One of the highlights of the Exim Policy is the duty free entitlement for service exporters.
Service providers, other than hotels, will not have to pay duty on imports equivalent to 10 per cent of the average foreign exchange earned by them in the preceding three years. For hotels, the entitlement is 5 per cent.
The entitlements are non-transferable and available only to those who earned more than an average of Rs 10 lakh in foreign exchange in the preceding three years.
According to the new norms, office equipment and furniture, professional equipment and consumables other than agriculture and dairy products can be imported duty free.
The commerce ministry has clarified that milk and dairy products and vegetable, horticulture and agriculture products viz. cereals will not be permitted under the entitlement.
However, beverages, spirits and vinegar covered by Chapter 22 of the ITC (HS) Classification and seafood (both processed and semi-processed) have been included in the duty free list.
This entitlement will be available for the import of cars by hotels, tour operators and tourist transport operators only.
The Director General of Foreign Trade (DGFT) had amended Para 3.18 (a) of the Handbook of Procedures (HB-1) to reduce the entitlement for service providers in the tourism sector to 5 per cent and restricted the eligibility to those registered with the tourism department. Hotels will also have to fulfill the same criterion.
A fee of Rs 5 per thousand will be charged for applications for duty free entitlement certificates.
However, such amendments to the substantive provisions of the Exim Policy, which is a notification issued by the Centre, is strange.
The Exim Policy can be amended only through a notification issued by the Centre and not through clarificatory circulars or amendments to the HB-1.
The Foreign Trade (Development & Regulation) Act, 1992 empowers the DGFT to advise the Centre on the formulation and implementation of the Exim Policy. The DGFT does not have the powers to amend it.
The Foreign Trade (Regulation) Rules, 1993, notified by the Centre specify the import licence application fees. Fees can be collected only for import licence applications.
Thus, the question is whether the DGFT can collect fees for duty free entitlements, which essentially are not import licenses. Also, can the DGFT collect fees that are different from what the Rules prescribe?
The DGFT seems to have exceeded his jurisdiction in matters relating to the Importer Exporter Code also. The DGFT recently prescribed mandatory returns for Importer Exporter Code (IEC) holders.
Under the provisions, the IEC could be blocked or invalidated if returns were not furnished on time or if the IEC holder had not made any exports or imports in the previous year.
Once inactivated, the IEC could only be reactivated on the payment of a fine of Rs 500. However, the FTDR Act does not give the DGFT the powers to block or invalidate IEC. It only allows for the suspension of the IEC and that too in specific situations.
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