A new example of red tape tangling

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The commerce ministry has amended the Incremental Exports Incentivisation Scheme (IEIS), disallowing entitlements against shipment of certain items and prescribing greater scrutiny for claims exceeding specified limits.

IEIS grants duty credits of two per cent on the incremental freight-on-board (FOB) value of exports. The scheme has two versions. The quarterly version covers incremental export growth to America, Europe and Asia (excluding Singapore, UAE and Hong Kong) during the quarter of January-March 2013 over January-March 2012. The yearly version covers incremental export growth in 2013-14 over 2012-13 to 53 countries in Africa and Latin America, in addition to those made to the regions (excluding specified countries) mentioned earlier.

Under both, 16 categories of exports were made ineligible for entitlement under IEIS. Now, in the yearly scheme, export of cotton, cotton yarn and items subject to minimum export price or export duty have also been made ineligible for the benefits. These items also get included in the list of ineligible categories under the Focus Market Scheme.

Under the quarterly scheme, for claims above Rs 1 crore, the authorities will scrutinise evidence of manufacture/purchase of export goods and excise/sales tax returns, check the quantity of export in the previous two years and in the current year of the company from which goods have been purchased and examine any other evidence to justify high export growth and consequent entitlement. Similar scrutiny will be made for claims above Rs 10 crore or more than 25 per cent incremental growth under the yearly scheme.

Para 3.14.4 of the Foreign Trade Policy (FTP) says for eligibility under the quarterly scheme, incremental growth must have been achieved in 2012-13 over 2011-12. Ineligible exports listed in the 16 categories of Para 3.14.5 of the FTP should not be counted for calculation of export performance or computation of entitlement. This list includes export to Singapore, UAE and Hong Kong. So, for eligibility of annual incremental growth under the quarterly scheme, exports to all countries except those excluded can be counted and for entitlement under the quarterly scheme, export to America, Europe and Asia (excluding Singapore, UAE and Hong Kong) alone can be counted.

The ANF-3F form for claiming the quarterly benefit gives a list of destination countries (50 in Europe, 41 in Asia, besides America). The annexure to ANF-3F prescribes the format of the Chartered Accountant (CA) certificate for claiming the entitlement, based on the quarterly export performance during January-March 2012 and January-March 2013. Form ANF-3F calls for a CA certificate on export for 2011-12 and 2012-13 to specified markets only. So, export to specified countries only need to be taken into account. That stipulation is at variance with the FTP provisions that necessitate incremental annual growth of export to all countries (other than those specifically excluded) for establishing eligibility.

Also in the case of application under the yearly version, ANF-3F calls for a CA certificate on export for 2012-13 and 2013-14 to specified markets and says the CA will also certify incremental export for each quarter as in the annexure to ANF-3F. The requirement for quarterly data in the yearly version makes no sense. The officials concerned should relook at the certifications called for in ANF-3F.

email: tncr@sify.com