DGFT should rethink provisions for deemed exports from DTA to EoU

We have a domestic tariff area (DTA) unit and an export-oriented unit (EoU) within the same state under the same goods and services tax identification number (GSTIN). We want to send the goods manufactured in the DTA unit to EoU for use as an input in the goods manufactured by the EoU. Can we get deemed export drawback benefits on such supplies?

 

Para 7.01(i) of the Foreign Trade Policy (FTP) says ‘deemed exports’ for this FTP refer to those transactions in which goods supplied do not leave the country, and payment for such supplies is received either in Indian rupees or in free foreign exchange. Supplies of goods as specified in Paragraph 7.02 are treated as ‘deemed exports’ provided goods are manufactured in India. Now, supply of goods to EoU is covered under Para 7.02A (b) of the FTP. The documentation prescribed at form ANF-7A requires you to submit a copy of form A prescribed under CBIC Circular no. 14/14/2017-GST dated November 6, 2017, along with a copy of tax invoice duly endorsed by the recipient and e-BRC for the payment received by the DTA. Now, you cannot issue a tax invoice because both your units are in the same state and have the same GSTIN, and the goods are usually sent from one unit in a state to another unit in the same state under a delivery challan prescribed under the GST laws. Without an invoice, getting payment from the EoU and e-BRC is also not possible. So, while the FTP does recognise DTA to EoU supplies as ‘deemed exports’, the prescribed procedures and conditions come in the way of claiming the deemed export benefits under FTP, where no tax invoice is generated or issued as the DTA supplier and the EoU receiver are in the same state and have the same GSTIN. I think the DGFT should consider this practical problem and revise the documentation and other requirements for such cases.

 

We manufacture cardboard cartons that are used as packing materials. A merchant exporter has asked us to supply 5,000 cartons to his registered warehouse in Mumbai for packing items like fresh fruits — apples, grapes, etc — for subsequent exports by air. He wants us to charge only 0.1 per cent IGST under the notification 41/2017-IT (rate) dated October 23, 2017. We are not sure whether we can do so, because the merchant will be showing his export product as apples or grapes that he exports and not as export of cartons. Please guide us. 

You should ask the merchant to state in the shipping Bill the number of cartons in which the grapes, apples, or other fresh fruits are packed, and also give your name, address, GSTIN number, invoice reference. The shipping bill should account for the number of cartons you have supplied.  

The Reserve Bank of India (RBI) had issued certain instructions on payment in INR (₹) through Special Vostro Accounts for import and export transactions. Are the instructions still valid? 

Yes. The AP (DIR) Circular no.10 dated July 11, 2022, on international trade settlement in INR is still valid.   

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