Revised DGFT forms simplify matters

EXIM MATTERS

The director general of foreign trade (DGFT) has notified the much-awaited revised applications forms to enable export houses claim the duty credit benefits under the Target-Plus (TP) scheme and Duty Free Credit Entitlement (DFCE) scheme.

The revised forms are well drafted and most instructions are quite clear. Unnecessary documents have not been sought.

Under the TP scheme, export houses can claim duty credit certificates based on the incremental exports made during 2004-05. Under the DFCE scheme, they can claim the duty credits on the basis of incremental exports made during 2003-04.

Under both the schemes, the eligibility is based on the exports made but actual claim is limited to the export proceeds realised within the period allowed by the Reserve Bank of India.

The DGFT has made a very useful provision to lodge a claim immediately on the basis of export proceeds already realised and make a supplementary claim within three months from the date of last receipt of realisations to cover the export proceeds received later.

The export eligibility is based on the incremental growth achieved in US dollar terms. If the exports are made in any other currency, the exports values have to be converted into US dollars on the basis of the customs notified exchange rates as on the 'let export' date.

For the purpose of entitlements in rupee terms, the exchange rates endorsed in the shipping bills have to be taken into consideration.

This provision will greatly benefit exporters who had sold goods on credit terms and ended up getting fewer rupees at the time of receiving payment due to appreciation of the rupee against the US dollar.

Interestingly, under the DFCE scheme, commissions and discounts are not to form part of the free on board (FOB) value, whereas under the TP scheme, there is no such bar. This can mean huge benefits under the TP scheme for exporters, who had offered large selling commissions to foreign agents.

The duty credit certificate holders can now import any item that has a 'broad nexus' with the product exported. A broad nexus will mean goods imported with reference to any of the product group of the exported goods within the overall value of the entitlement certificate.

Individual export house companies within a group can claim TP benefits based on their own incremental growth or that of the entire group. Where the companies within a group claim benefit only on the basis of their individual performances, the group, as a whole, must not have achieved negative growth.

The application form, through an example, shows lucidly how to adjust the export turnover so that none of the individual export house companies show negative growth.

An inexplicable restriction is that for exports made against free shipping bills, no entitlement would accrue under the DFCE scheme.

The same scheme restricts utilisation of certificates by supporting manufacturers only in proportion to their value-wise and product group-wise value of their direct contribution to the entitlements.

Under the TP scheme, there are no such restrictions. Utilisation certificates/returns need not be furnished but installation certificates are required for capital goods and office equipment.

It would help if the DGFT clarifies what he means by phrases such as "exports transferred", "exports made by one exporter on behalf another exporter", "exports within a group", "supplies made by one status holder to another", etc.

tncr@sify.com