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Highlights Of Annual Supplement (2013-14) To The Foreign Trade Policy 2009-14

April 19, 2013 Eximtutor Export

1. Measures to revive investors’ interest in SEZs.

1.1 A package of measures has been formulated to revive investors’ interest
in SEZs and to boost exports. The salient features of the package are:-

In view of the acute difficulties in aggregating large tracts of uncultivable
land for setting up SEZs, while ensuring vacancy and contiguity, we have decided
to reduce the Minimum Land Area Requirement by half. For Multi-product SEZ from
1000 hectares to 500 hectares and for Sector-specific SEZ from existing 100
hectares to 50 hectares.

To provide greater flexibility in utilizing land tracts falling between
50-450 hectares, it has been decided to introduce a Graded Scale for Minimum
Land Criteria which would permit a SEZ an additional sector for each contiguous
50 hectare parcel of land. This will also bring about more efficient use of the
infrastructure facilities created in such an SEZ.

Further flexibility to set up additional units in a sector specific SEZ is
being provided by introducing Sectoral broad-banding to encompass similar /
related areas under the same sector.

On the issues relating to Vacancy of Land, while the existing policy allows
for parcels of land with pre-existing structures not in commercial use to be
considered as vacant land for the purpose of notifying an SEZ, it has now been
decided that additions to such pre-existing structures and activities being
undertaken after notification would be eligible for duty benefits similar to any
other activity in the SEZ.

1.2 IT Exports constitute a very significant part of India’s exports and IT
SEZs have a major contribution in it. Exports from IT SEZs during financial year
2012-13 have exceeded Rs. 1.40 lakh crore registering a growth of over 70% over
the previous year’s exports. We have specifically addressed issues to boost
growth of this very important sector and also to give a fillip to employment and
growth in Tier-II and Tier-III cities.

The present requirement of 10 hectares of minimum land area has been done
away with. Now there would be no minimum land requirement for setting up an
IT/ITES SEZ. Only the minimum built up area criteria would be required to be met
by the SEZ developers.

The minimum built up area requirement has also been considerably relaxed with
the requirement of one lakh square meters to be applicable for the 7 major
cities viz: Mumbai, Delhi (NCR), Chennai, Hyderabad, Bangalore, Pune and
Kolkata. For the other Category B cities 50,000 square meters and for remaining
cities only 25,000 square meters built up area norm will be applicable.

1.3 The present SEZ Framework does not include an Exit Policy for the units
and feedback was that this was perceived as a great disadvantage. It has now
been decided to permit transfer of ownership of SEZ units, including sale

2. Zero Duty Export Promotion Capital Goods (EPCG) Scheme

2.1 Foreign Trade Policy has two variants under this scheme, namely, Zero
Duty EPCG for few sectors and 3% Duty EPCG for all sectors. During the last
announcement on 5th June, 2012, a new Post Export EPCG Scheme was also announced
which was notified on 18 February, 2013 by the CBEC. Based on the request of all
stakeholders, Government has decided to harmonize Zero Duty EPCG and 3% EPCG
Scheme into one scheme which will be a Zero Duty EPCG Scheme covering all
sectors.

2.2 Following are the salient features of the Zero Duty EPCG Scheme:-

Authorization holders will have export obligation of 6 times the duty saved
amount. The export obligation has to be completed in a period of 6 years.

The period for import under the Scheme would be 18 months.

Export obligation discharge by export of alternate products as well as
accounting of exports of group companies will not be allowed.

The exporters who have availed benefits under Technology Upgradation Fund
Scheme (TUFS) administered by Ministry of Textiles, can also avail the benefit
of Zero duty EPCG Scheme.

The import of motor cars, SUVs, all purpose vehicles for hotels, travel
agents, or tour transport operators and companies owning/operating golf resorts
will not allowed under the new Zero Duty EPCG Scheme.

2.3 Reduced EO for Domestic Sourcing of Capital Goods

The quantum of specific Export Obligation (EO) in the case of domestic
sourcing of capital goods under EPCG authorizations has been reduced by 10%.
This would promote domestic manufacturing of capital goods.

2.4 Reduced EO for units in the State of Jammu & Kashmir

In order to encourage manufacturing activity in the State of Jammu & Kashmir,
it has been decided to reduce the specific export obligation (EO) to 25% of the
normal export obligation. Earlier, this benefit was announced on 5th June, 2012
in respect of units located in North

Eastern Region and Sikkim. This provision is now being extended to J&K.

3. Widening of Interest Subvention Scheme

3.1 At present, 2% interest subvention scheme is available to certain
specific sectors like Handicrafts, Handlooms, Carpets, Readymade Garments,
Processed Agricultural Products, Sports Goods and Toys. The scheme had been
further widened to include 134 sub-sectors of engineering sector. Government had
also announced that the benefit of this scheme of 2% interest subvention could
be available upto 31.03.2014.

3.2 Government has now decided to further widen the scheme to include items
covered under Chapter 63 of ITC (HS) (other made up textile articles, sets,
rags) and additional specified tariff lines of engineering sector items under
the scheme. These sectors would be able to avail benefit under this scheme
during the period from 01.05.2013 to 31.03.2014.

4. Widening the Scope of Utilization of Duty Credit Scrip

4.1 Duty Credit Scrips issued under Focus Market Schemes, Focus Product
Scheme and Vishesh Krishi Gramin Udyog Yojana (VKGUY) can be used for payment of
service tax on procurement of services within the legal framework of service tax
exemption notifications under the Finance Act, 1994. Holder of the scrip shall
be entitled to avail drawback or CENVAT credit of the service tax debited in the
scrips as per Department of Revenue rules.

4.2 All duty credit scrips issued under Chapter 3 can be utilized for payment
of application fee to DGFT for obtaining any authorization under Foreign Trade
Policy. This benefit shall be available only to the original duty credit scrip
holders. Duty credit scrip can also be paid for payment of composition fee and
for payment of value shortfalls in EO under para 4.28 (b) of Hand Book of
Procedure Vol. 1.

5. Market and Product Diversification

5.1 Norway has been added under Focus Market Scheme and Venezuela has been
added under Special Focus Market Scheme. The total number of countries under
Focus Market Scheme and Special Focus Market Scheme becomes 125 and 50
respectively.

5.2 Approximately, 126 new products have been added under Focus Product
Scheme. These products include items from engineering, electronics, chemicals,
pharmaceuticals and textiles sector.

5.3 About 47 new products have been added under Market Linked Focus Product
Scheme (MLFPS). These products are from engineering, auto components and
textiles sector. 2 new countries i.e., Brunei and Yemen have been added as new
markets under MLFPS.

5.4 MLFPS is being extended from 01.04.2013 to 31.03.2014 for exports to USA
and EU in respect of items falling in Chapter 61 and Chapter 62 of ITC(HS).

5.5 Exports of High Tech products would be incentived and it would be
separately notified by 30th June, 2013.

5.6 The towns of Morbi (Gujarat) and Gurgaon (Haryana) have been added to the
existing list of towns of export excellence for ceramic tiles and apparel
exports respectively. These towns shall be eligible to get benefit under ASIDE
Scheme.

6. Incremental Exports Incentivisation Scheme

6.1 Government has announced Incremental Export Incentivisation Scheme on
26.12.12 for the exports made during January 2013 to March 2013. This scheme is
available for exports made to USA, EU and Asia. It has been agreed to extend
this scheme for the year 2013-14. The calculation of the benefit shall be on
annual basis under the extended scheme.

6.2 The Government has also agreed to include additional countries under
Incremental Exports Incentivisation Scheme. 53 countries of Latin America and
Africa have been added with the objective to increase India’s share in these
markets. The present exports to each of these markets is less than US $ 100
million.

7. Facility to close cases of default in Export Obligation

7.1 Requests have been received for grant of relief to close cases where
there is default in export obligations pertaining to advance authorizations and
EPCG authorizations. It has been decided to allow a facility to close such cases
after payment of required duty, along with applicable interest. The duty +
interest have to be paid within a limited period of six months from the date of
notification of this scheme. The total payment shall not exceed two times the
duty saved amount on default in Export Obligation.

8. Served from India Scheme (SFIS)

8.1 Service providers are entitled to duty credit scrips under Served from
India Scheme at the rate of 10% of free foreign exchange earned during a
financial year. The entitlement shall now be calculated on the basis of net free
foreign exchange earned (i.e., after deducting foreign exchange spent from the
total foreign exchange earned during the financial year).

8.2 Limited transferability of SFIS scrips shall be allowed by the Regional
Authority within group company of the status holder provided the group company
is manufacturer.

8.3 Service exporters who are also engaged in manufacturing activity are
permitted to use SFIS duty credit scrip for importing/domestically procuring
capital goods as defined in para 9.12 of FTP including spares related to
manufacturing sector business of the service provider.

8.4 Hotels, travel agents, tour operators or tour transport operators and
companies owning/operating golf resorts having SFIS scrip can import or
domestically procure motor cars, SUVs and all purpose vehicles using SFIS scrips
for payment of duties. Such vehicles need to be registered for “tourist purpose”
only.

9. VKGUY Scheme

9.1 There is a limiting provision which restricts benefit of VKGUY to a
reduced rate of 3% when a particular item avails drawback at more than 1% rate.
It has been decided to delete para 3.13.3 of FTP.

9.2 Limited transferability of the Agri Infrastructure Incentive Scheme
(AIIS) scrip from status holder to the supporting manufacturer (of the status
holder exporter) who is neither a status holder nor has a unit in a Food Park
(and is not a developer) shall be allowed. Such transfer from the status holder
would be endorsed by the Regional Authority.

10. Status Holder Incentive Scheme (SHIS)

10.1 Status Holder Incentive Scheme (SHIS) was extended for the year 2012-13.
The scheme will not be available for the year 2013-14. Regional Authority shall
allow limited transferability of SHIS scrip within group company of the status
holder provided the group company is a manufacturer.

11. Recredit of 4% SAD

11.1 Utilization of recredited 4% SAD scrips shall be allowed upto 30.09.13
as a trade facilitation measure. However, no further extension shall be
considered by Government and this would be the last such opportunity. The
importers are advised to make the initial payment of 4% SAD in cash in future if
they want a refund.

12. Duty Free Import Authorization Scheme (DFIA)

12.1 Anti Dumping Duty and Safeguard Duty was exempted under DFIA Scheme.
Exemption from payment of Anti Dumping Duty and Safeguard Duty shall henceforth
not be available after endorsement of transferability of such authorizations.

13. Import of Cars

13.1 Import of cars/vehicles is permitted through designated ports only. Now
import of cars/vehicles would also be allowed at ICD Faridabad and Ennore Port
(TN).

14. Improvement in quality and timeliness of Foreign Trade Data

14.1 Initiative been taken to improve quality and accuracy of foreign trade
data. The release of Press Note relating to Quick estimates has been compressed
to 15 days after completion of the month to which it relates. The period of
reporting by DGCIS about data on principal commodity-wise has been reduced from
2 ½ months to 1 month. Further transaction level (8 digit level) data is now
available within a period of 2 months.

14.2 It has been decided that items falling under chapter 3 schemes for
export incentive would be aligned with ITC (HS). This task has been completed by
DGFT and it has been uploaded on the website of DGFT to seek feedback from the
trade. Tade is requested to give their feedback by 17th May, 2013.

15. Second Task Force on Transaction Cost in International Trade

15.1 The report on Transaction Cost was released in Feb 2011. Implementation
of its recommendation resulted into estimated reduction of transaction cost of
approximately Rs 2495 Crores. Second Task Force on Transaction Costs has been
constituted. The Committee would submit its report in six months.

16. Electronic Data Interchange Initiatives

16.1 e-BRC system allows Transmission of realization of export proceeds
details from banks to DGFT in electronically secured format. The system has been
made mandatory with effect from 17th August, 2012. Up to 16th April, 2013, 31.2
lakh e-BRC have been uploaded on the website of DGFT by 81 banks. e-BRC data is
also of use to different ministries/departments of Central Government and State
Governments who have expressed interest in obtaining this data from DGFT.
Government of Maharashtra and Delhi has started the process, as first movers, to
use e-BRC data for processing VAT refund claims of exporters. E-BRC will improve
the productivity of DGFT, Banks, Central and State Government department dealing
with exporter/importers and will lead to substantial reduction of transaction
cost and time.

16.2 Reconciliation of export and bank documents at the time of closure of an
Advance or EPCG Authorisation involved manual submission of many documents.
Transmission of two key documents (Shipping bill from Customs and e-BRC from
Banks) relating to Advance Authorization and EPCG Authorizations in secured
electronic format to DGFT has established. Accordingly, DGFT has introduced the
system of online Export Obligation Discharge certificate (EODC). Exporters can
file EODC applications online. DGFT will also transmit all EODCs to DG Systems
through a secured message exchange. This will obviate the need to have re-
verification at the Custom’s end. Reconciliation of export import/Closure of an
authorization was document heavy process. With online EODC exporter can complete
the formalities at DGFT online and may get quick clearances at the Customs on
account of e-transmission of EODC from DGFT to Customs.

16.3 Message Exchange System for exchanging shipping data relating to Focus
Product Scheme (FPS), Focus Market Scheme(FMS), Market linked Focus Product
Scheme(MLFPS), Status Holder Incentive Scrip(SHIS), Served From India Scheme
(SFIS)and Agri Infrastructure Scheme shall be established with DG Systems. This
will allow exporters to quickly link (and not fill all details) Shipping bills
received from Customs with their applications for quick processing.

16.4 System for online issuance of Registration Certificate for export of
Cotton, Cotton Yarn, Non-Basmati Rice, Wheat and Sugar has been introduced. This
will allow quick issuance of Registration Certificates and easy monitoring.

16.5 An online system to resolve EDI issues has been established. The system
generates a key number for each complaint for follow up.

16.6 A new online complaint resolution system relating to EDI issues has been
devised where users can file online complaint. A key number for each complaint
will be generated which can be followed up by the users and DGFT officials for
early resolution of issues.

17. Ease of Documentation and procedural simplification

17.1 Submission of physical copies of IEC and Registration-cum-Membership
Certificate (RCMC) with individual application has been dispensed with.

17.2 It has been decided to dispense with submission of hard copy of EP copy
of shipping bills in case of (a) advance authorization, (b) duty free import
authorization for grant of Export Obligation Discharge Certificate (EODC) if
exports are made through EDI ports.

17.3 Application fee can be paid either in cash or through demand draft or
through EFT. Now exporters/importers would be allowed shortly to utilize their
credit card for payment of such application fee.

17.4 Existing procedures contained in para 2.20A of Handbook of Procedures
related to execution of bank guarantee / legal undertaking stands deleted.

17.5 In order to facilitate IT exports, we have extended the facility of
‘work from home’ to STPI / EOUs / BTPs / EHTPs.

18. Widening of items eligible for import for Handloom/Made ups and
Sports Goods.

18.1 5 additional items (embroidery/sewing threads/poly/quilted bedding
materials and printed bags) are included in the list of items which are allowed
duty free within the existing limits upto 5% FOB value of exports of handloom
made ups in preceding year or within the existing limit of upto 1% of FOB value
of exports of cotton/man-made ups in preceding year.

Similarly, 5 additional items have been added pertaining to sports goods
exports. These 5 items are (i) PVC Leather Clot (to be used in the manufacture
of Inflatable Balls & Sports Gloves), (ii) Latex Foam (to be used in the
manufacture of Shin Guard & Goal Keeper Gloves & other Sports Gloves), (iii)
Peva / Eva Foil (to be used in the manufacture of Shin Guard & Sports Gloves),
(iv) Stitching Thread (to be used in the manufacture of Inflatable balls &
Sports Gloves), (v)Printing Ink (to be used in the manufacture of Inflatable
balls & Sports Gloves).

Item descriptions shall be amended, from Synthetic Rubber Bladder to
PVC/Synthetic Rubber Bladders for Inflatable Balls and from PU Leather Cloth/PU
laminated with cotton for Inflatable Balls to TPU/PU Leather cloth/TPU/PU
laminated with cotton for Inflatable Balls, in Notification No.12/2012 – [Cus
(Sl.No.521 (f) and (k)] in relation to sports goods exports.

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