After the government unveiled its second financial package to rescue the economy, the Director General of Foreign Trade (DGFT) and Central Board of Excise and Customs (CBEC) have come out with some useful clarifications and changes.
Under Chapter 3 of the Foreign Trade Policy (FTP), export incentives are available by way of duty credits under schemes such as Served from India Scheme, Vishesh Krishi and Gram Udyog Yojana Scheme, Focus Market Scheme , Focus Product Scheme , High-Tech Products Export Promotion Scheme etc. The DGFT Policy Circular no. 51 dated January 6, 2009, clarifies that under these schemes, the computation of entitlement is to be done on the Free-onBoard (FOB) value of exports inclusive of commissions and discounts, if any. This means that the commission also will earn duty credit, as in the case of Duty Entitlement Passbook (DEPB) Scheme. Under DEPB scheme a ceiling of 12.5 per cent has been imposed for commission that will earn the duty credit but similar ceiling has not been prescribed under the Chapter 3 schemes.
Free shipping bills are filed for exports under Chapter 3 schemes. The exporter is, however, required to make a declaration regarding export under the relevant scheme, mainly to alert the Customs regarding any valuation issues, as the duty credits are available as a percentage of the FOB value. As a rule, the goods under free shipping bills are not examined.
Now, the CBEC has prescribed the norms for examination of the goods to be exported under Chapter 3 schemes. Simultaneously, the CBEC should have restored the facility of excise sealing and examination at the factory. But, the instruction that the excise authorities will not examine goods being exported under free shipping bills continues. This will cause difficulties, as the Chapter 3 shipments under free shipping bills will not be examined by the excise authorities at the factory but only by the customs at the ports.
The DGFT has clarified the existing legal position regarding import of restricted items under advance authorisations, the ‘nexus; verification only for sensitive items under Duty Free Import Authorisation scheme and import of Ozone Depleting Substances under advance authorisation. The legal provisions have been altered to allow extension under Export Promotion Capital Goods scheme against payment of composition fee as a percentage of proportionate duty saved amount and to deny duty credits under Vishesh Krishi Gram Udyog Yojana scheme against exports of table and kitchenware. DEPB rates that prevailed before November 5, 2008, have been restored with retrospective effect.
The CBEC has issued useful clarification regarding classification of footwear having uppers made of a combination of leather and non-leather materials such as synthetic, textile material, etc. for the purposes of duty drawback. The panel that verifies the investments made by the units manufacturing tobacco products in the North East has been reconstituted. To protect domestic producers, anti-dumping duty has been re-imposed on mulberry raw silk and float glass. Export of sugar, except against advance authorisations, would be permitted only if the exporters obtain release orders from the Directorate of Sugar. Restrictions on imports of ‘other transmission shafts and cranks’ have been removed. Rs 600 crore have been released to settle deemed export claims.
Exporters and importers want more simplification and useful clarifications that will reduce transaction costs at the operating levels.
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