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Free Trade Zones (FTZ) : Electronics Computer Hardware

The Government of India has established several schemes to promote exports and earn foreign exchange, including Free Trade Zones, Electronic Hardware Technology Parks, Advance Licence/Duty Exemption Entitlement Scheme, and Export Promotion Capital Goods Scheme. These schemes provide incentives like duty exemptions on imports of raw materials and capital goods. They require exporters to meet export obligations within certain timeframes in order to qualify for the incentives. India also has a Deemed Exports program that provides benefits to domestic suppliers of goods to certain export-oriented units and projects financed by international organizations. Other schemes aimed at promoting exports include Manufacture Under Bond and Duty Drawback, which allow import duty exemptions or refunds on imported inputs used in exported goods

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36 views3 pages

Free Trade Zones (FTZ) : Electronics Computer Hardware

The Government of India has established several schemes to promote exports and earn foreign exchange, including Free Trade Zones, Electronic Hardware Technology Parks, Advance Licence/Duty Exemption Entitlement Scheme, and Export Promotion Capital Goods Scheme. These schemes provide incentives like duty exemptions on imports of raw materials and capital goods. They require exporters to meet export obligations within certain timeframes in order to qualify for the incentives. India also has a Deemed Exports program that provides benefits to domestic suppliers of goods to certain export-oriented units and projects financed by international organizations. Other schemes aimed at promoting exports include Manufacture Under Bond and Duty Drawback, which allow import duty exemptions or refunds on imported inputs used in exported goods

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Mansi
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© © All Rights Reserved
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The Government of India has framed several schemes to promote exports and to obtain

foreign exchange. These schemes grants incentive and other benefits. The few important
export incentives, from the point of view of indirect taxes are briefed below:
Free Trade Zones (FTZ)
Several FTZs have been established at various places in India like Kandla, Noida, Cochin,
etc. No excise duties are payable on goods manufactured in these zones provided they are
made for export purpose. Goods being brought in these zones from different parts of the
country are brought without the payment of any excise duty. Moreover, no customs duties are
payable on imported raw material and components used in the manufacture of such goods
being exported. If entire production is not sold outside the country, the unit has the provision
of selling 25% of their production in India. On such sale, the excise duty is payable at 50% of
basic plus additional customs or normal excise duty payable if the goods were produced
elsewhere in India, whichever is higher.
Electronic Hardware Technology Park / Software Technology Parks
This scheme is just like FTZ scheme, but it is restricted to units in
the electronics and computer hardware and software sector.
Advance Licence / Duty Exemption Entitlement Scheme (DEEC)
In this scheme advance licence, either quantity based (Qbal) or value based (Vabal), is given
to an exporter against which the raw materials and other components may be imported
without payment of customs duty provided the manufactured goods are exported. These
licences are transferable in the open market at a price.
Export Promotion Capital Goods Scheme (EPCG)
According to this scheme, a domestic manufacturer can import machinery and plant without
paying customs duty or settling at a concessional rate of customs duty. But his undertakings
should be as mentioned below:
Export Obligation
Customs Duty Rate
10%

Time
5 years

4 times exports (on


FOB basis) of CIF value of
machinery.

6 times exports (on


FOB basis) of CIF value of
machinery or 5 times exports on
(NFE) basis of CIF value of
machinery.
6 times exports (on FOB basis)
of CIF value of machinery or 5
times exports on (NFE) basis of

8 years
Nil in case CIF value is
Rs200mn or more.

Nil in case CIF value is


Rs50mn or more for agriculture,

8 years

CIF value of machinery.


aquaculture, animal husbandry,
floriculture, horticulture,
poultry and sericulture.

Note:

NFE stands for net foreign earnings.

CIF stands for cost plus insurance plus freight cost of the machinery.

FOB stands for Free on Board i.e. export value excluding cost of freight and
insurance.

Deemed Exports
The Indian suppliers are entitled for the following benefits in respect of deemed exports:

Refund of excise duty paid on final products

Duty drawback

Imports under DEEC scheme

Special import licenses based on value of deemed exports

The following categories are treated as deemed exports for seller if the goods are
manufactured in India:

Supply of goods against duty free licences under DEEC scheme

Supply of goods to a 100 % EOU or a unit in a free trade zone or a unit in a software
technology park or a unit in a hardware technology park

Supply of goods to holders of licence under the EPCG scheme

Supply of goods to projects financed by multilateral or bilateral agencies or funds


notified by the Finance Ministry under international competitive bidding or under
limited tender systems in accordance with the procedures of those agencies or funds
where legal agreements provide for tender evaluation without including customs duty

Supply of capital goods and spares upto 10% of the FOR value to fertilizer plants
under international competitive bidding

Supply of goods to any project or purpose in respect of which the Ministry of Finance
permits by notification the import of goods at zero customs duty along with benefits
of deemed exports to domestic supplies
2

Supply of goods to power, oil and gas sectors in respect of which the Ministry of
Finance permits by notification benefits of deemed exports to domestic supplies

Manufacture Under Bond


This scheme furnishes a bond with the manufacturer of adequate amount to undertake the
export of his production. Against this the manufacturer is allowed to import goods without
paying any customs duty, even if he obtain it from the domestic market without excise duty.
The production is made under the supervision of customs or excise authority.
Duty Drawback
It means the rebate of duty chargeable on imported material or excisable material used in the
manufacturing of goods in and is exported. The exporter may claim drawback or refund of
excise and customs duties being paid by his suppliers. The final exporter can claim the
drawback on material used for the manufacture of export products. In case of re-import of
goods the drawback can be claimed.
The following are Drawbacks:

Customs paid on imported inputs plus excise duty paid on indigenous imports.

Duty paid on packing material.

Drawback is not allowed on inputs obtained without payment of customs or excise duty. In
part payment of customs and excise duty, rebate or refund can be claimed only on the paid
part.
In case of re-export of goods, it should be done within 2 years from the date of payment of
duty when they were imported. 98% of the duty is allowable as drawback, only after
inspection. If the goods imported are used before its re-export, the drawback will be allowed
as at reduced percent.

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