Opinion / Suggestion on Sub: Export of Capital Equipment’s such as Machinery , Moulds and other consumables from our India Plants to our DUBAI named as Moldtek Packaging, Customs - Exim - SEZ

[Rajavarapu Nageswar Rao]

Sir,

Kind Attn: Sri Viswanath Garu

Sub: Export of Capital Equipment’s such as Machinery , Moulds and other consumables from our India Plants to our DUBAI named as Moldtek Packaging FZE located at –RAK Free Trade Zone (registered as wholly owned subsidiary) for manufacturing purpose – Regarding..

With reference to above subject we intend to manufacture the capital goods such as Moulds, Auxilliary equipment in our Hyderabad plant facilities, India and will be exported to our Dubai (new plant).

We also manufacture certain consumables which are inputs for the plastic containers in our Indian plant and it will be exported regularly to our Dubai plant.

Now our question is as follows:

1. Does the transfer of Moulds with valid document such as Invoice with value , Packing list , Certificate of origin , Bill of Lading , Shipping Bill etc considered as export or not ? As per Govt rules and regulations.
2. The consumable which we intend to export will be considered as exports or not? As per Govt rules and regulations.
3. Is it mandatory such exports to our unit at Dubai should receive remittance for the value of the goods exported from India to consider it as an export?
4. What is the procedure to capitalise the capital goods in the process to show in the books of accounts?
5. Is there any other mandatory laid out the procedures to follow for such exports to take the benefit of export?

Please let us know under which provisions of export – import tariff / manual to be followed.

Look forward your early reply.

Thanks & Regards,

For Mold-Tek Packaging Ltd.,

R Nageswar Rao

Posts / Replies

[Ganeshan Kalyani]

Sir, Please refer Foreign Trade Policy in website www.cbec.gov.in.

[malay pota]

Dear Mr. R Nageswar Rao,

Your Dubai Company Wholly Owned Subsidiary (WOS as per ODI of FEMA) though your Company is holding entire capital of WOS but, the said WOS is different Company having distinct artificial entity capable to sue and being sued.

Now let consider your Issue:

1. Does the transfer of Moulds with valid document such as Invoice with value , Packing list , Certificate of origin , Bill of Lading , Shipping Bill etc considered as export or not ? As per Govt rules and regulations.

Ans: Yes, the same shall be treated as Export .If you effect transfer you shall have to have prepare all the pre and post shipment documentations and follow the procedures as you ought to follow in normal course of export.

1. The consumable which we intend to export will be considered as exports or not? As per Govt rules and regulations.

Ans: Yes,the same shall be considered as Export as the answer given above in serial No.1

2. Is it mandatory such exports to our unit at Dubai should receive remittance for the value of the goods exported from India to consider it as an export?

Ans: Yes, Export remittance is required to be received in India within stipulated time as per FEMA.

3. What is the procedure to capitalise the capital goods in the process to show in the books of accounts?

Ans: You add value of the Capital Goods in the value of the Gross block of the other capital goods installed or to be installed in the factory and claim depreciation there on .

4. Is there any other mandatory laid out the procedures to follow for such exports to take the benefit of export?

Ans: You can take EPCG licence for duty free import of Machinary for manufacturing Mould ( but you have to export 6 time of duty saved value in 6 years ).You claim Customs duty draw back at the time of export is alloed on your export item

Please you inform name of Consumable so that Import tariff canbe informed to you. For Machinary Import Tariff is 84

You may contact me on my cell no.9898003013

[surya narayana]

Dear Mr. Rao,

I fully concur with the views expressed by Shri. Malay Pota Ji and add the following other inputs.

1. Since it is a related party transaction, you may have to take care of Transfer pricing provisions under Income Tax

regarding valuation /export value of your products intended to export to your Dubai subsidiary.

2. You can also claim eligible export incentives on the goods so exported in terms of Foreign Trade Policy which is

available at www.dgft.gov.in in addition to DBK, Rebate etc.,

Regards

Suryanarayana

[malay pota]

Dear Mr R Nageswar Rao

Shri Surya narayana ji is correct if you are a Public Limited Company Related Party transaction is to be taken in consideration for transaction with WOS however, if you are a Private Limited Company Related Party Transaction is not applicable as per exemption dt.5-6-2015 issued by MCA.

[Rajavarapu Nageswar Rao]

Dear sir,

Thank you very much for providing your valuable suggestion / advise. In this context we requires some more clarifications as below:

a) BRC (Bank Reliazation Certification) is mandatory on each and every consignment / invoice wise. OR any specific Approval / Permission may be required from RBI (Master Circular No. 11/2015-16 Dt:01.07.2015) vide para B.4 (Page No.12) / B.7 (Page No.15) / B.12 (Page No.19) etc.,

b) Also As per FTP - Payments and Receipts on Imports / Exports : Chapter 2.52 (denomination of Export Contracts) & 2.54 (Non - Realisation of Export Proceeds - would they required any prior permission from RBI as per FT procedure No.2.85 & 2.87.

c) M As per CBEC in various circulars and Individual Customs & Excise Commissionerate various circulars they are demanding / Insisting BRC on each consignment wise, otherwise they don't allow LUT Renewal nor Bond re-credit nor they are not allowed rebate / refund of duty on such exports. FYI

Thanks & Regards,

R Nageswar Rao

[surya narayana]

Dear Mr. Rao,

Export proceeds may realize lumpsum from your subsidiary abroad but BRC to be taken from your Authorized Dealer Bank Shipping Bill/Invoice wise and to submit Customs,DGFT to claim the relevant benefits.

In case of non-realization, you may have to take the required permissions from RBI for waiver as per the available provisions but you may have to surrender the amount of incentives together with interest for non receipt of the BRC. Further, your payment with interest arises only for DBK to customs and not to DGFT because, for claiming any export incentives from DGFT, you may have link the export realization through e-BRC module while making the application itself.

Best Regards

Suryanarayana

[Kishan Barai]

What a great response from Malay Pota Sir, Suryanarayana Sir & all.

I would like to add bit more flavor.......

What if Cargo is damage in transit & money is realized via insurance company ?? should it be consider as Exports ?

Ans: Yes, as per RBI guidelines it is considered as exports.

I have huge respect for Suryanarayana Sir who is the king of Exim Trade. As Sachin has got answer for every ball. Suryanarayana Sir has got accurate answer for every question.