The annual supplement to the Foreign Trade Policy (FTP) was released in the first week of June. Now, almost seven weeks later, the Central Board of Excise and Customs (CBEC) has come out with a circular (dated July 27), detailing changes in FTP and the consequential changes in related exemption notifications.
Even after so much delay, CBEC says the modalities are being worked out in consultation with the Director General of Foreign Trade (DGFT) for making operational the changes in the export promotion capital goods (EPCG) duty credit scrip scheme and also for import of catalysts for second charge under the scheme.
It has been an old demand of exporters that the commerce ministry discuss new schemes and major changes in the FTP with the finance ministry before announcing these. And, that the FTP changes and consequential changes in customs exemptions be notified the same day.
For some time in the late 1990s, the two ministries did improve coordination. But, later, the commerce ministry started ignoring the finance ministry before announcing FTP changes with revenue implications.
The result of such unilateralism is that it takes a long time before consequential notifications come through; sometimes, the announcements could not be carried through and the changes had to be reversed.
The commerce ministry has also been guilty of delaying giving effect to several changes announced in the first week of June. Last week, it amended certain FTP provisions through a notification dated July 26. The first paragraph says the changes will take effect immediately; however, the last sentence says these would do so from June 5.
DGFT also issued a public notice (number 12, dated July 26) making certain changes to the Handbook of Procedures, Volume 1. One relates to “declaration of intent” on free shipping bills for claiming certain duty credit scrips under chapter three of the FTP.
In the annual supplement to the FTP, the requirement to furnish the declaration was deleted. Now, this requirement for furnishing the declaration has been prescribed with retrospective effect from June 5. How will those who’ve already exported goods without furnishing the declaration comply with the requirement retrospectively? DGFT does not seem to have thought through such practical problems.
The good news for exporters is that the Reserve Bank has now allowed them to retain all the export realisations in the exchange earner’s foreign currency account. But the total of accruals in the account during a calendar month should be converted into rupees on or before the last day of the succeeding calendar month, after adjusting for utilisation of the balances for approved purposes or forward commitments. They have also been allowed to cancel and re-book forward contracts to the extent of 25 per cent of contracts booked in a financial year for hedging their contracted export exposures. This partial relaxation will, hopefully, be a forerunner to lifting the remaining restrictions.
The ensuing Maharastra Budget may witness several tax relief for the dealers, traders and growers of agricultural and allied services.