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Benefits for Deemed Exports

Foreign Trade Policy

To provide a level-playing field to domestic manufacturers in certain specified cases, as may be decided by the Government from time to time.

Deemed Exports

  1. “Deemed Exports” for the purpose of this FTP refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign Supply of goods as specified in Paragraph 7.02 below shall be regarded as “Deemed Exports” provided goods are manufactured in India.
  2. “Deemed Exports” for the purpose of GST would include only the supplies notified  under  Section  147  of  the  CGST/SGST  Act,  on  the recommendations of the GST Council. The benefits of GST and conditions applicable for such benefits would be as specified by the GST Council and as per relevant rules and

Categories of Supply

Supply of goods under following categories (a) to (d) by a manufacturer and under categories (e) to (h) by main / sub-contractors shall be regarded as “Deemed Exports”:

  1. Supply by manufacturer:
  2. Supply of    goods   against   Advance     Authorisation  /     Advance Authorisation for annual requirement / DFIA;
  3. Supply of goods to EOU / STP / EHTP / BTP;
  4. Supply of capital goods against EPCG Authorisation;
  5. Deleted
  6. Supply by main / sub-contractor (s):
  7. Supply of goods to projects financed by multilateral or bilateral Agencies / Funds as notified by Department of Economic Affairs (DEA), MoF, where legal agreements provide for tender evaluation without including customs duty.
  8. Supply and installation of goods and equipment (single responsibility of turnkey contracts) to projects financed by multilateral  or    bilateral    Agencies/Funds    as    notified    by Department of Economic Affairs (DEA), MoF, for which bids have been invited and evaluated on the basis of Delivered Duty Paid (DDP) prices for goods manufactured
  9. Supplies covered in this paragraph shall be under International Competitive Bidding (ICB) in accordance with procedures of those Agencies /
  10. A list of agencies, covered under this paragraph, for deemed export benefits, is given in Appendix
  11. Supply of goods to any project or for any purpose in respect of which the Ministry of Finance, by erstwhile Notification No. 12/2012 –Customs dated 17.3.2012, as amended from time to time, had permitted import of such goods at zero customs duty (with exemption of both BCD and CVD) subject to conditions specified therein and which are continued under the Customs Notification  No.   50/2017-Customs   dated   30.6.2017   with exemption of zero basic customs duty and subject to conditions mentioned in the said new notification. Benefits of deemed exports shall be available only if the supply is made under procedure of
  12. Supply of goods required for setting up of any mega power project, as specified in the list 31 at Sl. No. 598 of Department of Revenue Notification No. 50/2017-Customs dated 30.6.2017, as amended from time to time and subject to conditions mentioned therein, shall be eligible for deemed export benefits provided such mega power project conforms to the threshold generation capacity specified in the above said
  13. For mega power projects, ICB condition would not be mandatory if the requisite quantum of power has been tied up through tariff based competitive bidding or if the project has been awarded through tariff based competitive
  14. Supply of goods to United Nations or International organization for their official use or supplied to the projects financed by the said

United Nations or an International organization approved by Government of India in pursuance of section 3 of United Nations (Privileges and Immunities Act), 1947. List of such organization and conditions applicable to such supplies is given in the Customs notification no. 84/97-Customs dated 11.11.1997, as amended from time to time. A list of Agencies, covered under this paragraph, is given in Appendix-7B.

  1. Supply of goods to nuclear power projects provided:
  2. Such goods are required for setting up of any Nuclear Power Project as specified in the list 32 at Sl. No. 602, Customs notification  no.    50/2017-Customs    dated    30.6.2017,    as amended from time to time and subject to conditions mentioned
  3. The project should have a capacity of 440 MW or
  4. A certificate to the effect is required to be issued by an officer not below the rank of Joint Secretary to Government of India, in Department of Atomic
  5. Tender is invited through National competitive bidding (NCB) or through

Benefits for Deemed Exports

Deemed exports shall be eligible for any / all of following benefits in respect of manufacture and supply of goods, qualifying as deemed exports, subject to terms and conditions as given in HBP and ANF-7A:

  1. Advance Authorisation / Advance Authorisation for annual requirement / DFIA.
  2. Deemed Export Drawback for BCD.
  3. Refund of terminal excise duty for excisable goods mentioned in Schedule 4 of Central Excise Act 1944 provided the supply is eligible under that category of deemed exports and there is no exemption.

Benefits to the Supplier /Recipient

Categories of supplies as          per Para 7.02 Benefits on supplies, as given in Para 7.03 above, whichever is

applicable.
Para 7.03 (a)

Advance Authorisation

 Para 7.03 (b)

Duty Drawback

 Para 7.03 (c)

 

Terminal Excise Duty
(a) Yes

(for inter mediate supplies against an invalidation letter)

 Yes

(against ARO)

 Yes
(b) Yes Yes Yes
(c) Yes Yes NA
(d) Deleted deleted deleted
(e) Yes Yes NA
(f) Yes Yes Yes,     only     for      para

7.08(iii)(a)
(g) Yes Yes NA
(h) Yes Yes NA

 

Conditions for refund of terminal excise duty

  1. Supply of goods will be eligible for refund of terminal excise duty as per Para 7.03 (c) of FTP, provided recipient of goods does not avail CENVAT credit/rebate on such Goods

Conditions for refund of deemed export drawback

Supplies will be eligible for deemed export drawback as per para 7.03 (b) of FTP, as under:

The refund of drawback in the form of Basic Customs duty of the inputs used in manufacture and supply under the said category shall be given on brand rate basis upon submission of documents evidencing actual payment of basic custom duties.

Common conditions for deemed export benefits

  1. Supplies shall be made directly to entities listed in the Para 7.02. Third party supply shall not be eligible for benefits/exemption.
  2. In all cases, supplies shall be made directly to the designated Projects /   Agencies/   Units/   Advance   Authorisation/   EPCG   Authorisation holder. Sub-contractors may, however, make supplies to main contractor instead of supplying directly to designated Projects/ Agencies. Payments in such cases shall be made to sub-contractor by main-contractor and not by project Authority.
  3. Supply of domestically manufactured goods by an Indian Sub- contractor to any Indian or foreign main contractor, directly at the designated project’s/ Agency’s site, shall also be eligible for deemed export benefit provided name of sub-contractor is indicated either originally or subsequently (but before the date of supply of such goods) in the main contract. In such cases payment shall be made directly to sub-contractor by the Project

Benefits on specified supplies

  1. Deemed export benefits shall be available for supplies of ‘Cement” under Para 7.02 (e)
  2. Deemed export benefit shall be available on supply of “Steel”:
    1. As  an   inputs   to   Advance   Authorisation/   Annual   Advance Authorisation/DFIA holder/ an EOU.
    2. To multilateral/ bilateral funded Agencies as per sub-Para 7.02(e).
  3. Deemed export benefit shall be available on supply of “Fuel” (in respect of eligible fuel items covered under Schedule 4 of Central Excise Act 1944) provided supplies are made to:
    1. Project listed for petroleum operations in the Customs Notification No. 50/2017-Customs  dated  6.2017  under  Sr. No. 404, as amended from time to time and subject to conditions mentioned therein and covered in Para 7.02 (f) of FTP.
    2. EOUs;
    3. Advance Authorisation holder / Annual Advance Authorisation holder.

Liability of Interest

Incomplete/deficient application is liable to be rejected. However, simple interest @ 6% per annum will be payable on delay in refund of duty drawback and terminal excise duty under the scheme, provided the claim is not settled within 30 days from the date of issue of final Approval Letter by RA.

Risk Management and Internal Audit mechanism

  1. A Risk Management system shall be in operation, wherein every month, Computer system in DGFT headquarters, on random basis, will select 10% of cases, for each RA, where benefit(s) under this chapter has/have already been granted. Such cases shall be scrutinized by an internal Audit team, headed by a Joint DGFT, in the office of respective Zonal DGFT. The team will be responsible to audit claims of not only for its own office but also the claims of all RAs falling under the jurisdiction of the Zone.
  2. The respective RA may also, either on the basis of report from Internal Audit/ External Audit Agency(ies) or suo-motu, reassess any case, where any erroneous/in-eligible payment has been made/claimed. RA will take necessary action for recovery of payment

along with interest at the rate of 15% per annum on the recoverable amount.

Penal Action

In case, claim is filed by submitting mis-declaration/mis-representation of facts, then in addition to effecting recovery under Para 7.10(b) above, the applicant shall be liable for penal action under the provisions of F.T. (D&R) Act, Rules and orders made there under.

Transitional Para

Deemed exports benefits contained in FTP 2015-20 shall be available for supplies effected till 30.06.2017 in terms of FTP 2015-20 provisions as it stood till 30.06.2017. In respect of supply made after 30.6.2017, new provision shall apply.

Hand Book of Procedures

Procedure for claiming Benefits

  1. Supplier / Recipient of goods shall submit application for claiming deemed export benefits, in ANF-7A, along with the documents prescribed therein, to the concerned RA.
  2. In case of supply of goods to an EOU, claim shall be filed with the concern Development Commissioner. A DTA Unit shall claim benefits from the concerned RA.

Criteria for claiming Benefits

  1. In respect of supply of intermediate goods to Advance Authorisation / DFIA holder, against Invalidation Letter, issued in terms of Paragraph 4.13 of HBP, application to obtain Advance Authorisation for import of duty free inputs, as provided under chapter 4 of FTP 2015-20, shall be made as per procedures given in Chapter 4 of For supplies against invalidation letter, TED refund shall be given in accordance with para 7.03(c) of FTP 2015-20, provided, there is no exemption.
  2. In respect of supply of goods to Advance Authorisation / DFIA, against ARO, procedure given in Chapter 4 of the HBP shall be followed. TED refund for supplies against ARO shall be allowed in accordance with para 7.03(c) of FTP 2015-20, provided, there is no exemption. Duty Drawback shall be allowed on basic custom duty paid on inputs used in such supplies.
  3. In respect of supply of goods to EOU / EHTP / STP / BTP, Advance Authorisation / DFIA can be obtained as per procedure given in the Chapter 4 of HBP for exemption from payment of Terminal Excise Duty, procedure as per Excise Circular number 851/9/2007-CX dated 3.5.2007 read with circular No. 10/2009-Cus dated 25.2.2009, shall be followed for removal of goods against CT-3. TED refund shall be given for supply of goods to EOU / EHTP / STP / BTP in accordance with para 7.03(c) of FTP 2015-20, provided, there is no exemption. In case Advance Authorisation, as provided in chapter 4 of FTP 2015- 20, is not obtained for import of duty free inputs against such supply, drawback claim for basic custom duty paid on inputs, used in the resultant product, shall be filed with the DC concerned. A DTA Unit shall claim benefits from the concerned RA.
  4. In respect of supply of goods to an EPCG Authorisation holder, against Invalidation Letter, application for Advance Authorisation / DFIA shall be made as per procedures given in Chapter 4 of If Advance Authorisation / DFIA is not obtained for duty free inputs, Duty drawback shall be allowed on basic custom duty paid on inputs used in the resultant product.
  5. In respect of supply of goods to other categories as listed in the Paragraph 7.02 (e), (f), (g) & (h) of FTP, Advance Authorisation / DFIA for import of duty free inputs as provided under chapter 4 of FTP 2015-20 may be obtained against Project Authority Certificate as per Appendix- 7C. However, if Advance Authorisation / DFIA is not obtained against such supplies for duty free inputs as provided in chapter 4 of FTP 2015-20, claim for duty drawback for basic custom duty may be filed as per ANF-7A. TED refund for projects mentioned in para 7.08(iii)(a) of FTP 2015-20 in respect of eligible items of supply covered under schedule IV of Central Excise Act, 1944, shall be available provided there is no

Eligibility criteria for claiming TED / Drawback

  1. Application can be filed either by supplier or by recipient of goods, having IEC
  2. Application can be made by Registered office / Head office / Branch office or Manufacturing
  3. In case supplier files claim for TED refund, it shall obtain a certificate for non-availment of CENVAT credit from the recipient of goods as per Annexure – I to ANF-7A and submit the In case recipient of goods is an applicant, then the applicant itself shall submit such certificate.
  4. Deleted
  5. In case recipient unit files claim for TED / Duty Drawback, disclaimer certificate as prescribed in the Annexure-III to ANF- 7A shall be obtained from supplier and shall be submitted along with the application. In case supplier of the goods is an applicant then the disclaimer certificate from the recipient of the goods shall be submitted.
  6. Claim can be filed only after payment is received in full, to the extent of supplies
  7. Claim can be filed against payment received through normal banking channel, as per e-BRC. In other words, supply documents have to be negotiated through bank only. In respect of supplies covered under Paragraph 7.02 (e) to (h) of the FTP 2015-20, payment certificate issued by Project Authority, in APPENDIX-7D, has also to be submitted.
  8. Sub-contractor can also file claim provided its name is endorsed in the Project Authority Certificate / Contract before supply of such goods.

Procedure for claiming TED refund on Fuel

For supply of High Speed Diesel (HSD) from Depots of domestic oil Public Sector Undertakings under Paragraph 7.02(b) of FTP 2015-20, terminal excise duty shall be refunded on the basis of duty paid certificate issued by concerned domestic oil Public Sector Undertaking in the format given in

Annexure-IV to ANF-7A. Duty refund will be allowed for quantity of HSD procured by EOU / EHTP / STP / BTP unit for its production activities, as certified by concerned DC / Bond authorities.

Frequency of application and time period for claiming TED / Drawback

  1. In respect of supplies covered in Paragraphs 7.02 (a) to (d) of FTP 2015-20, application for TED refund / drawback (whichever applicable) may be filed within 12 months from the date of realisation of 100% payment against such supplies. In cases where payment is received in advance and supply is made subsequently, in such cases application can be filed within 12 months from the last date of such supplies. Claim can be filed ‘Invalidation Letter / ARO wise’ against individual Authorisation within the time limit as specified
  2. In respect of supplies covered in Paragraphs 7.02 (e) to (h) of FTP 2015-20, claim may be filed either on the basis of proof of supplies effected or payment Claims should be filed within a period of twelve months from date of receipt of supplies by project authority or from date of receipt of the payment by supplier as per the option of applicant, either against a particular project or all the projects. Claims may also be filed where part payments have been received. Deemed export benefits may be allowed after 100% supplies have been made. However, benefit will be limited to the extent of payment received.

Fixation of Brand Rate

An application in ANF- 7A, along with documents prescribed in ANF-7A & Appendix-7E, may be made to RA or DC concerned, as the case may be, for fixation of brand rate. Application for fixation of Brand rate may be made  for the following:

  1. Where basic customs duty paid is claimed as brand rate of duty drawback, in terms of Paragraph 06 of FTP 2015-20.

Time barred / supplementary claim

In case claim is filed after prescribed time period, provision of late cut, under Paragraph 9.02 of HBP and provision of supplementary claim under Paragraph 9.03 of HBP shall be applicable.

Exemption from payment of TED

For claiming exemption from payment of terminal excise duty, wherever applicable, procedure prescribed by Central Excise Authority shall be followed.

Applicability of other Rules

Subject to procedure laid down in HBP, Customs and Central Excise Duties and Service Tax Drawback Rules, 1995 or Customs and Central Excise Duties Drawback Rules, 2017, as the case may be, shall apply mutatis mutandis to deemed exports scheme.

Payment of interest

  1. RA shall make payment within 30 days from the date of issuance of Approval Letter. In case payment is not made within the time period as given above, then RA shall add interest component, along with principal amount, in accordance with Paragraph 7.09 of the FTP 2015-20. No separate application for claiming interest is required to be made. A single mandate shall be issued to the bank for principal amount and
  2. If interest is not added by RA/DC, a separate application, as per ANF- 7B may be filed, within 30 days from the date of receipt of principal amount. No interest shall be paid thereafter. RA shall maintain separate account for disbursement of principal amount and interest for accounting
  3. RA shall submit a monthly report regarding disbursement of deemed exports claims, in the proforma as given in Appendix-7F. Wherever interest is paid, RA shall inform the reason for payment of interest. Report shall be sent at the email ID ddgdbk@nic.in.

Internal Audit Mechanism

The zonal offices of Additional DGFT shall constitute Audit team in their offices as per Paragraph 7.10 of FTP 2015-20 and shall carry out post Audit.