Foreign Trade Policy And EXIM

The Foreign Trade Policy (FTP) 2015-20 was unveiled by Ms. Nirmala Sitharaman, Minister of State for Commerce & Industry (Independent Charge), Government of India on April 1, 2015. Following are the highlights of the FTP:

FTP 2015-20 provides a framework for increasing exports of goods and services as well as generation of employment and increasing value addition in the country, in line with the ‘Make in India’ programme.
The Policy aims to enable India to respond to the challenges of the external environment, keeping in step with a rapidly evolving international trading architecture and make trade a major contributor to the country’s economic growth and development.
FTP 2015-20 introduces two new schemes, namely ‘Merchandise Exports from India Scheme (MEIS)’ for export of specified goods to specified markets and ‘Services Exports from India Scheme (SEIS)’ for increasing exports of notified services.
Duty credit scrips issued under MEIS and SEIS and the goods imported against these scrips are fully transferable.
For grant of rewards under MEIS, the countries have been categorized into 3 Groups, whereas the rates of rewards under MEIS range from 2 per cent to 5 per cent. Under SEIS the selected Services would be rewarded at the rates of 3 per cent and 7 per cent.
Trade facilitation and enhancing the ease of doing business are the other major focus areas in this new FTP. One of the major objective of new FTP is to move towards paperless working in 24x7 environment.

Ultimate Export Benefits

Merchandise Exports from India Scheme (MEIS)

Under the FTP 2015-20, MEIS intends to incentive exports of goods manufactured in India or produced in India. The incentives are for goods widely exported from India, industries producing or manufacturing such goods with a view to making Indian exports competitive. To enhance the export Government of India initiated the MEIS scheme that provided duty credit scrips as export benefits. The export incentive was provided as a fixed percentage of the FOB (free-on-board) value of the notified goods and ranged between 2% / 3% / 5% of the Net FOB Value depending upon 3 categories of the market as provided in Appendix 3B. MEIS scheme is available upto 31st January 2022 after onwards, it would be be replaced with RoDTEP Scheme.

Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme

As a replacement for the MEIS scheme, RoDTEP Scheme aims to provide export benefits in India by reimbursing the exporters of the duties that are neither credited nor refunded to them. Such duties include:

Excise Duty and VAT on the fuel used for the following purposes:
- Self-incurred transportation costs
- Operating Machines and plants
- Generating electricity via DG sets or power plants
Stamp duty paid on export documents
Electricity Duty paid for the purchase of electricity
Property Tax/ Mandi Tax/ Municipal Tax
GST [Compensation Cess/CGST/SGST/IGST], the credit of which is disallowed on certain items like food, beverages, works contract services, passenger transportation, etc.

Services Exports from India Scheme (SEIS)

Service exporters where they are provided transferable Duty Credit Scrips as export incentives based on a percentage of net Foreign Exchange earned in a financial year on the export of eligible services. These duty credit scrips can then be used for payment of Basic Customs Duty as well as duties listed in para 3.02 of FTP 2015-20.

To become eligible for the SEIS scheme, a service provider being a partnership firm/ LLP/ company shall, in the preceding financial year, have a minimum net free foreign exchange earnings of $15,000. Whereas, in the case of individual service providers or proprietorships, the amount is $10,000.

(Net Foreign Exchange = Gross earnings in foreign exchange – Total remittances, payments, or expenses of foreign exchange)

SEIS scheme is available upto 31st January 2022 after onwards, it might be be lapsed.

Export - Import

Regulation of EXIM in India

Foreign trade in India is regulated by the Foreign Trade (Development and Regulation) Act, 1992, and all relevant provisions and policies are developed by the central government.

The promotion and facilitation of foreign trade in India is managed by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry (MoCI).

An individual, Firm or an body-corporate should be registered as an EXIM unit before operating in foreign trade activities. Accordingly, it is mandatory to have a valid Import Export Certificate

Special Economic Zones or SEZ are geographical locations, which do not fall under the purview of normal economic laws, instead these zones are governed by special laws that help businesses operate in a hassle-free environment and boost exports

EOU or export-oriented units are business units established under special schemes to export entire production of goods and services (some sales are permissible under ‘Domestic Tariff Area’)

Domestic Tariff Area (DTA) comprises all areas other than SEZ and EOU. Businesses in DTA do not have any export obligations, except in cases when they obtain duty-free inputs or avail incentives under any export promotions/schemes

What is IEC and how to get it?

Importer–Exporter Code (IEC) is a 10-digit alphanumeric code required by a person or company to import in or export goods from India. No foreign trade can be performed without obtaining an IEC number (Importers/exporters listed at Para 2.07 of the Handbook of Procedures Vol.1 by DGFT are exempted from obtaining an IEC)

IEC can be obtained from regional offices of DGFT. An application for electronic form (e-IEC) can be submitted online on the DGFT. Every Exporter & Importer have to renewed his/her IEC in every financial year.

Registration-Cum-Membership Certificate (RCMC)

Registration-Cum-Membership Certificate (RCMC) is a certificate that validates an exporter dealing with products registered with an agency/ organization that are authorised by the Indian Government. The certificate is issued for five years by the Export Promotional Councils or commodity board in India. An exporter desiring to obtain an RCMC has to declare his mainstream business in the application. This application would be submitted to the Export Promotion Council/ Commodity Board relating to that line of business.

An exporter using an application specified in an ANF 2C register can become a member of Export Promotion Council(EPC). The applicant is granted with the Registration-cum-Membership-Certificate (RCMC) of EPC in the format that is given in Appendix 2R. To register as a manufacturer or Service exporter, the applicant has to furnish evidence for the same. Prospective/ potential exporters on the application can register and become an associate member of an Export Promotion Council(EPC).

Benefits of RCMC

An individual, Firm or Body-corporate applying for the following purposes can apply for this certificate.

An authorization to import/ export on restricted items
To seek benefits or concession under Foreign Trade Policy (FTP) like MEIS, SEIS, duty drawback, Authority of Advance Ruling, EPCG etc.

Certificate of Registration as an Exporter of Spices (CRES) that is issued by the Spices Board will be considered as RCMC and no other RCMC will be applied with any other Export Promotional Councils (EPC).

Export procedures

A company who is planning to engage in export activities is required to obtain an IEC number from the regional joint DGFT. After obtaining the IEC, the exporter needs to ensure that all the legal compliances are met under different trade laws. These include commercial documents – the ones exchanged between the buyer and seller, and regulatory documents that deal with various regulatory authorities such as the customs, excise, licensing authorities, as well as the export promotion bodies that help avail export import benefits

Bill of lading or airway bill;
Commercial invoice cum packing list;
Shipping bill or bill of export

Additional documents like certificate of origin and inspection certificate may be required as per the case.

The important regulatory documents include:

GST return forms (GSTR 1 or GSTR 3B);
GSTR refund form;
Exchange Control Declaration;
Bank Realization Certificate; and
Registration cum Membership Certificate (RCMC).

The RCMC helps exporters and importers avail benefit or concession under the Foreign Trade Policy 2015-20, which has been extended up to January 31st, 2022 to provide a stable regime during the COVID-19 pandemic.

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