The new Foreign Trade Policy (FTP) retains the major features of the earlier one and re-jigs some schemes in response to representations from the trade.
The two new incentive schemes for merchandise and services exports, Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS), are improvements over the ones they replace. Duty credit scrips against export of merchandise and services can now be transferred and used for payment of customs & excise duties and service tax. Basic customs duties debited to the scrips can be claimed back as drawback. The additional customs duties debited to the duty credit scrips can be claimed as drawback or taken as Cenvat credit, as earlier.
All providers of notified services, providing these from India, regardless of constitution or profile, can get SEIS. Export of handloom products, books/periodicals, leather footwear, toys and customised fashion garments (finalised using an e-commerce platform) through couriers or foreign post offices through specified gateway customs will be eligible for benefits up to an FOB value of Rs 25,000 a consignment. Allowing duty credit scrips for Special Economic Zone (SEZ) units takes away a major disincentive for setting up units in these areas. An unintended effect of the FTP would be a glut of duty credit scrips, erodig the premiums on transfers and, thus, incentivising imports and adversely impacting the revenues.
Reduction of export obligation against domestic sourcing of capital goods under the Export Promotion Capital Goods (EPCG) scheme will encourage more manufacturers or service providers to source their requirements from domestic makers and encourage more manufacturers to take up an export obligation. The capital goods required for generation or transmission of electricity will not be allowed under the EPCG scheme. The Duty Free Import Authorisation Scheme retains the name but gets the essential features of the Duty Free Replenishment Scheme that it replaced in 2006.
The new policy does not take away major reasons for seeking policy relaxation, such as more time for fulfilling export obligation under the advance authorisation scheme or submission of installation certificates within six months under the EPCG scheme. Surprisingly, incentives for services exports will not be available for project exporters which provide services through a commercial or physical presence abroad.
The role of sub-vendors from whom sub-contractors or main contractors source their goods for implementation of deemed export contracts has still not been suitably recognised or facilitated. The policy talks of self-certification by status holders (such as export houses) for the purpose of establishing the origin criteria under various trade agreements. The trading partners have to agree to this and the relevant Rules of Origin will have to be amended.
Extensive use of information technology, to facilitate claim of incentives and reduce transaction costs, is envisaged. Uploading some applications and scanning copies of some documents in the website of the Directorate General of Foreign Trade, instead of filing physical copies and linking the Customs with the DGFT website, might begin the way towards paperless transactions in due course. Such procedural improvements are to be expected as the technology advances and becomes part of everyday life.
Overall, the new policy takes forward the earlier initiatives. There is nothing much new or innovative about this one. It is a relief that continuity and stability of the policy has taken precedence over the urge to present a 'very different' one.
email : tncrajagopalan@gmail.com
