Supplies to SEZ can be counted as part of export obligation

Edited excerpts from the SME chatroom dicussions

Q. We had imported machines under the EPCG scheme. As part of fulfilment of our export obligation we supplied material to a unit in a SEZ against ARE-1. We have received payment along with SEZ-stamped copy of ARE-1 from the customer. We were not aware that we had to submit the bill of export along with other documents at the time of dispatch. Please advise if this supply, which is bona fide and to a large company in India, will be considered towards export obligation fulfilment.

There are many decisions of the Policy Relaxation Committee when such supplies to SEZ have been counted towards discharge of export obligation only on the basis of ARE-1 certified by SEZ Customs, even though the bill of export had not been filed. So, you may present your redemption application to the Regional Authority who issued the EPCG authorisation and, if there is any objection, approach the EPCG Committee for acceptance of ARE-1 duly certified by SEZ Customs as evidence of supplies to SEZ. 

Q. We do not have export house recognition. We have not received advance payment. Can we send our export documents directly to buyers? How can we regularise cases where we have already sent the export documents directly to buyers? 

According to Para B.15 (1) (ii) of RBI Master Circular on export of goods and services, the AD Category-I banks may accede to the request of the exporter, provided the exporter is a regular customer and the AD Category-I bank is satisfied, on the basis of standing and track record of the exporter and arrangements have been made for realisation of export proceeds. As per Para B.15 (3) of the same Circular, AD Category-I banks may regularise cases of dispatch of shipping documents by the exporter direct to the consignee or his agent resident in the country of the final destination of goods, up to $1 million or its equivalent, per export shipment, subject to the following conditions: (1) The export proceeds have been realized in full; (2) the exporter is a regular customer of AD Category-I bank for a period of at least six months; (3) the exporter’s account with the AD Category-I bank is fully compliant with the Reserve Bank of India’s extant KYC/AML guidelines; and (4) The AD Category-I bank is satisfied about the bona fides of the transaction.

Q. Can we discharge export obligation against EPCG authorisations by making deemed exports? 

As per Para 5.04 (e) of FTP, “Export shall be physical export. However, deemed exports as specified in paragraph 7.02 (a), (b), (e), (f) & (h) of FTP shall also be counted towards fulfilment of export obligation, along with usual benefits available under paragraph 7.03 of FTP.”

Q. We have not mentioned the EPCG authorisation number in some of our deemed export invoices. How can we count them towards discharge of export obligation against EPCG authorisation?

You may follow the procedure prescribed in DGFT Policy Circular no. 7 dated July 11, 2002 for condonation of the procedural lapse.