Recently, Foreign Trade Policy (FTP) was announced by Hon’ble Commerce Minister Nirmala Sitharaman amid anticipation of twofold growth in exports by year 2020. New policy aims at increasing exports currently leveled at 466 billion to 900 billion by year 2020; within a span of 5 years.
New Foreign Trade Policy (FTP) stands in line with Hon’ble Prime Minister Narendra Modi’s vision of Make in India, Digital India and ease of doing business, encouraging manufacturers and service providers to manufacture goods and provide services respectively, beyond Indian borders.
Following points, detailed below, gives you an analytical and simplified view of India’s foreign trade policy.
1) Facilitating trade in electronic environment, speedy processing of documents and ease of doing business.
a. Import Export code, a prerequisite for facilitating import and export in India, shall now be issued electronically and documents/ fee in this regard shall also be accepted electronically. Turnaround time for processing such applications has been reduced to 2 working days.
b. Documents required for import and export have been reduced to 3 (three) namely Bill of lading/ Airway Bill, Commercial Invoice and Shipping bill/ bill of export In case of export and Bill of entry in case of import.
c. All applications regarding import/ export including application of IEC can be filed online in 24 X 7 environment and faster processing is ensured under high speed internet network.
d. Submitting hard copies of online application along with necessary documents has been eliminated and now exporters can upload all documents online, thus, ensuring trade in paperless environment and faster processing of applications.
e. Earlier certificates from CA/ CS/ Cost Accountants w.r.t. export needed to be submitted in hard copies. With introduction of new FTP, it can be uploaded online by signing it digitally.
f. Consignment meant for export shall not be withheld or delayed by any agency of central/ state govt. In case of doubt, authorities may ask for undertaking from exporter and release consignment.
g. To facilitate ease in doing business, single window is introduced for exporters and importers under which clearance documents are lodged at single point only. Apart from ease of doing business, this would also reduce interference with govt. agencies, reduce cost and dwell time.
h. Now shipping bills can be filed prior to shipment (7 days prior for shipment through Air & ICD’s & 14 days prior for shipment by sea).
2) Simplification of schemes existing for Export from India.
a. 5 merchandise export schemes existing before announcing new FTP are now merged into single scheme namely Merchandise Exports from India Scheme (MEIS). This is a major advancement and boost for businesses exporting goods from India.
b. Under MEIS, basic custom duty is allowed as reward in form of duty credit scrips and can be used for payment for custom duty levied on imports, excise duty and service tax in form of CENVAT credit. Earlier only additional custom duty was allowed as reward for payment of above cited duties.
c. Coming to service sector, Served from India Scheme (SFIS) has been replaced with Service Exports from India Scheme (SEIS). SEIS shall apply to ‘Service Providers located in India’ instead of ‘Indian Service providers’.
d. Under this scheme, rate of reward in form of duty credit scrip’s is available on basis of net foreign exchange earned and can be utilized for payment of duties for procurement of goods or services.
e. Duty credits scrip’s (hereinafter referred as DCS) issued under both the schemes shall be either available for CENVAT or drawback and are freely transferable too.
f. DCS can now also be utilized for payment of duty on capital goods imported on lease financing terms.
g. SEZ’s, given exemption from taxes, were indirectly paying taxes in form of MAT. Now they can avail benefits of MEIS and SEIS schemes too. This is a major step for promoting SEZ’s as they contribute to the extent of 25% in India’s exports.
h. Special status and privileges shall be granted to export houses that have contributed considerably towards India’s exports and shall be given rating accordingly.
i. Privileges to such Status Holders include authorization and custom clearance of import/ exports on self declaration basis, exemption from furnishing Bank Guarantee under FTP schemes unless specified otherwise and shall be given preferential treatment among several other benefits.
j. To achieve recognition of Status Holder, export performance is required in 2 (two) out of 3 (three) financial years.
3) Simplifying procedures and processes under duty exemption/ remission schemes.
a. Duty exemption schemes namely Advance Authorization (hereinafter referred as AA) and Duty Free Import Authorization (hereinafter referred as DFIA) and Duty remission scheme in form of Duty Drawback (hereinafter referred as DBK) are cited in new FTP.
b. Requirement of certificate from Chartered Engineer for confirming use of imported spares, tools etc. under EPCG scheme has been called off.
c. EPCG authorization holders are now required to maintain records for 2 (two) years instead of 3 (three) years, after redemption of authorizations.
d. Now importers/ exporters can upload documents online in their profile and such documents once uploaded shall not be required to be submitted with every application.
e. Under IEC database, mobile number and email have been made mandatory requirement and exporters/ importers shall receive SMS/ email from department, thus, bridging the communication gap between government and businesses.
f. Import against AA scheme shall also be eligible for exemption from Transitional Product Specific Safeguard Duty apart from Basic Custom Duty, Additional Custom Duty, Education Cess, Anti-dumping Duty and Safeguard Duty.
g. To give a boost to capital goods manufacturer in India, import under EPCG authorization scheme shall not be eligible for exemption from anti-dumping duty, Safeguard duty and Transitional Product Specific Safeguard Duty.
h. Goods imported under DFIA scheme shall be exempted from Basic custom duty and Additional custom duty/ excise duty shall be adjusted as CENVAT credit.
i. Additional ports in form of Calicut Airport, Kerala and Arakonam ICD, Tamil Nadu have been notified as registered ports for import/ export.
4) Forthcoming government initiatives under new FTP.
DGFT is currently working on following initiatives for improving inter departmental communication and government to business communication namely, online issuance of Export Obligation Discharge Certificate (EODC), Message exchange with MCA & CBDT for CIN/ DIN and PAN respectively, Facility to pay application fee through debit and credit card, Mobile application for FTP etc.
Impact of new FTP on businesses and economy
Government under the guidance of Prime Minister Narendra Modi aims to realize their dream of Make in India, Digital India and Ease of doing business through newly launched Foreign Trade Policy 2015-2020.
New FTP aims at improving India’s exports by providing ample working space to businesses, through easing norms, doing away with redundant policies and reducing red tapism. Thus, businesses shall be motivated and get competitive edge in global market.
Indian businesses can now make their presence firmly noticed among global players and also global firms shall now look to setup their business in India seeing positive changes made in new FTP.
Government has approved 587 Special Economic Zones, however only 154 of them are operational. A major reason for such low turnout is taxes being introduced indirectly in form of MAT. SEZ’s contribute to 25% of India’s export. Keeping this is view, government extended benefits of MEIS and SEIS schemes to SEZ’s and creating a win-win situation for government and businesses. Businesses will now be encouraged to operate in SEZ’s seeing benefits extended to them and government can realize their target of increasing exports and thus reducing current account deficit.
Changes made in new FTP might not see an immediate effect on economy or businesses, but certainly, coming 2-3 years shall bring a positive change and cater a positive environment not only for Indian players but also global firms. India is a growing economy and steps taken through new FTP shall only improve the image of India globally and take it to the path of global convergence.
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- Written by Rohit Pandey