods in which such inputs have been used;

(c) If the importer use s the inputs for manufacture and sale in the DTA of excisable goods, he may claim Modvat in respect of the additional customs duty so paid, immediately upon the said inputs entering his factory;

(d) If the importer uses the inputs for manufacture and sale in the DTA of goods, which are not excisable or not dutiable or not eligible for Modvat benefit, he shall not be eligible to any rebate or adjustment of the additional customs duty so paid.

7.4

(i) Notwithstanding anything co ntained above, exemption from payment of additional customs duty shall be allowed in respect of Advance Licences, issued with actual user condition to:

(a) Manufacturer exporter

(b) Merchant exporter where the merchant expor ter agrees to the endorsement of the name(s) of the supporting manufacturer(s) on the relevant DEEC Book.

(ii) Such advance licences and/or materials imported thereunder shall not be transferable even after completion of export obligation.

Advance licences shall be issued in accordance with the Policy and procedure in force on the date of issue of licence and shall be subject to the fulfilment of a time bound export obligation and value addition as may be specified.

 

Advance Intermediate Licence

7.5 An Advance Intermediate Licence (AIL) is granted to a manufacturer-exporter for the import of inputs required in the manufacture of goods to be supplied to the ultimate exporter holding an Advance Licence/Special Imprest Licence.

Special Imprest Licence

7.6 A Special Imprest Licence is granted to a manufacturer- exporter for the import of inputs required in the manufacture of goods to be supplied to the categories mentioned in paragraph 10.2 (b) (c) (in case of zero duty EPCG licence) (d) (e) and (f) of the Policy. In addition, in respect of supply of goods to specified projects mentioned in paragraph 10.2 (d) (e) and (f) of the Policy, a Special Imprest Licence can also be availed by the sub-contractor of the main contractor to such projec t. A Special Imprest Licence is also granted for supplies made to United Nations Organisations or under the Aid Programme of the United Nations or other multilateral agencies and paid for in foreign exchange.

Description of a Duty Free Licence

7.7 A Duty Free Licence and the relevant DEEC Book shall specify:

(a) the names and description of items to be imported and exported/supplied;

(b) the quantity of each item to be imported or wherever the quantity cannot be indicated, the value of the item shall be indicated. However, if in Standard input output norms, the quantity and value of individual inputs is a limiting factor, the same shall be applicable.

(c) the aggregate CIF value of imports; and

( d) the FOB/FOR value and quantity of exports/supplies.

Input-Output Norms

7.8 The standard input-ouput norms for the imports and exports for the grant of a duty free licence shall be in accordance with the norms published by the Director General of Foreign Trade in the Handbook (Vol.2). However, in respect of goods fo r which such standard input-output norms have not been published, the norms will be as specified by the competent authority, referred in Paragraph 7.7 of the Handbook (Vol. I).

Value Addition

7.9 Unless otherwise specified, in a Standard Input-Output Norms, a duty free licence shall have a minimum value addition of 33%. The ALC may, however, consider requests on merits for grant of a duty free licence on a lower value addition, upto 25% and in exceptional cases even below 25%.

Exports not covered by freely convertible Currency

7.10 Exports for which payments are not received in freely convertible currency shall be subject to value addition as specified in Appendix 39 of Handbook (Vol.1). However, the Director General of Foreign Trade may permit a lower value addition , which shall be not less than 75%, in respect of such class or category of goods as may be specified by him in this behalf.

Third Party Exports

7.11 An Advance Licence holder may export directly or through third party(s) and discharge his export obligation. In the case of export through a third party, shipping bills relating to the export shall show the names of both the licence holde r and the third party.

Jobbing, repairing, etc. for re-export

7.12

(i) The import of goods in terms of para 7.2 supplied free of cost may be permitted for the purpose of jobbing.

(ii) In addition, patterns, drawings, jigs, tools, fixtures, moulds, tackles, computer hardware, software, ins truments and hangers may also be imported if they are directly related to the export order and are supplied free of cost by the foreign buyer.

(iii) The imports shall be under a bond/bank guarantee to the satisfaction of the customs authorities and subject to such conditions as may be specified by the customs authorities from time to time.

(iv) All goods so imported except the wastage shall be re- exported. The wastage shall be determined in terms of Standard Input-Output norms publish ed in Handbook (Vol.2) and disposed off in the manner specified by the customs authority. Where norms have not been notified, the extent of wastage shall be to the satisfaction of Asstt.Commissioner of Customs. The value addition to be achieved shall be not less than 10%.

(v) The imported patterns, drawings, jigs, tools, fixtures, moulds, tackles, computer hardware and instruments may be retained after the fulfilment of the export obligation, provided, such items are not in the Negative list o f Imports. For items in the Negative list of imports, request for retention may be made to the Advance Licensing Committee. However, retention of such goods will be subject to the payment of applicable customs duties.

Production Programme

7.13 Exporters having past export performance in the preceding three licensing years may also apply for Advance Licence and Advance Intermediate Licence. In addition, they are also eligible for Special Imprest Licences for supply of goods to th e category covered under para 10.2(b) of the Policy without an export order. The entitlement under this paragraph shall be upto 100% of the average FOB value of their exports in the preceding three licensing years.

 

Export Obligation

7.14 The period for fulfilment of the export obligation under a duty free licence shall commence from the date of issuance of the licence. The export obligation shall be fulfilled within a period of 18 months except in the case of supplies unde r Special Imprest Licence to the projects where the export obligation must be fulfilled during the contracted duration of execution of the project.

Advance Release Orders

7.15 A duty free licence holder intending to source the inputs from indigenous sources/canalising agencies/EOU/ EPZ/ EHTP/ STP units in lieu of direct import has the option to source them against Advance Release Orders denominated in foreign exchange/Indian rupees.In such a case the licence shall be invalidated for direct import and a permission in the form of ARO shall be issued which will entitle the supplier to the benefits of deemed export.

Back-to-Back Inland Letter of Credit

7.16 A duty free licence holder may, instead of applying for an Advance Release Order, avail of the facility of Back-to-Back Inland Letter of Credit in accordance with the procedure specified in Handbook (Vol.1)

Clearance of goods from Customs

7.17 The goods already imported/ shipped/ arrived in advance but not cleared from Customs may also be cleared against the duty free licence issued subsequently. However, in respect of inputs appearing in the Negative List of Imports, the above f acility shall be available only in respect of goods imported/ shipped/ arrived after the date of filing of application of duty free licence.

Exports in anticipation of Licence

7.18

(a) Exports/supplies made from the date of receipt of an application for an Advance Licence and Special Imprest Licence, by the licensing authority, may be accepted towards discharge of export obligation. However, in the case of applic ation for Advance Intermediate Licence, only such supplies shall be covered towards discharge of export obligation which are made after the issuance of the invalidation letter to the ultimate exporter. If the application is approved, the licence shall b e issued based on the input/output norms in force on the date of receipt of the application by the licensing authority in proportion to the provisional exports already made till any amendment in the norms is notified. For the remainder of the exports, th e Policy/ Procedures in force on the date of issue of the licence shall be applicable.

(b) The exports/ supplies made in anticipation of the grant of a duty free licence shall be entirely on the risk and responsibility of the exporter.

(c) The conversion of duty free shipping bills to drawback shipping bills may also be permitted by the customs authorities in case the application for a duty free licence is rejected or modified by the licensing authority.

Transferability

7.19

(a) A duty free licence except Special Imprest Licence and/or materials imported against it is transferable after the completion of export obligation and endorsement of transferability by the licensing authority.

(b) Not withstanding anything contained in the para (a) above,

(i) Advance Licences issued with Actual User condition under para 7.4(i) and/or material imported against it shall not be transferable, sold or othewise disposed off by the licence holder und er any circumstances; and

(ii) Advance licences issued for the import of Acetic Anhydride, Ephedrine and Pseudo-ephedrine or such goods imported under a duty free licence shall not be transferable, sold or othewise disposed off by the licen ce holder under any circumstances.

Prohibited Items

7.20 Prohibited items in the Negative List of Imports shall not be imported under the licences issued under the scheme.

Compliance with Export Policy

7.21 Exports made against licences issued under this scheme shall be subject to the provisions of Chapter 11 of the Policy and Chapter 11 of the Handbook (Vol.1). However, in respect of goods in the Negative List of Exports (excluding Prohibite d items), the export may be allowed without specific export licence, provided such goods are made out of inputs imported under the Advance licence and not out of indigenous inputs. In such cases, the Advance licences will be endorsed with `Prior import' condition.

Re-import of Exported goods under Advance Licence

7.22 Goods exported under Advance Licence may be reimported in the same or substantially the same form subject to such conditions as may be specified by the Deptt. of Revenue from time to time.

Admissibility of drawback

7.23 In the case of an Advance Licence, the drawback shall be available in respect of any of the duty paid materials, whether imported or indigenous, used in the goods exported, as per the all industry/ brand rate fixed by Ministry of Finance (Directorate of Drawback). The drawback shall however be restricted to the duty paid materials as indicated in the application for the licence and endorsed as such on the DEEC.

Value Addition

7.24 The value addition for the purposes of this Chapter shall be:-


                  A - B
  	VA =     -------- X 100, 
                    B
		where VA is the Value Addition
		     A is the FOB value of the export/FOR value of supply; 

		     B is the CIF value of the imported inputs covered by the 
			licence plus any other imported materials used.

Duty Entitlement Passbook

7.25 Under the Duty Entitlement Pass Book (DEPB) Scheme, an exporter shall be eligible to claim credit as a specified percentage of fob value of exports made in freely convertible currency. The credit shall be available against such export prod ucts and at such rate as may be specified by the Director General of Foreign Trade by a Public Notice issued in this behalf. Any item except those appearing in the Negative List of Imports shall be allowed for import without payment of basic customs du ty, special duty of customs as well as additional duty of customs, against the credit under a Duty Entitlement Pass Book (DEPB). The holder of Duty Entitlement Pass Book (DEPB) shall have the option to pay additional customs duty, if any, in cash as wel l.

Third party Exports

7.26 Third party exports are also admissible for grant of credit under DEPB.

Validity

7.27 The DEPB shall be valid for a period of 12 months from the date of its issuance.

Clearance of goods from Customs

7.28 The goods already imported/ shipped/ arrived in advance but not cleared from customs may also be cleared against the DEPB issued subsequently.

Types of DEPB

7.29 DEPB may be issued on:

(a) Post export basis and

(b) Pre export basis.

DEPB on post exports basis

7.30 DEPB on post-export basis shall be granted against exports already made.

Eligibility

7.31 Merchant-exporter and manufacturer-exporter are eligible for DEPB on post export basis.

Transferability

7.32 The DEPB on post export basis and/or the items imported against it are freely transferable. The transfer of DEPB shall however be for import at the port specified in the DEPB which shall be the port from where exports have been made.

DEPB on pre-export basis

7.33 DEPB on pre export basis aims to provide the facility to eligible exporters to import inputs which are required for production.

Eligibility

7.34 Manufacturer-exporters and Merchant-exporter tied with the supporting manufacturer(s) having export performance in the preceeding three licensing years are eligible to claim DEPB on pre export basis.

Entitlement

7.35 The credit of DEPB on pre export basis shall be granted at the rate of 5% of the average export performance of the applicant during the preceding three licensing years.

Offsetting

7.36 The DEPB on pre export basis shall carry an export obligation which has to be offset by the DEPB holder by making exports. The credit entitlement against such exports shall be calculated in accordance with the rate specified in this beha lf. When the DEPB holder has made exports of such a value which will entitle him to credit equivalent to the credit already given to him under DEPB on pre export basis, his obligation against such DEPB shall be offset.

Period of offsetting

7.37 The credit under DEPB on pre export basis shall be offset within a period of 12 months from the date of issue of DEPB.

Balance of Duty Entitlement Pass Book (DEBP)

7.38 At the time of issue of certificate of offsetting of the export obligation, the credit earned over and above the credit under DEPB on pre export basis, shall be given to the applicant by way of issuance of DEPB on post export basis.

Bank Guarantee

7.39 The DEPB holder shall be required to execute Bond with surety/security to the customs authority for a value as may be specified in this behalf before the imports are effected under the DEPB on pre export basis.

Actual User condition

7.40 DEPB on pre export basis shall be non-transferable and the items imported against it shall be subject to Actual User condition even after offsetting of obligation against such DEPB.

Applicability of Drawback

7.41 The exports made under the DEPB Scheme shall not be entitled for drawback.The additional customs duty paid in cash on inputs under DEPB shall be adjusted as MODVAT Credit or Duty Drawback as per Rules framed by the Deptt. of R evenue.

Penalty

7.42 If a holder of a licence, including DEPB under the Scheme, violates any condition of the licence or fails to offset the export obligation, he shall be liable to action in accordance with the Act, the Rules and Orders made thereunder, this Policy and any other law for the time being in force.

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