Deemed export

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Kirit Shah (Querist)
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22 July 2011 Exim Querry : 20-07-2011
An Indian Customer C places an order on overseas supplier S1 to import a machine + Automation system.

S1 will export the machine to C in India & will outsource the automation system from an indian supplier S2 who will deliver the system to the customer C directly. S2 will get paid by S1 in foreign currency.

1)Can this transaction between S1 & S2 be treated as deemed export ?
2)What will be the impact of taxes & duties ? Will excise duty, VAT etc be applicable on the automation system from S2 to C ?

Would appreciate an early reply from you.

Thanks & Regards

Kirit Shah

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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22 July 2011 Please noted that Deemed Exports’ as defined in the Export and Import Policy, 2009-2014 means those transactions in which the goods supplied do not leave the country and the supplier in India receives the payment for the goods.

It means the goods supplied need not go out of India to treat them as ‘Deemed Export’.

in your case you does not occurs in the category.

for more information:-
http://www.eximguru.com/exim/dgft/exim-policy/2008/chapter_8_deemed_exports.aspx

Kirit Shah

Kirit Shah (Querist)
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22 July 2011 Dear Sir,

S2 is an Indian Supplier & C is an Indian customer - both are in India. The goods therefore do no leave the shores of India.

My querry still remains - whether the transaction between S1 & S2 can be treated as deemed export in which case, can S2 avail of ED & VAT exemptions ?

Rgds

Kirit Shah

Kirit Shah

Kirit Shah (Querist)
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22 July 2011 Querry not resolved

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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25 July 2011 “Deemed Exports” refer to those transactions in which goods supplied do not leave country, and payment for
such supplies is received either in Indian rupees or in free foreign exchange.
Categories of Supply 8.2 Following categories of supply of goods by main / sub-contractors shall be regarded as “Deemed Exports” under FTP, provided goods are manufactured in India:

1. Supply of goods against Advance Authorisation / Advance Authorisation for annual requirement / DFIA;
2. Supply of goods to EOU / STP / EHTP / BTP;
3. Supply of capital goods to EPCG Authorisation holders;
4. Supply of goods to projects financed by multilateral or bilateral Agencies / Funds as notified by Department of Economic Affairs (DEA), MoF under International Competitive Bidding (ICB) in accordance with procedures of those Agencies / Funds, where legal agreements provide for tender evaluation without including customs duty;

Supply and installation of goods and equipment (single responsibility of turnkey contracts) to projects financed by multilateral or bilateral Agencies / Funds as notified by DEA, MoF under ICB, in accordance with procedures of those Agencies / Funds, which bids may have been invited and evaluated on the basis of Delivered Duty Paid (DDP) prices for goods manufactured abroad;
5. Supply of capital goods, including in unassembled / disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till stage of commercial production, and spares to extent of 10% of FOR value to fertilizer plants;
6. Supply of goods to any project or purpose in respect of which the MoF, by a notification, permits import of such goods at zero customs duty;
7. Supply of goods to power projects and refineries not covered in (f) above;
8. Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers) provided said containers are exported out of India within 6 months or such further period as permitted by customs;
(i) Supply to projects funded by UN Agencies; and
(j) Supply of goods to nuclear power projects through competitive bidding as opposed to ICB.
Benefits of deemed exports shall be available under paragraphs (d), (e), (f) and (g) only if the supply is made under procedure of
ICB.

However, in regard to mega power projects, the requirement of ICB would not be mandatory, if the requisite quantum of power has been tied up through tariff based competitive bidding or if the project has been awarded through tariff based competitive bidding.

Benefits for Deemed
Exports
PARA 8.3 Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and supply of goods qualifying
as deemed exports subject to terms and conditions as in HBP v1:-

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