#TaxmannPPT | Foreign Trade Policy 2023 | BDO India

FOREIGN TRADE POLICY 2023

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FOREIGN TRADE POLICY

HIGHLIGHTS

FOREIGN TRADE POLICY

From Incentives (MEIS/SEIS) to Tax Remission (RodTep) to be WTO compliant;

No end date to the policy. New FTP is dynamic and would be changed on need basis;

Existing schemes like Advance Authorisations/EPCG/DFIA to continue;

Boost to E-commerce exports. Courier exports limit increased from Rs.5 lacs to 10 lacs;

Greater Trade facilitation through technology, automation, and continuous process reengineering;

Amnesty scheme for non-fulfilment of export obligation for Advance Authorization /EPCG scheme

FOREIGN TRADE POLICY

AMNESTY SCHEME

FTP AMNESTY SCHEME

Public Notice No:2/2023 dated April 1, 2023

 One-time facility has been provided for regularisation of Export Obligation (‘EO’) default in case of Advance Authorisation (‘AA’) and Export Promotion Capital Goods (‘EPCG’) authorisation :

COVERAGE OF THE SCHEME

 Non fulfilment of export obligations for Authorizations issued under

▪ Foreign Trade Policy 2009-14 (till 31 March 2015); and

▪ Foreign Trade Policy 2004-09 and before (but limited to cases where EO period was valid beyond 12 August 2013)

FTP AMNESTY SCHEME

Public Notice No:2/2023 dated April 1, 2023

DETAILS OF THE SCHEME

 All the aforesaid pending cases of default can be regularized on payment of all customs duties that were exempted in proportion to the unfulfilled EO;

 Interest would be restricted to 100% of the duties so exempted. No interest is payable on Additional Customs Duty (ACD) and Special Additional Customs Duty;

 Scheme covers even adjudicated or in appeal. Scheme does not cover cases under investigation for fraud, mis-declaration and diversion of goods. Scheme will not cover cases where Custom Duties and Interest is paid in full.

 Exporters interested to avail benefit of this Scheme, needs to register themselves till June 2023. Exporters also need to pay Custom Duties and Interest till September’2023.

FTP AMNESTY SCHEME

Public Notice No:2/2023 dated April 1, 2023

Example : Where EO cannot be fulfilled

All the customs duties (including Additional Customs Duty and Special Additional Customs Duty) exempted is say Rs.50. The Customs duties exempted (except Additional Customs Duty and Special Additional Customs Duty) portion is say Rs.32, then interest payable is maximum of Rs. 32 (100% of Rs.32). Therefore for regularising this ease the maximum amount payable by the authorisation holder would be Rs. 50+32/- =Rs.82/-.

CHAPTER 1

LEGAL FRAMEWORK AND TRADE FACILITATION

FOREIGN TRADE POLICY

Chapter 1: Legal Framework and Trade Facilitation

PERPETUAL VALIDITY

 FTP-2023 to have a perpetual validity without sunset and shall be updated based on the feedback from trade and industry.

DUTY FREE ENTITLEMENTS CURTAILED

 Duty free import entitlements provided to Handlooms, Handicrafts and Leather and Footwear sector are withdrawn.

 Duty free import entitlements are now available only to Marine sector and Sports Goods and Toys sector.

FOREIGN TRADE POLICY

Chapter 1: Legal Framework and Trade

AMENDMENTS IN STATUS HOLDER SCHEME

 For granting status, an export performance would now be necessary in all the three preceding years (two for Gem and Jewelry sector) as opposed to earlier requirement of export performance in two out of four years (two out of three years for Gem and Jewelry sector).

 Revision of thresholds for accreditation as ‘status holders’ to enable more exporters to receive accreditation/status as under:  The benefit of Accredited Clients Programme as per the guidelines of CBIC to three Star and above Export House is withdrawn.

Facilitation

FOREIGN TRADE POLICY

Chapter

AMENDMENTS IN STATUS HOLDER SCHEME (Contd.)

 For one star export house status, exports of fruits and vegetables (under chapter 7 and 8) would be eligible for grant of double weightage, and the earlier grant of double weightage to units located in agro export zones is withdrawn.

 Status Holders to endeavor to provide skill upgradation/training in international trade to specified number of trainees.

STATUS HOLDER CERTIFICATION

 Status certificate issued under FTP 2015-20 shall remain valid only up to 30 September 2023.

 Status certificate issued under FTP2023 shall be valid for a period of 5 years from the data of application.

 On achieving higher status threshold, a firm can upgrade their status holder category, after surrender of previous certificate and applying as per para 1.08 of HBP.

1: Legal Framework and Trade Facilitation

CHAPTER 2

GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS

FOREIGN TRADE POLICY

REQUIREMENT TO OBTAIN IEC FOR A SERVICE EXPORTER

 For export of services or technology, IEC to be obtained on the date of rendition of services for availing benefit under the FTP as compared with earlier requirement of IEC being necessary only when the service provider is taking benefits under the FTP.

CLEARANCE OF GOODS FROM CUSTOMS AGAINST AUTHORIZATION

 Goods in ‘Restricted’ items or items traded through STEs, which are already imported / shipped / arrived, in advance, but not cleared from Customs may also be cleared against an Authorization issued subsequently, when first warehoused against Bill of Entry for Warehousing and then cleared for home consumption against an Authorization issued subsequently, if specifically allowed by DGFT. Earlier, there was no provision to allow such clearance by DGFT.

Chapter 2: General Provisions regarding imports and exports

FOREIGN TRADE POLICY

IMPORT OF SAMPLES

 No Authorization is required for Import of bona fide technical and trade samples of items “restricted” in ITC(HS) except defence /security items, seeds, bees and new drugs. Earlier, the defence/security items were not specifically mentioned in FTP.

IMPORT OF SECOND-HAND GOODS

 Import of refurbished/re-conditioned spares of Capital Goods are specifically mentioned to be freely importable, subject to production of Chartered Engineer certificate to the effect that such spares have at least 80% residual life of original spare.

MERCHANTING TRADE

 Para 2.39 is introduced to enable merchanting trade, providing that merchanting trade involving shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary is allowed subject to compliance with RBI guidelines, except for goods/items in the CITES and SCOMET list.

Chapter 2: General Provisions regarding imports and exports

FOREIGN TRADE POLICY

UPDATION OF IEC

 In case of any change in constitution of firm, address, bank details or any other primary details, IEC to be suitably updated online within 30 days of effecting such change.

VALIDITY PERIOD OF AUTHORIZATION

 Validity period for EPCG authorization has been extended from 18 months to 24 months.

Chapter 2: General Provisions regarding imports and exports

DUTY EXEMPTION / REMISSION SCHEMES CHAPTER 4

FOREIGN TRADE POLICY

Chapter 4: Duty Exemption / Remission schemes

NOMINATED AGENCIES FOR PROCUREMENT BY GEM AND JEWELLERY SECTOR

 MMTC Ltd., The State Trading Corporation of India Ltd., PEC Ltd and STCL Ltd are removed from the list of nominated agencies for procurement.

 Provision relating to import of gold by Four Star and Five Star Houses with Nominated Agency Certificate, notwithstanding any provision relating to import of gold by Nominated Agencies under Foreign Trade Policy (2015-2020), subject to actual user condition and permitted to import gold as input only for the purpose of manufacture and export by themselves during the remaining validity period of the Nominated Agency certificate, has been removed.

 The procedure for import of precious metals by the Gems & Jewellery units operating under EOU & SEZ schemes will be as per the applicable schemes.

FOREIGN TRADE POLICY

ENDORSEMENT IN CASE OF ADVANCE AUTHORIZATION FOR FREE OF COST AND PAID MATERIAL

 In the case of Advance Authorization for free of cost and paid material, a specific endorsement by RA, disallowing remittances for material being supplied free of cost, shall be made in the condition sheet of Advance Authorization, instead of exchange control copy of advance authorization.

Chapter 4: Duty Exemption / Remission schemes

EPCG SCHEME CHAPTER 5

FOREIGN TRADE POLICY

EPCG SCHEME

 The specific clause, permitting import of capital goods for Project Imports notified by CBIC under EPCG Scheme is removed.

 A specific clause is mentioned stating that import/procurement under EPCG scheme shall also be subjected to Average Export Obligation (AEO) as given in para 5.04(c) of FTP. The Average Export Obligation (AEO) shall be fulfilled every financial year, till export obligation is completed.

Exports/supplies made over and above AEO shall only be considered for fulfillment of Export Obligation.

 The validity of EPCG authorization has been extended to 24 months from 18 months earlier.

 Export obligation may be fulfilled both by physical exports as well as deemed exports. Deemed export supplies shall also be eligible for benefits available under paragraph 7.03 of FTP. Earlier supplies as specified in paragraph 7.02 (a), (b), (e), (f)& (h) of FTP2015-20 were counted towards fulfillment of export obligation;

 Exports made from DTA units shall only be counted for calculation and/or fulfillment of AEO and/or EO.

Chapter 5: EPCG scheme

FOREIGN TRADE POLICY

PROVISION FOR COMPANIES ADMITTED UNDER THE PROVISIONS OF INSOLVENCY AND BANKRUPTCY CODE

2016

 A company holding EPCG authorizations and having been admitted under the provisions of Insolvency and Bankruptcy Code 2016 for commencement of insolvency proceedings and in respect of whom the resolution plan has been approved under Section 31 of IBC 2016 by Adjudicating Authority may be permitted to relief, concessions and waivers in accordance with the resolution plan approved/ finalized by Adjudicating Authority/Appellate Authorities as the case may be. (Similar provision is not found in AA/DFIA schemes).

PROVISION FOR POST EXPORT EPCG SCRIPS DISCONTINUED

 The provisions for Post export EPCG scrips has been discontinued.

Chapter 5: EPCG scheme

FOREIGN TRADE POLICY

PROCESS FOR PROCUREMENT FROM SEZ

On a request with application for authorization for procurement of new capital goods from SEZs, the RA may issue a ‘Certificate of Supplies from SEZ’, containing the details for the requested items and other specified details after making the import item ‘invalid for direct imports’.

The ‘Certificate of Supplies from SEZ’ shall be marked in quadruplicate with a copy each to the authorization holder, SEZ supplier unit, designated officer at SEZ and relevant port customs authorities. The certificate would be issued as an online amendment to the authorization and has to be transmitted.

 The request for ‘Certificate of Supplies from SEZ’ to be accompanied with an authorization utilization status issued by the relevant customs authorities mentioned on the authorization for the RA to verify the actual utilization of the authorization at the time of application and the certificate may be issued to the extent of quantity available as per utilization status. The above procedure would apply even if the ‘Certificate of Supplies from SEZ’ is applied for along with application for authorization.

Chapter 5: EPCG scheme

FOREIGN TRADE POLICY

AMENDMENT IN LIST OF GREEN TECHNOLOGY PRODUCTS WITH REDUCED EXPORT OBLIGATION

 The following products are added in the list of green technology products, eligible for reduced EO of 75%:

▪ Battery Electric Vehicles (BEV) of all types,

▪ Vertical Farming equipment,

▪ Wastewater Treatment and Recycling,

▪ Rainwater harvesting system and Rainwater Filters,

▪ Green Hydrogen

▪ LED lights of various kind

 The following products are removed from the list of green technology products, eligible for reduced EO of 75%:

▪ Biomass gasifier

▪ Biomass / Waste boiler

Chapter 5: EPCG scheme

EOUS, EHTPs, STPs AND BTP CHAPTER 6

FOREIGN TRADE POLICY

CONVERSION

 Provisions dealing with conversion of an existing DTA unit into an EOU/EHTP/STP/BTP unit is amended to provide that where DTA unit has taken EPCG authorization, the conversion would be permitted only if either the unit has fulfilled the stipulated Export Obligation and has obtained Export Obligation Discharge Certificate or has made payment of applicable duties and taxes and compensation cess on capital goods imported under the EPCG Scheme.

 Previously, in case of an outstanding export commitment under the EPCG scheme, the same was to be added to the future export obligation by adding value of capital goods to the imported capital goods value of the EOU and all previous obligations under EPCG would cease to exist on such inclusion (Appendix-6M to the erstwhile HBP)

Chapter 6: Export Oriented Units (‘EOUs’), Electronics Hardware Technology Parks (‘EHTPs’), Software Technology Parks (‘STPs’) and Bio-Technology Parks (‘BTP’)

CHAPTER 10

SCOMET: SPECIAL CHEMICALS, ORGANISMS, MATERIALS, EQUIPMENT AND TECHNOLOGIES

FOREIGN TRADE POLICY

Chapter 10: SCOMET: Special Chemicals, Organisms, Materials, Equipment & Technologies

Classification of SCOMET categories and Licensing authorities

0 Nuclear materials, nuclear-related other materials, equipment and technology*

1 Toxic chemical agents and other chemicals

2 Micro-organisms, toxins

3 Materials, Materials Processing Equipment and related Technologies

4 Nuclear-related other equipment and technology, not controlled under Category ‘0’

5 Aerospace systems, equipment, including production and test equipment, and related Technology and specifically designed components and accessories thereof

6 Munitions List*

‘Reserved’

Special Materials and Related Equipment, Material Processing, Electronics, Computers, Telecommunications, Information Security, Sensors and Lasers, Navigation and Avionics, Marine, Aerospace and Propulsion

of Defence Production / Ministry of Defence

FOREIGN TRADE POLICY

Chapter 10: SCOMET: Special Chemicals, Organisms, Materials, Equipment & Technologies

Catch-all Controls

 If the exporter is notified in writing by DGFT or he knows or has reason to believe that an item, though not covered in the SCOMET list, has a potential risk of use in or diversion to WMD or in missile system or military use (including by terrorists and non-state actors), he shall apply for a SCOMET authorization.

 Export of such item may be denied/permitted basis the procedure provided in Para 10.06 of HBP.

Supply of SCOMET Items from DTA to SEZ/EOU and outside the country

 No export authorization is required for supplying SCOMET items from the DTA to SEZs/EOUs, subject to intimation to DC.

 Export authorization is be required where such items are intended to be physically exported outside the country from SEZ/EOU.

 Unless specifically exempted, imported goods (covered under the SCOMET list) are not permitted for export from the customs bonded warehouse without an export authorization.

FOREIGN TRADE POLICY

Inter Ministerial Working Group (‘IMWG’)

 IMWG is empowered to consider applications for authorisations to export SCOMET items or software or technology in the SCOMET List.

 The condition that the aforesaid application to be accompanied with enduser certificate (as provided in Para 2.74(II) of the erstwhile HBP) has been omitted.

 The new HBP stipulates that IMWG shall endeavour to furnish its written comments/views/no objection to DGFT within 30 days from the date of online application. It has also been provided that after the approval of IMWG or Chairman, IMWG, export authorization may be issued by the SCOMET cell in DGFT Headquarters.

Chapter 10: SCOMET: Special Chemicals, Organisms, Materials, Equipment & Technologies

FOREIGN TRADE POLICY

Chapter 10: SCOMET: Special Chemicals, Organisms, Materials, Equipment & Technologies

Validity of SCOMET authorizations

S.

Type of

2 GAICT Policy

24 months, unless specified otherwise

3 from the date of issue of authorization and shall be further subject to the following validity timelines, whichever is earlier:

• Till the validity of license exception of foreign parent company ; or

• Till the validity of license exception of foreign parent company for subsidiaries of the parent company abroad; or

• Till the validity of Master Service Agreement/Contract with foreign parent company and the Indian subsidiary.

3 GAEC Policy

5 years from the date of issue of GAEC, subject to subsequent post reporting(s) on quarterly basis to be reported within 30 days from the last quarter

4 GAER Policy

1 year from the date of issue of GAER subject to subsequent post reporting(s) within 30 days from such export

MISCELLANOUS CHANGES

FOREIGN TRADE POLICY

CHAPTER 3: DEVELOPING DISTRICTS AS EXPORT HUBS

 Developing Districts as Export Hubs seeks to galvanize the Indian districts to become export hubs by identifying products and services with export potential in the district.

 Accordingly, District Export Promotion Committees and State Export Promotion Committees have been constituted

CHAPTER 4: DUTY EXEMPTION/REMISSION SCHEMES

 Special Advance Authorization Scheme for export of Articles of Apparel and Clothing accessories

▪ Authorization may also be issued based on self-declaration as per para 4.07 of HBP - Ad hoc-norms to be fixed within 90 days.

 Self ratification scheme

▪ The expression “additional inputs” refers not to additionality in terms of quantity/value of an input specified in a norm, but to another additional input.

FOREIGN TRADE POLICY

Miscellaneous changes MISCELLANOUS CHANGES

▪ A status holder (being a manufacturer-cum-actual user holding 2-star or above status) who has already submitted its application for grant of AEO is eligible to apply for this scheme, subject to prescribed conditions.

 Minimum value addition

▪ In case of spices, the minimum value addition shall be 25%.

 Ineligible categories of import on Self Declaration basis

▪ All items with a basic custom duty of more than 30% will not be eligible for import under selfdeclaration basis.

 Pre-import condition

▪ The provision in the previous policy about import of drugs from unregistered sources to have preimport condition is removed. It remains to be seen whether the same gets listed in Appendix 4-J, which lists import items subject to pre-import condition.

FOREIGN TRADE POLICY

MISCELLANOUS PROVISIONS (OTHER CHAPTERS)

CHAPTER 7 – DEEMED EXPORTS

 Benefits on specified supplies

▪ As per Para 7.08(iii)(a) of the erstwhile FTP, the benefit of deemed export was available on “Fuel” supplied to Project listed for petroleum operations (as per Sl. No. 404 of Notification no.50/2017-Cus. dated 30 June 2017).

▪ The aforesaid benefit has now been discontinued in the FTP. As a consequential amendment, the benefit for claiming refund of Terminal Excise Duty on such supplies has also been discontinued.

 Application for claiming Terminal Excise Duty (‘TED’)/Drawback can no longer be filed by a Branch Office.

FOREIGN TRADE POLICY

MISCELLANOUS PROVISIONS (OTHER CHAPTERS)

CHAPTER 9 – PROMOTING CROSS BORDER TRADE IN DIGITAL ECONOMY

 A new chapter is introduced to provide framework for cross-border trade of goods and services from India in the digital economy and the promotion of e-Commerce.

 The terms “E-Commerce export of goods” & “E-Commerce export of Services” is separately defined to mean export of goods/services where selling is through the internet on e-Commerce platform, the payment for which shall be done through international credit or debit cards, or other authorized electronic payment channels and as specified by the RBI from time to time.

 The term “E-Commerce” as defined at Para 11.17 of the FTP means buying and selling of goods through the internet on an e-commerce platform, the payment for which shall be done through international credit or debit cards, or other authorized electronic payment channels and as specified by the Reserve Bank of India from time to time. However, the aforesaid definition does not include buying and selling of services through the internet on e-commerce platform.

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