Benefits to Exporters under Indirect Taxation (Excise...

Prepared & Presented By -

Sreeram Kaza Dated-31-01-2012

1

Benefits to Exporters under

Indirect Taxation

(Excise, Customs and FTP etc.) &

Professional opportunities for Practicing

CAs

Seminar – CPE Study Circle of

Baroda Branch of WIRC of ICAI



2

INDEX

Page No

I. Legal Dispensation of Area - DTA-EOU-SEZ 05

A. DTA 06

- Status of Different Category of Exporters under DTA 07

A-1 Manufacturer Exporter

• Inputs Benefits 08

• Capital Goods Benefits 09

• Input Service Benefits 10

• CENVAT Credit / ITC Benefits 11

• CENVAT Refund Benefits 12

• (a) Finished Goods Benefits (Indirect Taxation) 13

• (b) Finished Goods Benefits – FTP 14

• ( c) Other FTP Benefits 15



3

INDEX

Page No

A-2 Merchant Exporter 16

A-3 Deemed Exporter 17

• Inputs Benefits 18


• CENVAT Credit Benefits 20


• Finished Goods Benefits 22

A-4 Service Exporter

• Inputs / Input Services Benefits 23


• CENVAT Credit Benefits 25


• Finished Services Export Benefits 27



4

INDEX

Page No

B EOU 28

• EOU Benefits 29

C SEZ 30

• SEZ – General 31

• Special Provisions 32-35

• Indirect Tax Exemptions 36-39

• Drawback 40

• Re-warehousing 41

• SEZ In & Out ward Transaction 42-43

• Foreign Trade Incentives to DTA Supplier 44

D Direct Tax Benefits 45

E Various Requirement of CA Certificates 46-47



5

Legal

Dispensation

of Area

DTA EOU SEZ



6

DTA



7

DTA

Goods Services

Service

Exporter

Manufacturer

Exporter

Merchant

Exporter

Deemed

Exporter

Status of Different Category of Exporters under DTA



8

Procurement

of Inputs

Without Duty /

Re-imbursement

Central

ExciseCustoms FTP

- Annexure-1

(Domestic)(ED)

43/2001-CE (N.T.)

(Free)

- Input Rebates21/2004-CE (N.T.)

(Domestic ED/CVD)(Re-imbursement)

-DBK–Brand

RateRule-6 / 7

(Both Central

Excise /

Customs)(Re-imbursement)

- Advance

Authorization96/2009-Cus

99/2009-Cus

- DFIA98/2009-Cus

(Free)

DTA – Goods - Manufacturer



9

Procurement

of Capital

Goods

Without Duty

FTP

EPCG 0% Duty102/2009-Cus

( 6 / 6 ) (Free)


( 8 / 8 ) (Only 3% Duty)




10

Procurement of

Input ServiceBy way of

Exemption / Re-Imbursement

Service Tax

2 Services

Exempted

(GTA & Commission)18/2009-ST

(Free)

18 Services

Refund on Actual Basis

( or Percentage Basis )52/2011-ST

(Re-imbursement)


-Either 18 Services refund or % on F.G. FOB as per 52/2011.

-In case GTA Exemption is availed u/r 18/2009, then option to opt 17 services for

refund on actual basis under Noti. No. 52/2011 is available ( But No percentage route

is available )



11

CENVAT Credit / VAT ITC on

Inputs / C.G. / Input Services for the Exporter

Central

Excise VAT

ITCCENVAT

InputsCapital

Goods

Input

ServicesInputs

Capital

Goods




12

CENVAT

Refund

Central

Excise

Excess Cenvat

Credit Refund5/2006-CE (N.T.)

(Input &

Input Services)

Finished Goods

Rebate19/2004-CE (N.T.)

(Input + Capital Goods

+ Input Services)

VAT

Input ITC

Portion RefundRule-15(6)&(7) /

Section-37

(Input)




13

Finished

Goods

Central

Excise

Service

TaxCustoms VAT

F.G.

Rebate19/2004-CE

(N.T.)

LUT/Bond42/2001-CE

(N.T.) &

45/2001-CE

(N.T.)

(Bhutan)

(01-03-2012)

% on

Services

On FOB52/2011-ST

DBK

All Industry

Rate68/2011-Cus

(N.T.)

No VAT / CST

On Exports

(Traders

Form-H )

Basically the concept of AIR (DBK) is nothing but a Adhoc Advance Payment of Inputs Duties

reimbursement. If we have not satisfied with AIR (DBK) then we can go for Special Brand

Rate. Incase if there is no AIR (DBK) at all then we can go for fixation of Brand Rate.




14

Finished

Goods

FTP

Normal

Goods

Agri

Goods

Old

(Resciend)

FMS /

NFMS /

SFMS

93/2009

-Cus

F.P.S./

Sp. FP T&S /

MLFPS/

NFPS/

NSFPS/

NMLFPS/

FPBB/

SBB

92/2009

-Cus

S.H.I.S.

104/2009

-Cus

VKGUY

94/2009-

Cus

Sp.VKGUY /

New VKGUY /

VKGUY Product /

Agri & Other Product/

Forest Product /

Gram Udyog /

Oleoresins /

Forest Produce

95/2009-Cus

DEPB

97/2009-

Cus

Target Plus

& DFCEC

105/2009-

Cus




15

Other FTP Benefit

MAI

(Market

Access

Initiative)

MDA

(Market

Development

Assistance)

To P.C.

T.R.

(Expenses

Reimbursement

STATUS

(Status

Category)



16

Merchant Exporter

All the benefits narrated herein above for

Manufacturer exporter are equally applicable

to Merchant Exporters. In few cases the Merchant

Exporter can directly avail and in few cases

supporting manufacturer can avail.

DTA – Goods – Merchant Exporter



17

DEEMED EXPORTS what ?

1. Supply of goods against Advance Authorisation / Advance Authorisation for Annual requirement / DFIA

2. Supply of goods to EOU / STP / EHTP/ BTP

3. Supply of Capital goods to EPCG Authorisation holders

4. Supply of goods to Projects financed by multilateral or bilateral Agencies / Funds as notified by DEA / ICB / Supply and installation of goods and equipment to projects finance by multilateral or bilateral Agencies / Funds as notified by DEA, MoF under ICB

5. Fertilizer plants (5TH Five year plan)

6. Supply of goods to any project or purpose which the MoF by a notification

7. Supply of goods to power projects / refineries

8. Marine freight containers

9. Projects funded by UN Agencies

10.Nuclear power projects / as opposed to ICB



18

Procurement

of Inputs

Without Duty /

Re-imbursement

Central

ExciseCustoms FTP

- Annexure-1

(Domestic)(ED)

44/2001-CE (N.T.)

(Free)

-DBK–Brand

RateRule-6 / 7

(Both Central

Excise /

Customs)(Re-imbursement)

- Advance

Authorization96/2009-Cus

99/2009-Cus

- DFIA98/2009-Cus

(Free)

DTA – Goods – Deemed Exporter



19

Procurement

of Capital

Goods

Without Duty

FTP


( 6 / 6 ) (Free)


( 8 / 8 ) (Only 3% Duty)

Deemed Exporter can complete Export Obligation when he clear the

goods to the categories of 10 (of page No. 17) of above




20

CENVAT Credit / on

Inputs / C.G. / Input Services for the Exporter

Central

Excise

CENVAT

InputsCapital

Goods

Input

Services




21

CENVAT

Central

Excise

Finished Goods

RebateTED Refund

(Input + Capital Goods

+ Input Services)

In Some Cases Exemption as per Customs Noti. No. 06/2006 Dt-01-03-2006 as per Sr. 91

& 91-A. In other cases TED Refund (Non Mega Power Projects / Refineries. )




22

Finished Goods

Received from the AAH

Invalidation + Annexure-1

Clearance without

payment of duties / or

If paid then TED Refund

(without Annexure-1)

Note – Other than Adv. License cases the local Deemed Exporter can also avail

DBK-AIR




23

Re-Imbursement

of Inputs &

Input Services

Service Tax

Finished Service

Exports12/2005-ST

DTA – Services Exporter



24

Procurement

of Capital

Goods

Without Duty

Central

ExciseFTP

SFIS(Domestic)

34/2006-CE

SFIS(Import)

91/2009-Cus

EPCG

0% Duty( 6/6 )

102/2009-Cus

EPCG

3% Duty( 8/8 )

103/2009-Cus




25

CENVAT

Credit

InputsCapital

Goods

Input

Services




26

CENVAT

Refund

Central

ExciseService Tax

Excess Cenvat

Credit Refund5/2006-CE (N.T.)

Finished

Services Rebate11/2005-ST




27

Finished

Services

Export

Service Tax FTP

Export of

Services9/2005-ST

SFIS

91/2009-Cus




28

EOU



29

1. EOU can procure duty free indigenous / imported raw materials / Capital Goods

2. HSD Refund (Non CENVATABLE) and CST Refund available

3. EOU can clear manufactured goods into DTA. (Duty is payable 50% C.D.) DTAs Sales from free Procured Imported R.M. is also available.

4. All benefits narrated to DTA manufacturers are equally applicable related to FTP benefits as long as Income Tax benefits are not claimed (except DBK-AIR / AA / DFIA / EPCG).

EOU



30

SEZ



31

SEZ

• The First FTZ in India came up in 1965

• Later, the Government set up five more multiproduct EPZs

• SEZ policy in April 2000

• The Parliament passed the SEZ Act in 2005, which came into force together with the SEZ Rules,2006 on the 10th of February 2006.

• SEZs territories deemed to be outside the customs territory of India.

• The special status given to SEZs under section 53 of SEZ Act as areas deemed to be outside the Custom territory of India is for the limited purpose of conducting the authorized operations and to facilitate the import export activities in a simplified manner.



32

SEZ

Special Provisions / Important Provisions of

SEZ Act / Rules etc.

• Section-2(m) Supplies to SEZs and intra or inter-SEZ

supplies qualify as physical exports and are

eligible for export benefits

• Section : 07 Imports Exports exempted from duties &

taxes

• Section : 26 Special fiscal benefits

• Section : 27 Income tax benefits

• Section : 30 Levy of duties

• Section : 51 Over-riding effect of SEZ Act

• Section : 53 SEZ as deemed foreign territory & Port



33

• Rule : 11 Demarcation and fencing of SEZ and leasing

premises

• Rule : 24 Procedure for export benefits on supplies from

DTA

• Rule : 27 Imports and procurements

• Rule : 30(8) Reimbursement of Duty (RoD) in lieu of drawback for supply of goods to developers against payment in Indian Rupees

• Rule : 41 Sub-contracting

• Rule : 45 Exports

• Rule : 46(1) ‘Let Export’ order is given on the basis of

self certification

SEZ



34

• Rule : 46(10) Exports through a merchant

exporter or a status holder is

permitted subject to the

requirements

• Rule : 46(11) Procedure for third party

exports

• Rule : 47 DTA Sales

• Rule : 53 Foreign exchange earning

requirements

• Rule : 75 Self-clearances

• Rule : 76 Trading for the purposes

SEZ



35

• Instruction :11 Transfer from DTA of used capital goods

• Instruction :59 Inter-SEZ transfer of units

• Instruction No.68, 70, 11: Transfer of used Capital Goods:

There are no provisions in the SEZ Act / Rules preventing transfer of old capital goods. The only deterrent is non-availability of Income Tax exemption where the value exceeds 20% of the total capital goods installed in a year.

SEZ



36

SEZ

Indirect Tax exemptions

1) Exemption from Customs duties on imports.

2) Exemption from Central Excise duties.

3) Exemption from payment of Central Sales Tax on sale

or purchase of goods (other than newspapers) under

Central Sales Tax Act, 1956.

4) Exemption from Service Tax, education cess and

secondary and higher education cess leviable on

services received by units.



37

Services from DTA to SEZ ( Notification No. 17/2011-ST Dt-01-03-2011)

Refund can be

applied after

making payment

of Service Tax

Payable if – the

SEZ has Business

outside the SEZ

also

Services are exempted

If - the SEZ units is

Exclusively situated at

SEZ (No Business outside)

Group-III

Refund can be

applied after

making payment

of Service Tax

Payable if – the

Services are not

performed at

SEZ


If - the Services are

performed at SEZ

Group-II

Refund can be

applied after

making payment

of Service Tax

Payable if – the

property is not

situated at SEZ


If - the property situated

at SEZ

Group -I

Refund can be

obtained or notPayableExempted

Group of

Services

SEZ



38

• Are you ( from DTA ) sending your goods to SEZ unit or developer ?

• Need not to pay the excise duty. ( it is like a normal physical exports to you). or incase if your wish to pay the duty, you can obtain the rebate of Central Excise duty paid under rule 18 of the Central Excise Rules, 2002.

1. Circular : 6/2010 – cus dated 19 th March , 2010. ( related to rule 18 rebates)

2. Definition is mentioned in the section 2 (m) of the SEZ Act, 2005.

3. Exemption for excise duty on goods supplied from DTA to an SEZ unit or developer as per section 26 (c).

4. Over riding effect to the provisions of the SEZ Act over any other law is as per Section 51.

5. Procedure is mentioned in regard to removal as per rule 30 of SEZ Rules 2006.

6. Exemption is also specifically told in the CBEC circular 29 / 2006 – cus dated 2nd December, 2006.

SEZ



39

• Sale by DTA ( Gujarat ) to SEZ (Gujarat ) :

No VAT by the DTA ( as per section 5 A of Gujarat VAT Act,

2003 )

• Sale by DTA (Gujarat) to SEZ (for e.g. say Mumbai) :

Sale against Form – I ( No VAT by the DTA) ( section 8 (8)

of CST Act, 1956 )

SEZ



40

• Even SEZ can get the DBK Subject to NOC Received

from DTA. (Circular No 39/2010-Customs Dated : 15-10-

2010)

SEZ



41

• As per Rules 30 (4) of SEZ rules 2006 the re-

warehousing certificate to be received within 45 days.

Receipt of both the customs endorsed Bill of Export,

copy of ARE-1 are called as re-ware housing certificate.

• Incase if you dispatch without receipt of the bill of export

to the SEZ, then we loose the exports EXIM benefits.

SEZ



42

SEZ

---------VAT / CST

---Note – See page No.

37---Service Tax

---------Excise Duty

---------Customs Duty

EOU / SEZ

To SEZ

DTA to

SEZ

Import Into

SEZ

SEZ inward Transaction



43

SEZ

Payable (In case if VAT

Payable No SAD)

Payable (In case if

VAT Payable No

SAD)

---VAT / CST

SEZ has to paySEZ has to pay---Service Tax

---------Excise Duty

100% EOU has to file Bill of

Entry at SEZ Customs..

EOU Provide Procurement

Certificate to SEZ.

Payable at

Effective Rate (All

Customs duties

including CVD)

---Customs

Duty

SEZ to

EOU

SEZ to

DTA

Exports

From SEZ

SEZ Outward Transaction



44

SEZ

Yes3. DBK

Yes1. Adv. Authorization / DFIA

Yes2. EPCG

No7. SHIS

No6. Served from India Scheme (SFIS)

No5. Focus Market Scheme (FMS)

Yes4. Focus Product Scheme (FPS)

Foreign Trade Incentives to DTA Supplier

• SEZ will not get any incentives upon Exports from SEZ to foreign

countries.



45

Direct Tax

DTAEOU / STP /

EHTP / BTPSEZ

Section-80HHCOmitted w.e.f.

AY-2005-06

Section-10A / 10BOmitted w.e.f.

AY-2012-13

Section-10AAAvailable

-100% Profits forFirst 5 AYs

-50% Profits for Next 5 AYs

-50% Profits for Next 5 AYs *

* Provided special reserve

Is to be created

MAT is introduced from AY

2012-13 @18.50% on SEZ profits



46

Various Routine CA Certificates to be obtained under FTP/Refund Cases/Taxation

At the time of applicationIn lieu of Bank Certificate of

Exports and realizationCertificate for OFFSETTING of Export ProceedsAppendix 22 D12.

At the time of application

Duty Free Import Allowance

Certificate

Export Performance of non EOUs Other than

Pharma & Biotechnology SectorsAppendix 15 B10.

At the time of Refund application Refund Claim4% SAD Refund ClaimCBEC circular 16/2008 & JNPT P.N. 53/201019.

At the time of application PermissionFactory Stuffing PermissionCustoms Public Notice No. 23/201018.

If more than Six months period is involvedDBK (AIR) Exports realization

Realization made against Exports under DBK

(AIR)Customs Public Notice No. 37/201117.

At the time of applicationDeemed Exports DBK/Refund

DBK Claim (AIR)/Fixation of DBK claim/ TED

RefundAppendix 3516.

At the time of Redemption of EPCG LicenceEPCG LicenceRecords verification confirmationAppendix 26 A 15.

At the time of application EPCG Licence

For EPCG License past 3 years Exports

performanceAppendix 2614.

At the time of Redemption of LicenceAdvance LicenceFor RM ConsumptionAppendix 2313.


FIEO membership

Authority letter to be present in meetings on

behalf of companyAppendix 19 A11.


Duty Free Import Allowance

CertificateFor duty free Import of R&D EquipmentsAppendix 15 A9.

At the time of applicationPermissionPermission for Sale of goods in DTA by EOUAppendix 14-I-H8.

With Annual ReportGuidelinesLegal Agreement for EOUAppendix 14-I-F7.

At the time of Refund applicationCST RefundFor CST reimbursementAppendix 14-I-I6.

At the time of applicationAdvance LicenseProduction consumption dataAppendix 11 A5.

At the time of applicationSHIS ScripStatus Holder Incentive ScripANF 3E4.

At the time of applicationVKGUYAgri Infrastructure IncentiveANF 3D3.

At the time of application SFIS ScripServed From IndiaANF 3B2.

At the time of applicationStatus CertificateStatus Holder CertificateANF 3A1.

StageLicence/ ScripPurposeAppendix/ Forms/Notification/Public NoticeSr. No



47

Various Routine CA Certificates to be obtained under FTP/Refund Cases/Taxation

At the time of remittanceCertificateFor import of ServicesForm No. 15CB of Income Tax Act25.

At the time of Refund application

Refund claim

For obtaining Service Tax Refund on actual

basisService Tax Notification No. 52/201121.

At the time of Refund application Refund

Refund of Unutilized CENVAT credit of

Inputs and Services (Rule 5)

CBEC Circular 120/01/2010 dtd.

19.01.1020.

At the time of applicationCertificate

Certificate for claiming Exemption in respect

of Area Based units

Form No. 10CCAC/10CCB of Income

Tax Act24.

At the time of submission of audit reportAudit ReportTax audit reportSection 44AB of Income Tax Act23.

At the time of submission of audit report Audit ReportFor VAT audit report Form No. 217 (As per Section 63)22.

StageLicence/ ScripPurpose

Appendix/ Forms/Notification/Public

NoticeSr. No



48

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