Annual Supplement, Forward, Sector Specific Initiatives, Service Tax on Exports, Status Holders.
ANNUAL SUPPLEMENT 2007
TO FOREIGN TRADE POLICY 2004-09
When I announced the Foreign Trade Policy for
2004-09 three years ago, I had set a goal of doubling
India’s share in world trade by 2009. I am pleased to
announce that not only have we almost doubled our exports within a short span of
three years, but also, in December 2006, India’s share of world trade moved from
a fraction to an integer, crossing the 1% mark. This has
been possible because our export growth has been higher than the world’s average
consistently for the past three years.
This does not mean that all hurdles have been crossed, and that the way ahead is
level and smooth.
Global trade has become more complex and Indian exports face a variety of tariff
and non-tariff barriers in many markets in the world. For trade and industry to
face this challenge, we would have to tackle it in multifarious
ways. We would have to both diversify our exports as well as identify and
develop new markets to, not just to survive, but to flourish.
Since the announcement of the Foreign Trade Policy in 2004, the focus of my
Ministry has been on reducing the transaction costs and providing incentives
to boost exports. The Focus Products and the Focus
Markets Schemes as well as the Vishesh Krishi Upaj Yojana are some of the major
initiatives taken in this regard. We are deepening these incentives to boost
exports and create more employment.
In this Annual Supplement, a number of measures are being taken to further
reduce transaction costs. In the past there have been problems in the issuance
of the requisite notifications by the Department of Revenue to
the various announcements made. I am happy to announce that this year it has
been agreed that all the Department of Revenue notifications would be issued
within 30 days of the announcement of the Annual
Supplement.
Exporters will be happy that the DEPB scheme has been extended till 31st March
2008. This removes a major uncertainty. We are working on an alternative scheme.
When it is finalized, we shall run the two schemes in parallel
till 31st March 2008 so as to ensure a smooth transition.
The whole objective of
expanding trade is to make
2
it an instrument of greater employment and greater prosperity. With increased
trade – exports, of course, but also imports – economic activity increases. This
leads to
a number of spin-offs and ancillary activities in manufacturing, transport,
marketing, accounting – at each stage thousands of new jobs are created,
increasing production and productivity, and bringing the benefits of trade to
the common man, directly and indirectly.
Three years of the working of this Policy has proved that we are headed in the
right direction.
KAMAL NATH
MINISTER OF COMMERCE & INDUSTRY
GOVERNMENT OF INDIA
New Delhi
April 19, 2007
ANNUAL SUPPLEMENT
TO
FOREIGN TRADE POLICY 2004-09
- SECTOR SPECIFIC INITIATIVES
1.1 Handloom and Handicraft Sector
Absence of environmentally sustainable production process often works as a
non-tariff barrier. To overcome this, exemption from duty on machinery and
equipment for effluent treatment plants for handlooms and handicrafts has been
allowed. As these sectors comprise of many small units and are located in
geographically contiguous regions, these essential supports would strengthen
their marketability.
A special focus initiative will provide for tools, machinery and equipments for
handicrafts within present duty free entitlement ceiling.
1.2 Gems and Jewelry Sector
An initiative will provide for tools, machinery and equipments for gems and
jewelry sector within present duty free entitlement limit.
In light of increase in global prices of precious metal,
duty free entitlement for consumables for export of rhodium plated silver
jewelry has been increased to 3%.
1.3 Samples for all exporters
Duty free import of samples up to Rs. 75,000/-
(Presently Rs. 60,000/) would be allowed for all exporters.
- SERVICE TAX ON EXPORTS
2.1 Exemption from Service Tax on services
(related to exports) rendered abroad
Government has enunciated the principle that we should only export goods and not
the taxes and duties thereon. In line with this, services rendered abroad and
charged on exports from India would be exempted from Service Tax.
2.2 Exemption / Remission of Service Tax on export of goods
Service tax on services rendered in India and utilized by exporters would be
exempted / remitted. Remission mechanism would be institutionalized after
working out modalities with Department of Revenue (DoR).
- STATUS HOLDERS
Categorization of exporters as One to Five Star Export Houses has been changed
to Export Houses & Trading Houses, with rationalization and change in export
performance parameters.
-
VISHESH KRISHI AND GRAM UDYOG YOJANA
(VKGUY): EXPANSION AND CHANGES
4.1 Forest based products
Forest based products are added to existing list, which presently include Minor
Forest Produce. This would benefit artisans, employed in manufacture of value
added products like artistic wooden furniture, particularly in small scale,
cottage and tiny sectors.
4.2 Scope of VKGUY Scheme
Scope of agricultural sector is enhanced to include many more products. Value
added products have been included to ensure employment generation.
4.3 Status Holders developing Agri-Infrastrucuture
4.3.1 Duty Credit benefits
Status Holders will be incentivised with duty credit
scrip equal to 10% of FOB value of agricultural exports which can be used for
duty free import / procurement of capital goods related to infrastructure meant
for agro- processing to promote agricultural exports. This would be in addition
to prevailing benefits in other schemes administered by Ministry of Agriculture.
4.3.2 Allocation basis
Allocation of funds will be on a first-cum-first-served basis. Assessment of
applicants’ proposal can be with respect to their past export performance. This
would be within the additional allocation of Rs 200 Cr for 2007-08.
4.4 VKGUY extended to EOUs
VKGUY benefits are extended to EOUs not availing direct tax benefits.
- FOCUS MARKET & PRODUCT SCHEMES
5.1 Expansion of Ceiling, Scope and Coverage
Under Focus Market Scheme (FMS) and Focus Product Scheme (FPS) coverage / scope
of eligible markets / items would be enhanced. Revised allocation for benefits
is now Rs.
1000 Cr, for exports during 2007-08.
5.2 New Markets and Products
16 countries (including 10 from CIS block) are added as new Markets and several
value-added low volume export products have been identified and would be
entitled to benefits under FPS.
5.3 FMS & FPS extended to EOUs
Moreover, EOUs not availing direct tax benefits would also get benefits under
FMS and FPS.
- PROMOTION OF HIGH TECH PRODUCTS
Promotion of High Tech Products is essential to increase quantum of such
products’ manufacturing base
in India for export purposes. An Export Promotion Scheme
is launched with following salient features:-
- Duty credit of 10% on incremental export
growth would be given as incentive for exporter.
- List of products would be notified in
consultation with concerned Scientific
Ministries.
- DUTY ENTITLEMENT PASS BOOK (DEPB) SCHEME
7.1 Extension of DEPB Scheme
DEPB Scheme stands extended upto 31.3.2008. It
is proposed to introduce a new scheme instead of DEPB, soon.
7.2 Modification in DEPB scheme
While extending the scheme for another year, government has agreed to reimburse
the cost of duty on fuel and special additional duty, on all export related
imported goods, to the extent it is not cenvatable. Benefit may be allowed by
notifying Brand rate of DEPB for such products.
-
HIGHER EXPORT GROWTH THROUGH RATIONALIZATION OF EXPORT PROMOTION CAPITAL
GOODS (EPCG) SCHEME
8.1 Export Obligation (EO) for tiny and cottage
sector
For tiny and cottage, sector export obligation period
is raised to 12 years.
8.2 Spares, tools and spare refractory for Imported CGIssue of EPCG for import of spares, tools and spare
refractory would be allowed for existing imported plant and machinery (though
not imported under EPCG cover).
8.3 Waiver of EO due to Force Majeure
Waiver of outstanding export obligations can only be considered where, because
of force majeure or other unforeseen circumstances / reasons, exporter is unable
to fulfill export obligation.
8.4 Concurrent EPCG – Fixation of Average EO
Wherever more than one EPCG authorizations are issued concurrently, fresh EPCG
authorization would build
upon last required average export obligation only
(incorporating the previous EPCG obligation),
notwithstanding actual achievements. This removes
anomaly whereby better performance is penalized presently.
8.5 Block wise EO abolished
Block-wise fulfillment of export obligation would be done away with. This will
reduce unnecessary transaction cost and paper work. While doing so in case of
existing export obligations fresh EPCG would be issued only to
such applicant who has fulfilled proportionate export
obligation by that time. Simultaneously, services sector will have to maintain
the average to avail new EPCG. This would be a supportive measure for export
promotion and growth.
- 100% EOU AND SEZ UNITS
9.1 Interest on delayed payments
Interest on delayed payments (refund of terminal excise duty / duty drawback on
deemed exports and CST) would be payable in lines of provisions in Customs and
Income Tax Acts. This facility would also apply to delayed payments for deemed
exports.
9.2 Counting for NFE of EOU
Supplies of accessories such as buttons and hangers by EOUs to DTA units will be
counted for NFE calculations.
9.3 Defining manufacture under Income Tax
Definition of manufacturing shall be incorporated in Income Tax Act. This would
remove uncertainty regarding taxation for EOU units.
9.4 EOU units extended benefits under VKGUY, FMS & FPS Schemes
EOUs not availing direct tax benefits would also get benefits under VKGUY, FMS
and FPS schemes.
9.5 Co-Developer of SEZ
Developer and Co – developer of Special Economic
Zone would be notified for benefits under all duty neutralization schemes like
DEPB, DFIA and Advance Authorisation Schemes.