CHAPTER 13 DEEMED EXPORTS 1
CHAPTER 13 DEEMED EXPORTS INDEX Para No TOPIC Page No 13 Introduction 3 13 1 Concessional Export Finance 4 13 2 Approved Multilateral Agencies 5 13 3 Benefits of Deemed exports 5 2
13. INTRODUCTION Deemed exports mean those transactions in which the goods supplied do not leave the country and the payment for the goods is received by the supplier in India. Following categories of supply of goods by the main/sub-contractors shall be regarded as deemed exports provided goods are manufactured in India. CATEGORIES OF SUPPLY: The following categories of supply of goods by the main/sub- contractors shall be regarded as Deemed exports under this Policy, provided the goods are manufactured in India : a) Supply of goods against Advance Licence/DFRC under the Duty Exemption / Remission Scheme; b) Supply of goods to Export Oriented Units (EOUs) or units located in Export Processing Zones (EPZs) or Special Economic Zone (SEZs) or Software Technology Parks (STPs) or Electronic Hardware Technology Parks (EHTPs); c) Supply of capital goods to holders of licences under the Export Promotion Capital Goods (EPCG) scheme; d) Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by the Department of Economic Affairs,Ministry of Finance under International Competitive Bidding in accordance with the procedures of those agencies/funds, where the legal agreements provide for tender evaluation without including the customs duty; e) Supply of capital goods, including unassembled/disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till the stage of commercial production and spares to the extent of 10% of the FOR (Free on Rail) value to fertilizer plants. f) Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits the import of such goods at zero customs duty coupled with the extension of benefits under this chapter to domestic supplies; g) Supply of goods to the power and refineries not covered in (f) above and coal, hydrocarbon, rail, road, port, civil aviation, bridges and other 3
infrastructure projects provided minimum specific investment is Rs.100 crores or more; h) Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers) provided the said containers are exported out of India within 6 months or such further period as permitted by the Customs; and i) Supply to projects funded by UN agencies. j) Supply of goods to nuclear power projects through competitive bidding as opposed to international competitive bidding. k) Supply of goods required for the expansion of existing mega power project shall also be eligible for deemed exports benefits. The benefits of deemed exports shall be available under paragraph (d) (e) (f) and (g) only if the supply is made under the procedure of International Competitive Bidding (ICB). However, in regard to mega power projects, the requirement of ICB 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 bidding. 13.1 CONCESSIONAL EXPORT FINANCE: Until recently, the RBI permitted extension of export credit limits only to those deemed exports involving supplies made to I.B.R.D, I.D.A, A.D.B, or any other multilateral funds aided projects and programmes against orders secured through global tenders. RBI has recently extended availability of concessional export finance to all other categories of deemed exports as well. Packing Credit limits can be extended on the lines similar to any other normal physical exports. The post-shipment credit is however restricted to 30 days. Post-shipment limits normally will be in the form of FDBP/AFDBC (i) the post supply advances would be treated as overdue after the period of 30 days. (ii) In cases where such overdue credits are liquidated within a period of 180 days from the notional due date [i.e. before 210 days from 4
the date of advance], the banks are required to charge, for such extended period, interest prescribed for the category ECNOS at the post-shipment stage. (iii) If the bills are not paid within the aforesaid period of 210 days, banks should charge from the date of advance, the rate prescribed for ECNOS -Post-shipment. Packing Credit is covered under WTPCG. However, post sales advances are not covered under WTPSG. 13.2 APPROVED MULTILATERAL AGENCIES: The names of approved multilateral agencies/funds for the purpose of deemed exports are as under: i) World Bank including International Bank for Reconstruction and Development (IBRD) and the International Development Agency (IDA) ii) International Fund for Agricultural Development (IFAD) iii) Asian Development Bank (ADB) iv) Organization of Petroleum Export Countries Fund (OPEC) v) Yen Credit channelized through Overseas Economic Co-operation Fund (OECF) vi) Swedish International Development Agency Payment for such supplies should however be received in free foreign exchange, to be eligible for concessional finance. 13.3 BENEFITS FOR DEEMED EXPORTS: Deemed exports shall be eligible for any/all of the following benefits in res -pect of manufacture and supply of goods qualifying as deemed exports subject to the terms and conditions as given in EXIM Policy:- (a) Advance Licence for intermediate supply / deemed exports 5
(b) Deemed exports Drawback. (c) Refund of Terminal Excise Duty. For the purpose of claiming the deemed exports benefits, if any, the indigenous supplier shall produce documentary evidence substantiating the realisation of proceeds from the recipient through the normal banking channel as well as a copy advance release order/non-negotiable copy of Back to Back Inland LC. In respect of supply of capital goods to EPCG Licence holder, the supplier shall produce a certificate from the respective excise authorities evidencing supplies/receipt of the manufacturer of capital goods & shall produce documentary evidence substantiating the realisation of proceeds from the EPCG Licence holder through the normal banking channel. Supplies in respect of Deemed exports as above shall be certified by the receiving agencies. In case of supplies to EOU/EPZ, the Domestic Tariff Area (DTA) unit shall claim the benefits of deemed exports from the Development Commissioner. However, for supplies to EHTP/STP, the DTA unit shall claim such benefits from the licensing authority concerned. In respect of supply of capital goods as per policy above, the supplier shall produce a certificate from the respective Assistant Commissioner of Customs and Central Excise having jurisdiction over the factory as evidence of having supplied/received the manufactured capital goods and shall produce documentary evidence substantiating the realisation of proceeds from the EPCG licence holder through the normal banking channel. In respect of supplies under categories (d) (e) (f) and (g) (h) & (I) of the policy, payment against such supplies shall be certified by the Project Authority concerned in prescribed form. However, supplies to the projects funded by such agencies alone as may be notified by Department of Economic Affairs, Ministry of Finance shall be eligible for deemed exports benefits. Supplies under category mentioned under para (e) above, shall be for the plants being set up at Kakinada, Gadepan, Babrala and Shahjahanpur and those which 6
may have been set up or expanded / revamped / retrofitted / modernised during the Eight Plan period, provided such supplies are made under the procedure of international competitive bidding. Supplies of capital goods (excluding office machines howsoever described) & spares upto 10% FOR value of such capital goods alone shall be eligible for the deemed exports benefits. The benefit of deemed exports shall also be available in respect of supplies of capital goods & spares to fertilizer plants which are set up or expanded/revamped/retrofitted modernised during the ninth plan provided such supplies are made under the procedure of International competitive bidding, without reference to bid evaluation methodology. Supplies made by an Indian sub-contractor of an Indian or foreign main contractor, shall also be eligible for deemed exports benefits provided the name of the sub-contractor is indicated in the contract, and payment certificate is issued by the Project Authority in the name of the sub-contractor in the form given in EXIM Policy. Bank guarantee related to deemed exports will attract commission as per FEDAI Rules. Export Realisation Certificate in respect of deemed exports should be issued by A/B Category branches. To enable the A/B category branches to issue the certificate; photo copies of order/contract, and documentary proof supplied by concerned authority regarding payment etc. are to be forwarded to them. For post shipment bills, invoice signed by Asst. Commissioner of customs of SEEPZ to be obtained to evidence the movement of goods. The details of the invoice should be checked with that of the documents submitted. 7