Deemed Export
The policy relating to deemed exports is given in Chapter 7 of Foreign Trade Policy. The term ‘Deemed Export’ refers to those transactions in which goods supplied do not leave the country and payment for such supplies is received either in Indian rupees or in free foreign exchange. The following goods are regarded as ‘deemed exports’ provided they are manufactured in India:
- Supply of goods against Advance Authorization/Advance Authorization for annual requirement/DFIA;
- Supply of goods to EOU/STP/EHTP/BTP;
- Supply of capital goods against EPCG Authorization;
- Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers) provided said containers are exported out of India within 6 months or such further period as permitted by customs;
- Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by Department of Economic Affairs, Ministry of Finance, where legal agreements provide for tender evaluation without including customs duty;
- Supply and installation of goods and equipment to projects financed by multilateral or bilateral agreements/funds as notified by Department of Economic Affairs for which bids have been invited and evaluated on the basis of Delivered Duty Paid prices for goods manufactured abroad;
- Supply of goods to any project or for any purpose in respect of which the Ministry of Finance, by Notification No. 12/2012-Customs, dated 17.3.2012 as amended from time to time, permits import of such goods at zero customs duty subject to conditions specified in the said Notification;
- Supply of goods required for setting up of any mega power of project subject to the condition that such mega power project conforms to the threshold generation capacity specified in the above said Notification;
- Supply of goods to UN or International Organizations for their official use or supplied to the Projects financed by the said organizations approved by Government of India;
- Supply of goods to nuclear power projects provided-
Benefits
The following are the benefits available to deemed exports:
- Advance Authorization/Advance Authorization for annual requirement/DFIA;
- Deemed export drawback;
- Refund of terminal excise duty (‘TED’ for short), if exemption is not available.
Benefits on specified supplies
Deemed export benefits shall be available-
- For supplies of ‘cement’;
- On supply of ‘steel’-
- As an inputs to Advance Authorization/Annual Advance Authorization/DFIA holder/an EOU;
- To multilateral/bilateral funded Agencies;
- On supply of ‘fuel’ provided supplies are made to-
Common Conditions
The following are the common conditions for deemed export benefits:
- Supplies shall be made directly to entities; Third party supply shall not be eligible for benefits/exemption;
- Supplies shall be made directly to the designated projects/Agencies/units/Advance Authorization/EPCG Authorization holders. Sub contractors may, however, make supplies to main contractor instead of supplying directly o designated projects/agencies. Payments in such cases shall be made to sub contractor by main contractor and not by project authority;
- 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 Authority.
Eligibility for claiming TED/Drawback
The following are the criteria for making eligible to claim TED/Drawback:
- Application can be filed either by the supplier or by recipient of goods, having IEC number;
- Application can be made by Registered office/head office/branch office or manufacturing unit;
- In case of supplier files claim for TED refund, it shall obtain a certificate for non availment of CENVAT credit from the recipient of goods and submit the same. In case recipient of goods is an applicant, then the applicant itself shall submit such certificate;
- In case supplier files claim for duty drawback, it shall submit a certificate for non availment of CENVAT credit. In case of recipient of goods is an applicant, then it shall obtain such certificate from the supplier and submit the same;
- In case recipient unit files claim for TED/Duty drawback, disclaimer certificate 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;
- Claim can be filed only after payment is received in full, to the extent of supplies made;
- 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.
- Sub contractor can also file claim provided its name is endorsed in the Project Authority Certificate/Contract before supply of such goods.
Procedure for claim benefits
The supplier/recipient of goods shall submit application for claiming deemed export benefits, in ANF-7A, along with the documents prescribed therein, to the concerned to the Regional Authority. 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 Regional Authority. Incomplete/deficient application is liable to be rejected.
Conditions for refund of TED
The following are the conditions for the refund of TED:
- Supply of goods will be eligible for refund of TED provided recipient of goods does not avail CENVAT credit/rebate on such goods;
- Supply of goods which are exempted ab initio from payment of terminal excise duty would be ineligible to get refund of TED. Exemption from TED is available to the following:
- Supplies under ICB;
- Supplies of intermediate goods, against invalidation letter, made by an Advance Authorization holder to another Advance Authorization holder;
- Goods procured by EOU/EHTP/STP/BTP unit from a unit in DTA; and
- Supply of goods to UN/International Organization or project funded by it.
Conditions for refund of deed export drawback
The following are the conditions for refund of deemed export drawback:
- In case CENVAT credit/rebate has not been availed on the inputs/input services, by the supplier of goods, then, benefit as per Column ‘A” of All Industry Rate of Duty Drawback Schedule shall be admissible;
- If CENVAT credit/rebate has been availed by the supplier of goods, on inputs/input services, then, no drawback shall be admissible as per column ‘B’ of All Industry Drawback Schedule. However in such cases, Basic customs duty paid can be claimed as branded rate of Duty Drawback based upon submission of documents evidencing actual payment of duties.
Limitation
In respect of the following supplies the application for TED refund/drawback may be filed within1 2 months from the date of realization of 100% payment against such supplies:
- Supply of goods against Advance Authorization/Advance Authorization for annual requirement/DFIA;
- Supply of goods to EOU/STP/EHTP/BTP;
- Supply of capital goods against EPCG Authorization;
- Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers) provided said containers are exported out of India within 6 months or such further period as permitted by customs;
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/AROwise’ against individual authorization within the time stated above.
In respect of the following supplies the claim may be filed either on the basis of proof of supplies effected or payment received:
- Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by Department of Economic Affairs, Ministry of Finance, where legal agreements provide for tender evaluation without including customs duty;
- Supply and installation of goods and equipment to projects financed by multilateral or bilateral agreements/funds as notified by Department of Economic Affairs for which bids have been invited and evaluated on the basis of Delivered Duty Paid prices for goods manufactured abroad;
- Supply of goods to any project or for any purpose in respect of which the Ministry of Finance, by Notification No. 12/2012-Customs, dated 17.3.2012 as amended from time to time, permits import of such goods at zero customs duty subject to conditions specified in the said Notification;
- Supply of goods required for setting up of any mega power of project subject to the condition that such mega power project conforms to the threshold generation capacity specified in the above said Notification;
- Supply of goods to UN or International Organizations for their official use or supplied to the Projects financed by the said organizations approved by Government of India;
- Supply of goods to nuclear power projects provided-
Claims should be filed within a period 12 months from date of receipt of supplies by project authority or from the date of receipt of the payment by supplier as per the option of the applicant either against a particular project or all the projects. The claims may also be filed where part payments have been received. Deemed export benefits may be allowed after 100% supplies have been made. The benefit, however, will be limited to the extent of payment received.
In case claim is filed after the prescribed time period, the late cut will be done as detailed below:
- Application received after the expiry of last date but within six months from the last date – 2% cut;
- Application received after six months from the prescribed date of submission but not later than one year from the prescribed date – 5% cut;
- Application received after 12 months from the prescribed date of submission but not later than 2 years from the prescribed date – 10% cut.
Interest
Regional Authority shall make payment within 30 days from the date of issuance of approval letter. In case payment is not made within that period then the Regional Authority shall pay interest @ 6% per annum. No separate application for claiming interest is required to be made. A single mandate shall be issued to the bank for principal amount and interest amount. If interest is not paid 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.
Internal Audit Mechanism
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 Regional Authority, where benefits 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 Addl. DGFT. The team will be responsible to audit claims of not only for its own office but also the claims of all Regional Authorities falling under the jurisdiction of the zone. The respective Regional Authority may also, either on the basis of report from Internal Audit or suo motu, reassess any case, where any erroneous payment has been made he will take necessary action for recovery of payment along with interest @ 15% per annum on the recoverable amount.
Penalty
In case claim is filed by submitting mis declaration of facts then in addition to effecting recovery of the amount the applicant shall be liable for penal action under the provisions of Foreign Trade (Development & Regulations) Act and Rules and order made there under.
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