Ambiguity remains in export scheme

The commerce ministry introduced the status holder incentive scrip (SHIS) scheme in August 2009. As usual, it was not perfect from the outset, so some useful changes were made. Yet, three years down the line, exporters still have some doubts and want some changes.

The scheme envisaged grant of duty credits to status holders (i.e. exporters having recognition as an export house, trading house, etc, based on performance) to the extent of one per cent of the FOB value of exports made of goods of select sectors. Initially, the scheme was available for exports during 2009-10 and 2010-11. Later, it was extended for those during 2011-12 and 2012-13. More sectors were added for entitlements. Initially, imports of only the capital goods relating to specified sectors were allowed under the scrip. Later, up to 10 per cent of the value of the scrip was allowed for import of components and spares/parts of capital goods imported earlier. Also, the scrip was allowed to be utilised for payment of excise duty on domestically procured items. Initially, the scrip was non-transferable; later, transferability was permitted to manufacturers who held status as an export house, etc.

The provision allowing transferability of SHIS scrip among status holders who are manufacturers was introduced on June 5.

Some regional licencing authorities are taking a view that in respect of scrips issued before this date, transferability will not be allowed. This seems incorrect, in view of the provision in Para 3.10.6 of the Handbook of Procedures, Vol. 1 (HB-1), that transferability will be allowed as in Para 3.16.3 of the Foreign Trade Policy (FTP). However, it would help if the Directorate General of Foreign Trade clarifies the matter, as the practices are divergent. Para 3.16.5 of the FTP, allowing import of components and spare parts, says they must be the parts of capital goods imported earlier.

The related customs notification no. 104/2009 dated September 11, 2009, says the parts must relate to the capital goods of specified sectors. Exporters want this facility extended to SHIS scrips issued before June 5 this year and greater flexibility in import of goods under the scrips.

Para 3.17.11 of the FTP says duty credit scrips can also be utilised/debited for payment of custom duties in case of export obligation defaults for authorisations issued under chapters 4 and 5 of the policy.

Some Customs officers say as the SHIS scheme permits import of only capital goods, the scrips cannot be allowed to be utilised towards payment of duty in case of defaults under advance authorisations or duty-free import authorisations, as the latter relate only to inputs required for export production. Here, again, the practices are divergent and clarifications from DGFT would help.

Overall, exporters find limited use for SHIS scrips. These restrict utilisation to import of some capital goods and parts. Restriction on transfer only to other status holders who are manufacturers limits the number of prospective buyers, as most status holders can use the EPCG scheme or earn SHIS against their own exports. So, the premiums on transfer are down to almost 30 per cent. So, the DGFT should examine ways to finetune the scheme, by allowing more items and freer transferability of the scrips.

Email: tncr@sify.com