Basic Concepts of Customs

Vishal Jain Page 1 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

BASIC CONCEPTS OF CUSTOMS

BIRD’S EYE VIEW

Product, Process and Place Transportation, Control & Storage of Goods

Section 2(22) Goods Section 2(9) Conveyance
Section 2(7)  Coastal Goods Section 2(42)  Vehicle
Section 2(33)  Prohibited Goods
Section 2(31) Person In-Charge
Section 2(14)  Dutiable Goods
Section 2(44)  Warehoused Goods Section 2(11) Customs Area
Section 2(23) Import Section 2(13)  Customs Station
Section 2(25)  Imported Goods Section 2(12)  Customs Port
Section 2(26)  Importer Section 2(10)  Customs Airport
Section 2(18) Export Section 2(29)  Land Customs Station
Section 2(19)  Export Goods Section 2(43)  Warehouse
Section 2(20)  Exporter Section 57  Public Warehouse
Section 2(27) India Section 58  Private Warehouse
Section 2(28)  Indian Customs Water Section 58A  Special Warehouse

Other Concepts

Section 2(21) Foreign Going Vessel & Aircraft

Vishal Jain Page 2 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

PRODUCT, PROCESS & PLACE

As per Section 1, Customs Act, 1962 extends to whole of India and save as otherwise provided in this Act, it applies also to any offence or
contravention thereunder committed outside India by any person.
Note: Foreign Supplier, Foreign Customs Broker and Other Persons (including Indian Person) violating CA, 1962 would be subject to penalty
and prosecution in India.

(1) PRODUCT – GOODS

Section 2(22) of Customs Act, 1962
Goods
INCLUDES

Vessels, Aircrafts & Currency & Negotiable Any other kind of

Stores Baggage
Vehicles Instruments Movable Property
Levy of Import Duty on Duty Drawback on Monitoring of Baggage Monitoring Foreign General Meaning
Conveyance which is NOT Stores supplied to and Levy of Import Duty Currency in terms of of Goods
used for Import & Export Foreign Going Vessel / on Baggage in excess of Foreign Exchange
of Goods Aircraft & Indian Navy General Free Allowance Management Act

Related Definitions:
1. Dutiable Goods Means  Goods chargeable to Duty and
– Section 2(14)  Duty is NOT yet paid
2. Warehoused Means  Goods deposited in Warehouse (Public Warehouse + Private Warehouse + Special Warehouse)
Goods – Section Note: Warehoused Goods under Section 59 are Imported Goods until they are cleared for Home Consumption from
2(44) Warehouse.
3. Coastal Goods – Means  Goods other than Imported Goods
Section 2(7)  which are transported in Vessel from One Port in India to Another Port in India
4. Prohibited Means  Absolute Prohibition on Import / Export of Goods
Goods – Section But Does Not  Import / Export of Goods with Conditions AND Condition is complied with
2(33) Include

Vishal Jain Page 3 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

(2) PROCESS – IMPORT OR EXPORT

Section 2(23) of Customs Act, 1962
Import
Import MEANS Bringing goods into India from a Place outside India

Goods cleared for Home Consumption from Customs Station Goods cleared for Warehousing from Customs Station
(Customs Station  Home Consumption) (Customs Station  Customs Warehouse  Home Consumption)
Import of goods commences when they cross the TWI, but it Import of goods commences when they cross the TWI, but it
continues and it is completed when they are cleared for Home continues and it is completed when they are cleared for Home
Consumption from the Customs Station by filing Bill of Entry for Consumption from the Customs Warehouse by filing Ex-Bond Bill
Home Consumption. of Entry for Home Consumption.
(GARDEN SILK MILLS V. UOI – 1999 – SC) (KIRAN SPINNING MILLS – 1999 – SC)

Related Definitions:
1. Imported Means  Goods brought into India from a Place outside India
Goods – Section But Does Not  Goods cleared for Home Consumption
2(25) Include
2. Importer – in relation to any goods at any time between their importation and the time when they are cleared for home
Section 2(26) consumption,
Includes  Owner or
 Beneficial Owner or
 Person holding himself to be the Importer
Note: As per 2(3A), Beneficial Owner MEANS any person
 on whose behalf the goods are being imported or exported or
 who exercises effective control over the goods being imported or exported

Vishal Jain Page 4 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs
Clearance for Home Consumption from Customs Station Clearance for Home Consumption from Customs Warehouse
Bill of Entry for Home Consumption is filed by Importer and goods First, Into-Bond Bill of Entry for Warehousing is filed by Importer
are cleared for Home Consumption on payment of Import Duty and goods are taken to Customs Warehouse without payment of
Import Duty by executing Bond (3 times Import Duty).
Later, Ex-Bond Bill of Entry for Home Consumption is filed by
Importer and goods are cleared for Home Consumption on payment
of Import Duty
No Deferment of Import Duty No Deferment of Import Duty
No Execution of Bond No Execution of Bond
No Payment of Rent and Charges for Storage in Warehouse No Payment of Rent and Charges for Storage in Warehouse

Vishal Jain Page 5 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs
Section 2(18) of Customs Act, 1962
Export
Export MEANS Taking goods out of India to a Place outside India

Vessel is sunk before crossing TWI Vessel is sunk after crossing TWI but before reaching Destination
Export of goods is complete when the goods cross the TWI. Thus, Export of goods is complete when the goods cross the TWI. Thus,
when vessel is sunk before crossing TWI, the goods are NOT said to when vessel is sunk after crossing TWI, the goods are said to be
be exported. exported. Reaching of Destination (say USA) is not necessary.
Notes:
 TWI to be read as EEZ as per SC Judgment ABON LYOD CHILES OFFSHORE LTD – 2008 – SC.
 For GST Act and Customs Act, receipt of Foreign Currency is NOT relevant for export of goods generally. However, for Duty Drawback as
per Section 75 of CA, 1962 and Foreign Trade Policy, receipt of Foreign Currency is relevant for claiming most of the export incentives /
benefits.

Related Definitions:
1. Export Goods – Means  Goods to be taken out of India to a Place outside India
Section 2(19)
2. Exporter – in relation to any goods at any time between their entry for export and the time when they are exported
Section 2(20) Includes  Owner or
 Beneficial Owner or
 Person holding himself to be the Exporter
Note: As per 2(3A), Beneficial Owner MEANS any person
 on whose behalf the goods are being imported or exported or
 who exercises effective control over the goods being imported or exported

Vishal Jain Page 6 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

(3) PLACE – INDIA

Section 2(27) of Customs Act, 1962
India
India INCLUDES Territorial Waters of India

Land Area Sea Area

Land Mass + Jammu & Kashmir Upto Territorial Waters of India (TWI i.e. 12 Nautical Miles)

Related Definitions:
1. Indian Customs Water Means  Exclusive Economic Zone [i.e. Upto 200 Nautical Miles]
– Section 2(28) Includes  Bay, Gulf, Harbour, Creek or Tidal River
Note: If a person has committed any offence punishable under customs law within Indian Customs Water, he may
be arrested. Also, vessel be stopped in Indian Customs Water and goods may be confiscated if the same is found
to be used in smuggling. Further, prohibited goods can also be confiscated if brought within Indian Customs
Water.
2. Special Economic Zone For Levy of Export Duty  SEZ is part of India and thus, NO Export Duty will be levied for goods
under Section 12 taken to SEZ
For Duty Drawback under  SEZ is outside India and thus, Duty Drawback will be allowed for goods
Section 74 & Section 75 taken to SEZ

GST VS. CUSTOMS DUTY

Particulars Goods and Service Tax Customs Duty
Consideration Consideration is generally relevant (except in Schedule I Consideration is NOT relevant (Customs Duty is
where supply can be there without consideration) levied even if there is no Consideration)
Concept of Mutuality Concept of Mutuality is NOT relevant if Branches are Concept of Mutuality is NOT relevant (Customs Duty
registered under same GSTIN is levied even if transaction is between Branches)

Vishal Jain Page 7 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

TRANSPORTATION, CONTROL & STORAGE OF GOODS

TRANSPORTATION OF GOODS & CONTROL OF GOODS

Section 2(9) of Customs Act, 1962 Section 2(31) of Customs Act, 1962
Conveyance Person In Charge
INCLUDES MEANS

 Vessel  Master of Vessel

 Aircraft  Commander or Pilot-in-charge of Aircraft
 Vehicle [Section 2(42)] 
 MEANS Conveyance of any kind used on Land  Driver or Other Person-in-charge of the Conveyance
 INCLUDES Railway Vehicle  Conductor, Guard or Other Person having the chief
direction of the Train.

Vishal Jain Page 8 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

STORAGE OF GOODS
Section 2(11) of Customs Act, 1962
Customs Area
(MEANS & INCLUDES)

Section 2(13) of Customs Act, 1962 Section 2(43) of Customs Act, 1962
Customs Station Customs Warehouse
MEANS MEANS

Customs Customs Airport / Land Customs Public Private Warehouse Special

Port International Courier Station Warehouse Warehouse
Terminal or Foreign Post
Office
Note: Public Warehouse and Private Warehouse are NOT under
Inland Container Air Freight Station Customs Control whereas Special Warehouse is under Customs
Depot Control.
Note: Not all Ports / Airports are Customs Port i.e. Only a Port
appointed by CBIC is Customs Port / Customs Airports. Also, a
place which is not Port / Airport can be Customs Port (ICD) /
Customs Airports (AFS) if appointed by CBIC.
Customs Stations are appointed by CBIC whereas Customs Warehouse are licensed.

Inland Container Depot (ICD) / Air Freight Station (AFS) Container Freight Station (CFS)
ICD / AFS is opened up to have speedy clearance of goods. CFS is opened up to avoid congestion at Customs Station.
ICD / AFS is a Stand-Alone Customs Station. CFS is not a Stand-Alone Customs Station.
All the activities related to filing of Bill of Entry, Shipping Bill, Activities related to filing of Bill of Entry, Shipping Bill, Clearance of
Clearance of Goods etc., can take place at ICD / AFS Goods etc., cannot take place at CFS
An ICD may also have a number of CFSs attached to it
[Cost of Transportation from Entry Customs Station TO ICD / AFS / CFS is NOT included for Import Valuation (Rule 10(2), IVR, 2007]

Vishal Jain Page 9 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

OTHER CONCEPTS

Section 2(21) of Customs Act, 1962

Foreign Going Vessel / Aircraft
(MEANS & INCLUDES)

Vessel / Aircraft carrying Goods / Vessel / Aircraft NOT carrying Vessel engaged in Fishing or Naval Vessel of Foreign
Passengers Goods / Passengers Any Operations Govt.

From India  To Outside India From India  To Outside India Outside TWI Naval Exercises
From Outside India  To India From Outside India  To India Note: TWI to be read as EEZ
Note: It may also touch Intermediary Note: Only outward movement as per SC Judgment ABON
Ports or Airports. is covered here. LYOD CHILES OFFSHORE
LTD – 2008 – SC
Note: Duty Drawback is given for Stores supplied to Foreign Going Vessel / Aircraft under Section 74 or Section 75. For stores supplied to
Indian Navy (which is NOT Foreign Going Vessel / Aircraft) for Naval Exercises, Duty Drawback is given under Section 90.

Example 1: Stores to Vessel/Aircraft carrying Goods & Passengers Example 2: Stores to Vessel/Aircraft not carrying Goods & Passengers
Particulars FGVA DDB Particulars FGVA DDB
From Mumbai (via Chennai) to London From Mumbai to London
From London to Mumbai From London to Mumbai

Example 3: Stores to Vessel going for Mining Operations Example 4: Stores to Naval Vessel for Naval Exercises
Particulars FGVA DDB Particulars FGVA DDB
176 NM (As per SC Judgment) Sri Lankan Navy
214 NM Indian Navy

Vishal Jain Page 10 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

IMPORT VS. EXPORT

Particulars Import Export
Section 2(23) Section 2(18)
Meaning
Bringing [goods] into India from a place outside India Taking [goods] out of India to a place outside India
Section 12 – Import Duties Section 12 – Export Duties
BCD CA, 1962 [Section 12] BCD CA, 1962 [Section 12]
SWS FA, 2018 Note: Only BCD is leviable, and that too it is exempt in
Duty Liability
IGST & CC IGST Act, 2017 [Section 5] most of the cases. IGST is also leviable but not as part of
Note: Other Import Duties are also leviable in certain Export Duty; IGST is separately leviable as per IGST Act,
situations 2017 but however it is zero-rated under GST.
Collection of Duty [Revenue] Controlling over-encashment of Export Incentives under
Objective various Export Promotion Schemes under CA, 1962 and
FTP
Under-Invoicing Over-Invoicing
Price declared at Customs is less than what is actually Price declared at Customs is much more than what is
General Issue
paid for the goods for evasion of duty liability. This way actually received for the goods. This way Black Money is
Involved
Lesser Customs Duty are paid to Customs Department converted into White and also Higher Export Incentives are
en-cashed under FTP.
Section 14 read with Import Valuation Rules, 2007 Section 14 read with Export Valuation Rules, 2007
Valuation Aspect
AV = CIF AV = FOB
I Schedule II Schedule
 Preferential Rate – Import from Most Favored  Generally, no export duty is there on export of most of
Classification Aspect Nations the goods.
 Standard Rate – Import from Other Countries  Exceptionally, if export duty is there, only one rate is
there prescribed in II Schedule
Section 17 Section 17
Assessment of Duty Self-Assessment [Customs Officer empowered to verify Self-Assessment [Customs Officer empowered to verify
such assessment and make re-assessment, if required] such assessment and make re-assessment, if required]
Payment of Duty  Importers under Accredited Clients Programme (i.e. Generally, question of payment of duty doesn’t arise in this

Vishal Jain Page 11 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

Tier-1 Authorized Economic Operator) – Electronic case

Payment
 Importers paying ID >= Rs.10,000 / BE – Electronic
Payment
 Other Importers – Manual or Electronic Payment
Clearance
Transaction Basis Transaction Basis
On
Clearance Importer Himself or Exporter Himself or
By Engage Customs Broker [CB] Engage Customs Broker [CB]
Section 46 Section 50
Customs Document Bill of Entry [Import by Sea / Air / Land] to be filed Shipping Bill [Export by Sea / Air] / Bill of Export [Export
electronically by Land] to be filed electronically
Section 47 Section 51
PO gives Out-of-Charge Order PO gives Let Export Order
Release Order
Section 2 – Proper Officer [PO]: Customs Officer whosoever is authorized to do a particular function is PO for that
function

Vishal Jain Page 12 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

VJPJ Education’s Online Store in India – Instamojo

https://www.instamojo.com/vjpjeducation/

Vishal Jain Page 13 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

Hearty Congratulations!!!
Our Beloved Students who shined in November 2019 Exams!!!

CA Monisha Nithiyanandam CA Vaanmathi Soundararaj

(AIR 20) (AIR 40)

CA Tamil Amudhan CA Arun Ram

CA Krishna Mahesh CA Naveen
CA Sathya Narayanan CA Abirami Karunakaran
CA Priyanka CA SreeHarii K
CA Sujith CA S Krupa
CA Daniel Leo CA Abisheik Aravindan
CA Manickam Maalan Bharathi CA Dhanush Rajendran

Vishal Jain Page 14 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Basic Concepts of Customs

CA Nithin Balaji CA Sarvan Kumar

CA Venketraman CA Santhosh Sivaramalingam
CA Keerthana CA Padmapriya
CA Vinith CA Priyanka Ramasamy
CA Karthik CA Sachin
CA Raghavendar S CA Vijay Shankar
CA Ishwarya Meenakshi CA Mufeed Ahamed
CA Romil Bothra CA Apoorva Shree
CA Payal CA Akhil KV
CA Uttam CA Gaurav
& …………………..
All the Best to those who are very much
Determined to Fight and Win the Race to become CA!!
Believe
Yourself!!
Vishal Jain Page 15 Praveen Jain
Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage

Vishal Jain Page 1 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage

BAGGAGE
BIRD’S EYE VIEW

Baggage – Customs Act, 1962 Baggage – Baggage Rules, 2016

Main Rules
Section 77 Entry of Baggage by Owner
General Duty Free Baggage Allowance in
Relevant Date for Rate of Duty and Tariff Rule 3 case of Passengers arriving from Countries
Section 78
Valuation in respect of Baggage other than Nepal, Bhutan or Myanmar
Duty Exemption to Baggage General Duty Free Baggage Allowance in
Section 79
(Baggage Rules, 2016) Rule 4 case of Passengers arriving from Nepal,
Bhutan or Myanmar
Section 80 Temporary Detention of Baggage
Rule 5 Jewellery Allowance
Section 81 Regulations in respect of Baggage
Rule 6 Transfer of Residence

Other Rules

Rule 7 Currency

Rule 8 Unaccompanied Baggage

Rule 9 Crew Baggage

Vishal Jain Page 2 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage

BAGGAGE

As per Section 2(3) of Customs Act, 1962,

Stores
Include  Unaccompanied Baggage
But Does  Motor Vehicle
Not Include
Note: In common parlance, Baggage means the luggage of a passenger comprising trunks or bags and the personal belongings of the
passenger.
“Baggage List” in the prescribed format is required to be filed as part of the Import Manifest / Import Report as well as Export Manifest /
Export Report by Person-in-Charge of Conveyance.

BAGGAGE VS. COMMERCIAL CARGO

Particulars Baggage Commercial Cargo
Goods Baggage = Personal Effects – Motor Vehicle Commercial Cargo = Business Items + Motor Vehicle
Import Export Code Import Export Code (IEC) is NOT required Import Export Code (IEC) is required
Filing of Customs No filing of Bill of Entry for Import OR Shipping Bill / Filing of Bill of Entry for Import OR Shipping Bill / Bill
Document Bill of Export for Export (Owner has to file Baggage of Export for Export
Declaration Form)
Classification Classification under Heading 98.03 (Rate – 38.5%) Classification under Respective Heading (Chapter 1 to
irrespective of exact nature of goods Chapter 96)
Import Duty BCD + SWS has to be paid (Exemption of IGST is there in BCD + SWS + IGST has to be paid (No Exemption of
case of Baggage) IGST is there in case of Commercial Cargo)

The term “goods” has been defined under Section 2(22) of the Customs Act, to include inter alia, baggage also. Therefore, the restrictions and
regulations governing the import and export of goods will apply mutatis mutandis to baggage also.
Entry of Baggage by Owner –  Owner of the Baggage has to make a declaration of its contents (i.e. BAGGAGE DECLARATION
Section 77 FORM) to the Proper Officer for the purpose of clearing it. Declaring packing list is sufficient declaration.
 Bill of Entry for Import OR Shipping Bill / Bill of Export for Export is NOT applicable for Baggage.
 Declaration of its contents to PO shall be deemed to be an Entry for Import / Export of Baggage.

Vishal Jain Page 3 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage
Relevant Date for Rate of Duty  Relevant Date for Rate of Duty and Valuation is Date of Filing of Declaration under Section 77.
and Tariff Valuation in respect  Rate of Duty for Baggage is 38.5% i.e. BCD – 35% and SWS – 10% (IGST is exempted)
of Baggage – Section 78 (i) All Dutiable Goods when imported Baggage is classified under Heading 98.03
(ii) They are assessed collectively under 98.03 and NOT under their individual heading
 Rate of Duty for Baggage 38.5% is NOT applicable to
(i) Fire Arms, Cartridges of Fire Arms exceeding 50, Cigarettes, Cigars, Tobacco in excess of the
quantity prescribed for importation of free of duty under Baggage Rules
(ii) Goods imported through Courier Service.
Duty Exemption to Baggage  Subject to limits and conditions under Baggage Rules, 2016, Proper Officer will clear Bona-fide Baggage
(Baggage Rules, 2016) – Section without charging Import Duty.
79
Temporary Detention of  Where baggage of passenger contains any Dutiable / Prohibited Articles and in respect of which True
Baggage – Section 80 Declaration has been made under Section 77,
 Passenger may request Proper Officer to detain (keep in custody) such articles with him for the
purpose of returning him said article at the time of his leaving India;
 And, if passenger is not able to collect the article when he is leaving India, he can claim his articles as
follows:
(i) authorize any other passenger (who is also leaving India) to collect the detained baggage
(ii) request to Proper Officer to send the detained baggage as cargo consigned in his name
Note: If the goods are NOT declared under Section 77, the passenger CANNOT subsequently claim the
benefit under Section 80 and the goods are liable for confiscation.
Regulations in respect of  CBIC can make regulations with respect to Baggage providing for
Baggage – Section 81 (a) the manner of declaring the contents of any baggage;
(b) the custody, examination, assessment to duty and clearance of baggage;
(c) transit or transhipment of baggage from one customs station to another OR to a place outside India
 As per Customs Baggage Declaration Regulations, 2013
(a) Baggage Declaration will have to be filed ONLY by those passengers who carry dutiable or
prohibited goods or have anything to declare.
(b) Domestic Passenger who board International Flights in Domestic Leg are NOT required to file the
Baggage Declaration.

Vishal Jain Page 4 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage

BAGGAGE RULES, 2016

RULE 3: PASSENGERS ARRIVING FROM COUNTRIES OTHER RULE 4: PASSENGERS ARRIVING FROM NEPAL, BHUTAN
THAN NEPAL, BHUTAN OR MYANMAR OR MYANMAR
Particulars Articles allowed free of duty Particulars Articles allowed free of duty
Indian Resident OR (a) Used Personal Effects and Travel Any Person (a) Used Personal Effects and Travel
Foreigner Residing in India Souvenirs – Unlimited Exemption (Excluding Infant) Souvenirs – Unlimited Exemption
OR Tourist of Indian (b) Articles (other than Annexure-I) upto – Arriving India by (b) Articles (other than Annexure-I) upto
Origin (Excluding Infant) the value of Rs.50,000 other than Land the value of Rs.15,000
Tourist of Foreign Origin (a) Used Personal Effects and Travel Any Person (a) Only used Personal Effects –
(Excluding Infant) Souvenirs – Unlimited Exemption (Excluding Infant) Unlimited Exemption
(b) Articles (other than Annexure-I) upto – Arriving India by (b) Articles (other than Annexure-I) upto
the value of Rs.15,000 Land the value of Rs.0 (i.e. No exemption)
Infant (< 2 Yrs.) (a) Only used Personal Effects – Infant (< 2 Yrs.) (a) Only used Personal Effects –
Unlimited Exemption Unlimited Exemption
Note: The above categorization in Rule 3 (excluding infant) is based on Note: The above categorization in Rule 4 (excluding infant) is
type of passengers. based on type of route.
Definitions under Rule 2:
(a) “Infant” means a child not more than 2 years of age;
(b) “Resident” means a person holding a valid passport issued under the Passports Act, 1967 AND normally residing in India;
(c) “Tourist” means a person not normally resident in India, who enters India for a stay of not more than 6 months in the course of any 12
months period for legitimate non-immigrant purposes;
(d) “Personal effects” means things required for satisfying daily necessities but does not include jewellery.
(e) “Family” includes all persons who are residing in the same house and form part of the same domestic establishment.
Important Notes:
(a) Pooling Not Permissible: General Free Allowance [GFA] of one passenger under Rule 3 and Rule 4 of Baggage Rules, 2016 shall NOT be
allowed to be pooled with the GFA of any other passenger.
(b) EN 11/2004 – One Laptop Exempt: One Laptop Computer [Notebook Computer] falling under tariff item 98.03 [i.e. Baggage] when
imported into India by a passenger [other than a member of crew] of the age of 18 years or above is exempt from whole of customs duty.

Vishal Jain Page 5 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage
RULE 5: JEWELLERY
Class of Passenger Origin Country from where Passenger is coming Articles allowed free of duty
Passenger residing abroad Any Country (a) Gentleman: Lower of 20 grams OR Rs.50,000
for more than 1 year (b) Lady: Lower of 40 grams OR Rs.1,00,000

RULE 6: TRANSFER OF RESIDENCE (RULE 3 / RULE 4 EXEMPTION + BELOW EXEMPTION)

Duration of Stay Abroad Articles allowed free of duty Conditions & Relaxation
< 3 months Not Extra Allowance under Rule 6 Not Applicable
> 3 months <= 6 months Personal and Household Articles (Used Indian Passenger
/ Unused), other than Annexure I &
Annexure II but including Annexure III,
upto an aggregate value of Rs.60,000
> 6 months <= 1 Year Personal and Household Articles (Used Indian Passenger
/ Unused), other than Annexure I &
Annexure II but including Annexure III,
upto an aggregate value of Rs.1,00,000
Min. Stay of 1 Yr. during Personal and Household Articles (Used Indian Passenger should NOT have availed such concession in
2 Preceding Yr. / Unused), other than Annexure I & Preceding 3 Years
Annexure II but including Annexure III,
upto an aggregate value of Rs.2,00,000
Min. Stay of 2 Yrs. or Personal and Household Articles (Used (i) Indian Passenger should NOT have availed such concession in
above / Unused), other than Annexure I & Preceding 3 Years
Annexure II but including Annexure III, (ii) Minimum stay in abroad shall be 2 Years immediately preceding the
upto an aggregate value of Rs.5,00,000 date of his arrival on transfer of residence
Relaxation: Shortfall of upto 2 Months in stay abroad can be
condoned by Assistant Commissioner / Deputy Commissioner
(iii) Maximum Total Stay in India shall be 6 Months during last 2 Years
Relaxation: Short visits in excess of 6 Months in India can be
condoned by Principal Commissioner / Commissioner of Customs.
Note: Allowance under Rule 6 would be in addition to the General Free Allowance under Rule 3 or Rule 4, as the case may be

Vishal Jain Page 6 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage

RULE 7: CURRENCY RULE 8: UNACCOMPANIED BAGGAGE RULE 9: MEMBERS OF THE CREW

Import & Export of Currency shall be General Principle: Exemption given in above Rules General Principle: Exemption given in above
governed by Foreign Exchange (Rule 3 to Rule 6) is NOT applicable for Rules (Rule 3 to Rule 6) is NOT applicable to
Management (Export and Import of Unaccompanied Baggage Crew
Currency) Regulations, 2015 Exception: Exemption given in above Rules (Rule 3 to Exception: Exemption given in above Rules
Rule 6) is applicable EVEN for Unaccompanied (Rule 3 to Rule 6) is applicable EVEN for
Baggage in below 2 cases: Crew at the time of Final Pay Off on
Case 1: Termination of their Engagement (i.e.
Arrival of Unaccompanied Resigning from Job)
Passenger followed by Baggage
1 Month + Extension by AC / DC However, at each time of their visit in India,
Case 2: Crew are allowed a small exemption  Crew
Unaccompanied Arrival of can bring Articles like Chocolates, Cheese,
Baggage followed by Passenger Cosmetics and Other Petty Gift Items for
2 Months + Extension by AC / DC their Personal / Family Use, upto a value of
(Total Time including Extension <= 1 Year) Rs.1,500
Note: The above Rules (Rule 7 to Rule 9) are ONLY basically for clarification. They don’t provide any exemption as such (except Rule 9 to a
very limited extent for crew members).

Vishal Jain Page 7 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage
ANNEXURE–I
(SEE RULE 3, 4 AND 6)
(1) Fire arms. (4) Alcoholic liquor or wines in excess of 2 litres.
(2) Cartridges of fire arms exceeding 50. (5) Gold / Silver in any form other than ornaments.
(3) Cigarettes exceeding 100 sticks / cigars exceeding 25 / tobacco (6) Flat Panel (Liquid Crystal Display/Light-Emitting Diode/
exceeding 125 gms (If it is <= prescribed quantity, it is NOT covered Plasma) television.
by Annexure-I and thus, exemption under Baggage Rules is available)

ANNEXURE II
(SEE RULE 6 – POSH HOUSEHOLD ARTICLES)
(1) Colour Television. (6) Video camera or the combination of any such Video camera
(2) Video Home Theatre System. with one or more of the following goods, namely:-
(3) Dish Washer. (a) television receiver;
(4) Domestic Refrigerators of capacity above 300 litres or its equivalent. (b) sound recording or reproducing apparatus;
(5) Deep Freezer. (c) video reproducing apparatus.
(7) Cinematographic films of 35mm and above.
(8) Gold / Silver in any form other than ornaments.

ANNEXURE III
(SEE RULE 6 – ESSENTIAL HOUSEHOLD ARTICLES)
(1) Video Cassette Recorder or Video Cassette Player or Video Television (7) Fax Machine.
Receiver or Video Cassette Disk Player. (8) Portable Photocopying Machine.
(2) Digital Video Disc player. (9) Washing Machine.
(3) Music System. (10) Electrical or Liquefied Petroleum Gas Cooking Range
(4) Air-Conditioner. (11) Personal Computer (Desktop Computer)
(5) Microwave Oven. (12) Laptop Computer (Note book Computer)
(6) Word Processing Machine. (13) Domestic Refrigerators of capacity up to 300 litres or its
equivalent.

Vishal Jain Page 8 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage
Example 1: Mr. Trump, a tourist of USA origin aged 32 years, came to Indian on tourist visa for period of one month on 01-04-2019 along with
his wife aged 30 years and child Ms. Melina aged 1 year. Compute import duty payable on baggage given that he brought the following items
along with him:
(1) Personal effects like clothes of Mr. Trump, Mrs. Trump and Ms. Melina valued at Rs.40,000, Rs.50,000 and Rs.25,000 respectively.
(2) 2 Laptops of Rs.36,000 each
(3) 3 Bottles of Wine of 1 liter each; total value all bottles being Rs.6,000
(4) Digital Camera of Rs.10,000
(5) Mobile of Rs.15,000
Computation of Import Duty on Baggage for Ms. Melina
Baggage Articles Total Value (Rs.) General Free Allowance ID @ 38.5% (Rs.)
(Rs.)
Used Personal Effects 25,000 25,000 (Rule 3) Nil
Total Import Duty Nil

Computation of Import Duty on Baggage for Mr. Trump

Baggage Articles Total Value (Rs.) General Free Allowance ID @ 38.5% (Rs.)
(Rs.)
Used Personal Effects 40,000 40,000 (Rule 3) Nil
Travel Souvenirs - - Nil
Other Articles (not under Annexure 1)
 1 Laptop (Separately Exempt) 36,000 36,000 (EN 11/2004) Nil
 All Others (2 liter wine and Digital Camera) 14,000 15,000 (Rule 3) Nil
Total Import Duty Nil

Computation of Import Duty on Baggage for Mrs. Trump

Baggage Articles Total Value (Rs.) General Free Allowance ID @ 38.5% (Rs.)
(Rs.)
Used Personal Effects 50,000 50,000 (Rule 3) Nil
Travel Souvenirs - - Nil

Vishal Jain Page 9 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage

Other Articles (not under Annexure 1)

 1 Laptop (Separately Exempt) 36,000 36,000 (EN 11/2004) Nil
 All Others (1 liter wine and Mobile) 17,000 15,000 (Rule 3) 770
Total Import Duty 770
Notes:
(a) Since only 2 liters of wine can be accommodated in General Free Allowance, therefore 2 liters is declared in the baggage of Mr. Trump and
1 liter in the baggage of Mrs. Trump.
(b) General Free Allowance of one passenger cannot be pooled with that of other.
(c) For infants only used personal effects shall be allowed duty free. It has been assumed that Mrs. & Mr. Trump and child Ms. Melina have
brought three separate baggage for which separate declaration have been given to lower the incidence of customs duty.

Example 2: Mr. Gandhi, a resident of India and carrying out his profession in Italy, returned back to India after 1 year 3 months of stay and
brought the following:
(1) Used Personal Effects of Rs.1,60,000
(2) Jewellery of Rs.44,000 (22 grams)
(3) Personal & Household Articles (including Annexure III but excluding Annexure I & Annexure II) of Rs.2,25,000
(4) Other articles not falling under Annexure I of Rs.55,000
Determine Customs Duty payable by Mr. Gandhi.

Computation of Import Duty on Baggage for Mr. Gandhi

Baggage Articles Total Value (Rs.) General Free Allowance ID @ 38.5% (Rs.)
(Rs.)
Used Personal Effects 1,60,000 1,60,000 (Rule 3) Nil
Travel Souvenirs - - Nil
Other Articles (not under Annexure 1) 55,000 50,000 (Rule 3) 1,925
Jewellery (lower of Rs.50,000 or Rs.40,000) 44,000 40,000 (Rule 5) 1,540
Note: 20 gms = (Rs.44,000 / 22 gms) * 20 gms = Rs.40,000
Personal & Household Articles 2,25,000 2,00,000 (Rule 6) 9,625
Total Import Duty 13,090

Vishal Jain Page 10 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage
Example 3: Ms. Lakshmi came back from USA after 3 Years with Example 4: Mr. Bapi Lehari came back from USA after 3 Years with
Jewellery – Rs.1,05,000 (35 gms)  GFA under Rule 5 Jewellery – Rs.48,000 (16 gms)  GFA under Rule 5
Particulars Amount Particulars Amount
Total Value Jewellery Rs.1,05,000 Total Value of Jewellery Rs.48,000
Less: GFA under Rule 5 (lower of Rs.1,00,000 or Less: GFA under Rule 5 (lower of Rs.50,000 or
Rs.1,20,000) Rs.1,00,000 Rs.60,000) Rs.48,000
Note: 40 gms = (Rs.1,05,000 / 35) * 40 = Rs.1,20,000 Note: 20 gms = (Rs.48,000 / 16) * 20 = Rs.60,000
Value of Jewellery subject to ID @ 38.5% Rs.5,000 Value of Jewellery subject to ID @ 38.5% Nil

Vishal Jain Page 11 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage

VJPJ Education’s Online Store in India – Instamojo

https://www.instamojo.com/vjpjeducation/

Vishal Jain Page 12 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage

Hearty Congratulations!!!
Our Beloved Students who shined in November 2019 Exams!!!

CA Monisha Nithiyanandam CA Vaanmathi Soundararaj

(AIR 20) (AIR 40)

CA Tamil Amudhan CA Arun Ram

CA Krishna Mahesh CA Naveen
CA Sathya Narayanan CA Abirami Karunakaran
CA Priyanka CA SreeHarii K
CA Sujith CA S Krupa
CA Daniel Leo CA Abisheik Aravindan
CA Manickam Maalan Bharathi CA Dhanush Rajendran

Vishal Jain Page 13 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Baggage

CA Nithin Balaji CA Sarvan Kumar

CA Venketraman CA Santhosh Sivaramalingam
CA Keerthana CA Padmapriya
CA Vinith CA Priyanka Ramasamy
CA Karthik CA Sachin
CA Raghavendar S CA Vijay Shankar
CA Ishwarya Meenakshi CA Mufeed Ahamed
CA Romil Bothra CA Apoorva Shree
CA Payal CA Akhil KV
CA Uttam CA Gaurav
& …………………..
All the Best to those who are very much
Determined to Fight and Win the Race to become CA!!
Believe
Yourself!!
Vishal Jain Page 14 Praveen Jain
Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Import Procedures

Vishal Jain Page 1 Praveen Jain

 Import Procedures

IMPORT PROCEDURES
BIRD’S EYE VIEW

Import Procedures
Entry of Imported Goods into India
Section 29 Arrival of Vessels & Aircrafts in India
Section 30 Delivery of Import General Manifest (Arrival Manifest) OR Import Report
Section 30A Delivery of Passenger & Crew Arrival Manifest & Passenger Name Record Information
Unloading of Imported Goods
Section 31 Entry Inwards for Vessel before Unloading of Imported Goods
Section 32-36 Unloading of Imported Goods
Exit of Conveyance from India
Section 37-38 Power of Proper Officer over Conveyance and Person In-Charge
Section 42 Departure Permission
Custody over Imported Goods
Section 45 Restrictions on Custody and Removal of Imported Goods

Clearance of Imported Goods

Section 46 Entry of Goods on Importation
Section 47 Clearance of Goods for Home Consumption
Section 48 Procedure in case of goods not Cleared, Warehoused or Transhipped within 30 days after Unloading
Section 51A Payment through Electronic Cash Ledger

Non-Applicability of Import Procedures

Section 44 Non-Applicability of Section 45-49 to Baggage & Import by Post

Vishal Jain Page 2 Praveen Jain

 Import Procedures

ENTRY OF IMPORTED GOODS INTO INDIA

Arrival of Vessels & Aircrafts General Rule: Person In-Charge (PIC) of Vessel of Aircraft should call or land ONLY at Customs Port
in India – Section 29 or Customs Airport or Notified Place by CBIC. Thus, entry (or attempt to enter) goods originating from
outside India into any other place is barred.
 Exception: Person In-Charge (PIC) of Vessel of Aircraft can call or land @ any other places due to
Accident / Weather / Other Unavoidable Reason. In such cases, following would be obligations of PIC
and Passengers & Crew
Obligation of PIC  PIC to report the arrival to Nearest Customs Officer / Nearest Police Officer
(Also, PIC to produce log book, if demanded)
 PIC shall NOT Permit unloading of goods and NOT allow passengers or
crew to leave the immediate vicinity
Exception: Goods can be unloaded and passengers or crew can depart for
reason of Health / Safety / Preservation of Life or Property
PIC to comply with the directions given by such officers with respect to
any such goods
Obligation of  Passengers and crew shall NOT leave the immediate vicinity
Passengers & Crew
Delivery of Import General  IGM / IR: Person In-Charge (PIC) shall file IGM / IR to Proper Officer. IGM / IR contains detailed
Manifest (IGM) OR Import information to customs about goods in the vessels / aircrafts / vessels
Report (IR) – Section 30  which are for unloading at that particular port / airport / land customs station and
(IGM also called as Arrival  which would be carried further for other port / airport / land customs station
Manifest)  Time Limit for Filing IGM / IR:
Route Document Time of Filing Mode of Filing
Electronic Filing
IGM shall be filed at any time
Air / Sea IGM Exception: Permission from Principal
before arrival of Vessel or Aircraft
Comm. / Comm. of Customs
IR shall be filed within 12 Hrs. Manual Filing
Land IR
after arrival of Vehicle

Vishal Jain Page 3 Praveen Jain

 Import Procedures
 Other Points of IGM / IR:
Belated Filing of IGM  IGM / IR filed belatedly may also be accepted by PO on valid justified
/ IR grounds.
 Maximum Penalty – Rs.50,000 (No penalty if sufficient cause for delay)
Amendment to IGM /  If IGM / IR is in any way incorrect or incomplete and there is no
IR fraudulent intention, PO may permit it to be amended or supplemented.
 Subsequent amendment of IGM / IR will not be treated as late filing
Note: Goods involved in an export (say from USA to Australia) may be carried in the conveyance without
being delivered in India. Even that information is to be given in Arrival Manifest.
Delivery of Passenger & Crew  PCAM & PNRI: Person In-Charge (PIC) shall file PCAM and PNRI to Proper Officer.
Arrival Manifest (PCAM) &  Time Limit for Filing PCAM & PNRI:
Passenger Name Record Route Document Time of Filing
Information (PNRI) – Section PCAM PCAM shall be filed at any time before arrival of Vessel or Aircraft
30A Air / Sea
PNRI PNRI shall be filed within prescribed time
PCAM PCAM shall be filed upon arrival of Vehicle
Land
PNRI PNRI shall be filed within prescribed time
 Other Points of PCAM & PNRI:
Belated Filing of  Maximum Penalty – Rs.50,000 (No penalty if sufficient cause for delay)
PCAM & PNRI

UNLOADING OF IMPORTED GOODS

Entry Inwards (EI) for Vessel  No Unloading without EI Order: Master of Vessel shall NOT permit the unloading of any goods until
before Unloading of Imported Proper Officer grants ENTRY INWARDS to such vessels. EI is NOT applicable for Aircrafts or Vehicles.
Goods – Section 31  No EI Order without IGM / IR: EI shall NOT be given until the IGM / IR has been delivered or the
Proper Officer is satisfied that a valid reason is given for NOT delivering it within prescribed time.
 Non-Applicability of EI: EI is NOT applicable for
 Unloading of ANY Goods in Aircraft and Vehicle
 Unloading of Baggage, Mail Bags, Animals, Perishable Goods and Hazardous Goods in Vessel

Vishal Jain Page 4 Praveen Jain

 Import Procedures
Notes:
(i) Grant of EI is an acknowledgement of the fact that Customs Department is ready to supervise the
unloading of the cargo, and is prepared to assess the goods to duty.
(ii) It is NOT given if there is no berth for the ship to dock [Bharat Surfactants Pvt Ltd v Union of India –
1989 – SC]; or if customs supervision is not possible for other reasons [SRS Engineering Industries v
Secretary, Ministry of Finance – 2009 – Del. HC].
Unloading of Imported Goods  Section 32: No unloading unless goods are mentioned in IGM / IR
– Section 32 to Section 36  Section 33: Unloading ONLY at Landing Places (approved by Commissioner of Customs)
 Section 34: Unloading only under supervision of Proper Officer
Notes:
(i) CBIC may give general permission and Proper Officer may give special permission (in particular
case) for any goods or class of goods to be unloaded without the supervision of Proper Officer.
(ii) In major ports, customs officers are deployed at the wharfs and berths where the goods are imported
or exported. These officers supervise all loading and unloading, and shipping operations.
 Section 35: No imported goods shall be Water-Borne (Unloading with the help of Small Boats) for being
loaded in any Vessel unless the goods are accompanied by Boat Note, which is to be obtained from
Proper Officer.
Notes:
(i) CBIC may give general permission and Proper Officer may give special permission (in particular
case) for any goods or class of goods to be water-borne without being accompanied by Boat Note.
(ii) In certain circumstances (like size of vessel, hazardous nature of cargo etc) the vessel cannot be
berthed at the port. The cargo is ferried from or to the ships anchored at mid-sea to the port in boats,
otherwise known as lighters.
 Section 36: Unloading of goods to be done ONLY during Working Hours on Working Days. If unloading
of goods is done on Non-Working Day OR After Working Hours, it shall be done after payment of
Merchant Overtime Fees (MOT)
Note: MOT is NOT chargeable at Ports and Airports notified for 24 * 7 clearance. Also MOT is NOT
chargeable at Container Freight Station (CFS) attached to such Ports and Airports notified for 24 * 7
clearance.

Vishal Jain Page 5 Praveen Jain

 Import Procedures

EXIT OF CONVEYANCE FROM INDIA

Power of Proper Officer over  Section 37: Proper Officer may, at any time, board any conveyance carrying imported goods and may
Conveyance and Person In- remain on such conveyance for such period, as he considers necessary.
Charge (PIC) – Section 37 &  Section 38: Proper Officer may require the PIC of any conveyance to produce any document or answer
Section 38 any questions and such person shall be bound to comply with the same
Departure Permission – Section  PIC which has brought any imported goods at a customs station shall NOT cause or permit the
42 conveyance to depart from that customs station until a written order to that effect has been given by the
Proper Officer.
 Departure Permission is required EVEN if next destination is in India

CUSTODY OF IMPORTED GOODS

Custodian’s Role – Section 45(1)  Custodian (approved by Principal Commissioner / Commissioner of Customs) will take Unloaded
Imported Goods into his custody till
 Goods are Cleared for Home Consumption /
 Goods are Warehoused
 Goods are exported for Transshipment
 Custodian’s role commences in respect of imported goods the moment the ship is berthed in the harbour
or the goods are ready for unloading from the aircraft.
Notes:
(i) In major ports, the Port Trust is the custodian.
(ii) In Inland Container Depots, the Container Corporation of India, which operates the Container Freight
Station (CFS) is the custodian of the imported cargo.
(iii) In case of air cargo, the Airport Authority of India is the custodian in most airports.
(iv) In case of rail, Station Master is the custodian.
Custodian’s Obligations – During the time the goods are in the custody of the custodians, they have the following responsibilities:
Section 45(2)  Maintain proper record of Unloaded Goods received from carriers and send a copy of record to Proper
Officer

Vishal Jain Page 6 Praveen Jain

 Import Procedures
 Permit removal of goods or deal with goods ONLY with the permission of Proper Officer in writing OR
in accordance with general procedure as may be prescribed.
Custodian’s Liability – Section  If imported goods are pilfered after unloading while in custody of the custodian, such custodian shall be
45(3) liable to pay duty on such goods. Therefore, in respect of pilfered goods covered by Section 13, the loss
of revenue is compensated by the custodian
 Import duty shall be paid at the rate prevailing on the day of delivery of the IGM or IR under Section 30.
Special Note: Section 45(3) applies only to the private custodians who are required to be approved by
Principal Commissioner/ Commissioner of Customs under Section 45(1). Accordingly, the major ports
and airports covered under Major Port Trust Act, 1963 who do NOT require any approval under Section
45(1), are NOT covered by Section 45(3). Thus, the Department cannot demand duty from Port Trust on
the pilferage under Section 45(3).
Section 45(3) of the Customs Act, 1962 holds the custodian responsible ONLY in respect of the customs
duty in respect of pilfered goods. It does NOT extend to the value of goods lost. However, the Port Trust,
as bailee of the goods, is liable for value of the goods to the importer.

CLEARANCE OF IMPORTED GOODS

Entry of Goods on Importation –  Bill of Entry: Importer shall file Bill of Entry for Home Consumption OR Bill of Entry for Warehousing to
Section 46 Proper Officer. Therefore, there are 3 types of Bills of Entries prescribed for these three different
purposes.
(i) Form I (White) – for Home Consumption.
(ii) Form II (Yellow) – for Warehousing (Into Bond).
(iii) Form III (Green) – for Ex-Bond Clearance for Home Consumption (Ex-Bond).
When Bill of Entry is filed electronically, it is in 4 copies:
(a) Original, meant for the customs authorities for assessment and collection of duty;
(b) Duplicate, meant for the custodian of the cargo to release cargo to the importer from his custody;
(c) Triplicate, as a copy for record for the importer; and
(d) Quadruplicate, as a copy to be presented to the Bank or RBI for the purposes of making remittance
for the imported goods

Vishal Jain Page 7 Praveen Jain

 Import Procedures
 Documents along with Bill of Entry: Importer shall file following documents along with Bill of Entry:
(i) Invoice cum Packing List OR Invoice and Packing List separately
(ii) Bill of Lading / Airway Bill / Lorry Receipt / Railway Receipt
(iii) Valuation Declaration duly signed
(iv) Certificate of Country of Origin, if preferential rate is claimed
(v) Import License, when clearance is under license
Note: Bill of Lading / Airway Bill / Lorry Receipt / Railway Receipt given by the carrier of the goods is
the importer’s document of title to the goods. It covers all the goods imported with full description
 Time Limit for Filing of Bill of Entry: Importer shall file Bill of Entry as follows:
Normal Bill of  If Bill of Entry is filed by Importer after IGM / IR is filed by PIC (i.e.
Entry Normal Bill of Entry), then Bill of Entry should be filed before the end of
next working day (excluding holidays) on Arrival of Vessel or Aircraft or
Vehicle.
Advance Bill of  If Bill of Entry is filed by Importer before IGM / IR is filed by PIC (i.e.
Entry Advance Bill of Entry), then Bill of Entry should be filed at any time NOT
exceeding 30 days prior to Expected Arrival of Vessel / Aircraft / Vehicle
 Belated Filing and Mode of Filing of Bill of Entry:
Belated Filing of  If Bill of Entry is filed its due-date and there is no justifiable reasons for
Bill of Entry delay, the Importer shall pay late fees as follows:
(i) Delay for 1st 3 Days – Rs.5,000 / Day
(ii) Subsequent Delay – Rs.10,000 / Day
Note: No Late Fees if delay in filing BE is due to technical problems related
to ICES connectivity.
Mode of Filing of  Bill of Entry shall filed Electronically [Bill of Entry (Electronic Integrated
Bill of Entry Declaration and Paperless Processing) Regulations, 2018]
Exception: Permission from Principal Comm. / Comm. of Customs to file
Manual Bill of Entry [Bill of Entry (Forms) Regulations, 1976]
 Other Points of Bill of Entry:
Substitution of Bill  PO may allow substitution of Bill of Entry (i.e. (BEHC to BEWH OR BEWH to
of Entry BEHC) if interest of revenue is NOT pre-judicially affected and NO

Vishal Jain Page 8 Praveen Jain

 Import Procedures

fraudulent intention is involved

Declaration while  Importer filing Bill of Entry shall ensure the following:
filing Bill of Entry (i) Accuracy and completeness of information given
(ii) Authenticity and validity of any document supporting it; and
(iii) Compliance with the restriction or prohibition, if any, relating to the
goods under this Act or under any other law
Clearance of Goods for Home  Clearance Order: Proper Officer shall pass Clearance Order / Pass Out of Customs Charge Order to
Consumption – Section 47 Importer. Clearance Order is passed ONLY if Proper Officer is satisfied that
(i) Goods are NOT Prohibited Goods AND
(ii) Importer has paid Import Duty & Other Charges
Such order may also be made electronically through the Customs Automated System on the basis of risk
evaluation through appropriate selection criteria
 Time Limit for Payment and Interest for Late Payment: (Refer Special Note 1)
(i) Self-Assessed Bill of Entry – Payment of Import Duty shall be on Date of Presentation of Bill of Entry
(ii) Assessed Bill of Entry by Proper Officer (i.e. Assessment, Re-Assessment or Provisional Assessment)
– Payment of Import Duty shall be within 1 Working Day (excluding Holiday) after Return of Bill of
Entry by Proper Officer
(iii) Notified Importers by Central Government [i.e. AEO (Tier-Two) and AEO (Tier-Three)]– Payment of
Import Duty shall be within Due-Date notified by Central Government
Note: In case of delayed payment after above mentioned due-dates, Interest @ 15% p.a. shall be paid by
the Importer along with Import Duty.
 Mode of Payment: (Refer Special Note 2)
(i) Importers registered under Authorized Economic Operator (i.e. AEO) – Electronic Payment
(ii) Importers paying Import Duty >= Rs.10,000 / BE – Electronic Payment
(iii) Other Importers – Manual or Electronic Payment
SPECIAL NOTE 1: DEFERRED PAYMENT OF IMPORT DUTY RULES, 2016
The salient features of the new rules are discussed hereunder:
(i) Information about intent to avail benefit of notification: An eligible importer intending to avail the benefit of deferred payment shall
intimate to the Principal Commissioner/Commissioner of Customs, having jurisdiction over the port of clearance, his intention to avail the
said benefit who on being satisfied with the eligibility of the importer allow him to pay the duty by due dates.

Vishal Jain Page 9 Praveen Jain

 Import Procedures
(ii) Electronic payment of duty: The eligible importer shall pay the duty electronically. However, the Assistant/Deputy Commissioner of
Customs may for reasons to be recorded in writing, allow payment of duty by any mode other than electronic payment.
(iii) Deferred payment not to apply in certain cases: If there in default in payment of duty by due date more than once in three consecutive
months, this facility of deferred payment will not be allowed unless the duty with interest has been paid in full. The benefit of deferred
payment of duty will NOT be available in respect of the goods which have not been assessed or not declared by the importer in the entry.
(iv) Due dates for deferred payment of import duty: The eligible importer has to pay the duty by the dates mentioned below inclusive of the
period (excluding holidays) as mentioned in section 47(1):
For goods corresponding to bill of entry returned for payment from Duty to be paid by
1st to 15th day of any month 16th day of that month
16th day till the last day of any month other than March 1st day of the following month
16th day till the 31st day of March 31st March

SPECIAL NOTE 2: CBIC CIRCULAR: INTEGRATED DECLARATION UNDER INDIAN CUSTOMS SINGLE WINDOW PROJECT
SWIFT – SINGLE WINDOW INFERFACE FOR FACILITATING TRADE
(i) CBIC has taken-up the task of implementing ‘Indian Customs Single Window Project’ to facilitate trade. This project envisages that the
importers and exporters would electronically lodge their Customs clearance documents at a single point only with the Customs.
(ii) The required permission, if any, from Partner Government Agencies (PGAs) such as Animal Quarantine, Plant Quarantine, Drug
Controller, Food Safety and Standards Authority of India, Textile Committee etc. would be obtained online without the importer/exporter
having to separately approach these agencies.
(iii) This would be possible through a common, seamlessly integrated IT systems utilized by all regulatory agencies, logistics service
providers and the importers/exporters. The Single Window would thus provide the importers/exporters a single point interface for
clearance of import and export goods thereby reducing dwell time and cost of doing business.
(iv) This online clearance under Single Window Project has been rolled out at main ports and airports in Delhi, Mumbai, Kolkata and
Chennai so far. It will be gradually extended across the country.
(v) CBIC has since developed the ‘Integrated Declaration’, under which all information required for import clearance by the concerned
government agencies has been incorporated into the electronic format of the Bill of Entry.
(vi) The Customs Broker or Importer shall submit the “Integrated Declaration” electronically to a single entry point, i.e. the Customs Gateway
(ICEGATE). Separate application forms required by different PGAs would be dispensed with.
(vii) The Integrated Declaration will be applicable for consignments to be cleared under the Indian Customs EDI Systems. For the clearance of
imported goods in the manual mode, separate documents prescribed by the respective agencies will continue to apply.

Vishal Jain Page 10 Praveen Jain

 Import Procedures
(viii) Apart from incorporating such forms, the Integrated Declaration will also include different types of undertakings, declarations, and
letters of guarantee that are presently required to be submitted on company letter heads.
(ix) Upon filing of the Integrated Declaration, the bill of entry will automatically be referred to concerned agency, if required, based on risk.
The system has been modified to enable simultaneous processing of bill of entry by PGA and Customs.

Procedure in case of goods not  Goods are NOT cleared for Home Consumption / Warehousing / Transshipment within 30 days:
Cleared, Warehoused or If imported goods are NOT removed within 30 days or extended time from Customs Station, then with
Transhipped within 30 days the Approval of Customs Department and after giving Notice to Importer, Custodian can sell the goods
after Unloading OR Title of in Auction.
Goods is relinquished by  Title of Goods is relinquished by Importer:
Importer – Section 48 If importer relinquishes the title to imported goods, then with the Approval of Customs Department,
Custodian can sell the goods in Auction.
Notes:
(i) In case of sensitive goods like Animals, Foodstuff, Dangerous Goods or Hazardous Goods, Custodian
with the approval of Proper Officer can sell the goods even before expiry of 30 days.
(ii) In case of Arms & Ammunition, which cannot be sold in public auction, manner of sale shall be
determined by Central Government.
CBIC Circular No. 49/2018-Customs:
After the successful bidder has been informed about the result of the auction, a Consolidated Bill of Entry,
buyer-wise will be filed with the Customs in the prescribed format by the concerned custodian for clearance
of the goods as per Section 46 read with Un-Cleared Goods (Bill of entry) Regulations, 1972
(a) Proper Officer of Customs shall assess the goods to duty in accordance with the extant law within 15
days of filing of Bill of Entry and after assessment inform the amount of duty payable to the concerned
custodian.
(b) The auctioned goods shall be handed over to the successful bidder after assessment and out-of-charge
orders given by the proper officer, on payment of dues.
Payment through electronic  Deposit in Electronic Cash Ledger:
Cash Ledger – Section 51A Every deposit made towards duty, interest, penalty, fee or any other sum payable by a person under the
provisions of CA, 1962 or under the CTA, 1975 or under any other law for the time being in force,
 using authorised mode of payment shall, subject to such conditions & restrictions, be credited to

Vishal Jain Page 11 Praveen Jain

 Import Procedures

Electronic Cash Ledger of such person,

 to be maintained in such manner, as may be prescribed.
 Utilization of Electronic Cash Ledger:
The amount available in the Electronic Cash Ledger may be used
 for making any payment towards duty, interest, penalty, fees or any other sum payable under the
provisions of CA, 1962 or under the CTA, 1975 or under any other law for the time being in force,
 in such manner and subject to such conditions and within such time as may be prescribed.
 Refund of Electronic Cash Ledger:
The balance in the Electronic Cash Ledger,
 after payment of duty, interest, penalty, fee or any other amount payable,
 may be refunded in such manner as may be prescribed.
 Non-Applicability of Section 51A:
Notwithstanding anything contained in this section, if the CBIC is satisfied that it is necessary or
expedient so to do, it may, by notification,
 exempt the deposits made by such class of persons or with respect to such categories of goods, as
may be specified in the notification,
 from all or any of the provisions of this section

NON-APPLICABILITY OF PROVISIONS OF IMPORT PROCEDURES

Provisions of Section 45-Section 49 is NOT applicable to Baggage & Import by Post

Vishal Jain Page 12 Praveen Jain

 Import Procedures

Example 1: Late Fees: Arrival of Vessel on 11th September Example 2: Late Fees: Arrival of Vessel on 11th September
Particulars Late Fees Particulars Late Fees
Bill of Entry filed on 12th September – No delay in Bill of Entry filed on 17th September – 5 days delay
Nil Rs.35,000
filing BE in filing BE  (Rs.5,000 * 3) + (Rs.10,000 * 2)

Example 3: Interest: Arrival of Vessel on 11th September and Filing of Example 4: Interest: Arrival of Vessel on 11th September and Filing of
Bill of Entry for Home Consumption on 17th September Bill of Entry for Home Consumption on 17th September
Particulars Due-Date Particulars Due-Date
Self-Assessed Bill of Entry for Home Self-Assessed Bill of Entry was taken for Scrutiny
17th September 26th October
Consumption accepted and Re-Assessment done on 25th October
Note: If Import Duty is not paid within due-date (i.e. 17th September), Note: If Import Duty is not paid within due-date (i.e. 26th October),
interest @ 15% p.a. to be paid after next day of due-date (i.e. 18th interest @ 15% p.a. to be paid after next day of due-date (i.e. 27th
September). October).

Example 5: Interest: Arrival of Vessel on 11th September and Filing of Example 6: Interest: Arrival of Vessel on 11th March and Filing of Bill
Bill of Entry for Home Consumption on 17th September of Entry for Home Consumption on 17th March
Particulars Due-Date Particulars Due-Date
Authorized Economic Operator 1st October Authorized Economic Operator 31st March
Note: If Import Duty is not paid within due-date (i.e. 1st October), Note: If Import Duty is not paid within due-date (i.e. 31st March),
interest @ 15% p.a. to be paid after next day of due-date (i.e. 2nd interest @ 15% p.a. to be paid after next day of due-date (i.e. 1st April).
October).

Vishal Jain Page 13 Praveen Jain

 Import Procedures

WAREHOUSING WITHOUT WAREHOUSING – PROVISO TO SECTION 46(1), SECTION 49 AND SECTION 85

Warehousing without Warehousing refers to a situation where Goods are allowed to be Warehoused without Execution of WH Bond /
Complying with other conditions of WH Procedures. 3 Cases of WH without WH are as follows:
Proviso to Section 46(1) Section 49 Section 85
Assessee is unable to file Bill of Entry for (i) Assessee has filed Bill of Entry for Home Assessee has filed Bill of Entry for
Home Consumption for want of full Consumption for Imported Goods (Dutiable Warehousing
information or Non-Dutiable) but AC / DC is satisfied that
the goods cannot be cleared for Home
Consumption OR
(ii) Assessee has filed Bill of Entry for
Warehousing for Imported Goods (ONLY
Dutiable) but AC / DC is satisfied that the
goods cannot be cleared for Warehousing
Any goods can be warehoused without Any goods in case (i) and ONLY Dutiable Goods Only stores can be warehoused without
warehousing in case (ii) can be warehoused without warehousing
warehousing
Goods can be deposited in Public Goods can be deposited in Public Warehouse Stores can be deposited in Special
Warehouse only only Warehouse only
No Time Limit 30 days (Assistant / Deputy Commissioner) + No Time Limit
Extension (Commissioner of Customs)

Example 1: Assessee wants to take goods for HC but does not have Example 2: Assessee has filed BEHC u/s 46 but officer wants to test the
proof of Country of Origin for claiming Preferential ROD goods
Section Options Section Options
Proviso to Warehousing without Warehousing Section 49 Warehousing without Warehousing
Section 46(1) (Don’t pay ID now and don’t clear the goods. Pay ID later (Don’t pay ID now and don’t clear the goods. Pay ID
and clear the goods) later and clear the goods)
Section 18 Provisional Assessment Section 18 Provisional Assessment
(Pay Provisional Duty and clear the goods) (Pay Provisional Duty and clear the goods)

Vishal Jain Page 14 Praveen Jain

 Import Procedures

SUMMARY OF IMPORT PROCEDURES

Goods arrived at Indian Customs Station

Person-In-Charge -----> Import General Manifest / Import Report -----> Proper Officer

Proper Officer -----> Entry Inwards (ONLY for Vessel) -----> Person-In-Charge

Unloading of Goods at Customs Station

Goods under Custody of Custodian
(Supervision of Proper Officer + At Approved Places
+ On Working Days at Working Hours)

Importer -----> Electronic Filing Bill of Entry for Home Consumption -----> Proper Officer

Importer making Payment of Self-Assessed Duty in case of Home Consumption

Proper Officer -----> Order for Clearance of Home Consumption -----> Importer

Vishal Jain Page 15 Praveen Jain

 Import Procedures

VJPJ Education’s Online Store in India – Instamojo

https://www.instamojo.com/vjpjeducation/

Vishal Jain Page 16 Praveen Jain

 Import Procedures

Hearty Congratulations!!!
Our Beloved Students who shined in November 2019 Exams!!!

CA Monisha Nithiyanandam CA Vaanmathi Soundararaj

(AIR 20) (AIR 40)

CA Tamil Amudhan CA Arun Ram

CA Krishna Mahesh CA Naveen
CA Sathya Narayanan CA Abirami Karunakaran
CA Priyanka CA SreeHarii K
CA Sujith CA S Krupa
CA Daniel Leo CA Abisheik Aravindan
CA Manickam Maalan Bharathi CA Dhanush Rajendran

Vishal Jain Page 17 Praveen Jain

 Import Procedures

CA Nithin Balaji CA Sarvan Kumar

CA Venketraman CA Santhosh Sivaramalingam
CA Keerthana CA Padmapriya
CA Vinith CA Priyanka Ramasamy
CA Karthik CA Sachin
CA Raghavendar S CA Vijay Shankar
CA Ishwarya Meenakshi CA Mufeed Ahamed
CA Romil Bothra CA Apoorva Shree
CA Payal CA Akhil KV
CA Uttam CA Gaurav
& …………………..
All the Best to those who are very much
Determined to Fight and Win the Race to become CA!!
Believe
Yourself!!
Vishal Jain Page 18 Praveen Jain
 Duty Drawback

Vishal Jain Page 1 Praveen Jain

 Duty Drawback

DUTY DRAWBACK
BIRD’S EYE VIEW

Type 1 Drawback Type 2 Drawback

Customs Act, 1962 Customs Act, 1962
Drawback on Imported Materials used in
Section 74 Drawback on Re-Export of Duty Paid Goods Section 75
Manufacture of Export Goods

Re-export of Imported Goods (Duty Drawback of Customs Customs, Central Excise Duties Drawback Rules, 2017
Duties) Rules, 1995 Rule 3 Drawback as per AIR
- Only Procedural Rules (Not Relevant) Rule 4 Revision of AIR
Rule 5 Relevant Date of AIR
Rule 6 Drawback as per BR
Rule 7 Drawback as per SBR
Rule 8 Prohibition of Drawback as per BR & SBR
Rule 9 Upper Limit for AIR

Common Provisions of Drawback

Section 75A Interest on Drawback Section 76 Prohibition & Regulation of Drawback

Vishal Jain Page 2 Praveen Jain

 Duty Drawback

DUTY DRAWBACK

Particulars Drawback (DBK) under Section 74 Drawback (DBK) under Section 75

BASIC PROVISIONS FOR DRAWBACK
Applicability Imported Goods are exported as such [without being Imported Goods [Inputs] and/or Excisable Goods [Inputs] are
used] or after use. Example: Import of Fabric and Export used in manufacture of goods [Final Products] and then FP are
of Fabric (No processing should be done) exported. Example: Import of Fabric, Processing of Fabric and
Section 74 is resorted where there is an Excess Shipment Export of Dyed Fabric OR Shirt (Processing may or may not be
OR Wrong Shipment OR Goods are imported for Manufacture)
purpose of participating in Exhibition and Sent Back, etc.
Drawback Refund of Duty paid on Importation of goods (i.e. BCD Rebate of Duty paid on Imported Materials (i.e. BCD + SWS +
+ SWS + IGST + Compensation Cess) which are IGST + Compensation Cess) and/or Excisable Materials (i.e.
exported outside India Excise Duty) which are used in the manufacture of goods
exported outside India
Related Rules Re-export of Imported Goods (Duty Drawback of Customs, Central Excise Duties Drawback Rules, 2017
Customs Duties) Rules, 1995
MEANING & MODE OF EXPORT FOR DRAWBACK
Meaning of (i) Supply of goods outside India (i) Supply of goods outside India
Export (ii) Supply of goods by DTA to SEZ (ii) Supply of goods by DTA to SEZ
(iii) Supply of stores to Foreign Going Vessel / Aircraft (iii) Supply of stores to Foreign Going Vessel / Aircraft
Mode of Export (i) General Export of Cargo (Filing of Shipping Bill / Bill (i) General Export of Cargo (Filing of Shipping Bill / Bill of
of Export u/s 50 followed by Let Export Order u/s 51) Export u/s 50 followed by Let Export Order u/s 51)
(ii) Baggage Export Baggage Export (i.e. Baggage Export is NOT covered)
(iii) Export by Post under Section 84(a) (ii) Export by Post under Section 84(a)
CONDITIONS FOR GOODS EXPORTED FOR DRAWBACK
Nature of Goods Exported Goods should have been Imported and Import Exported Goods may be manufactured from Imported /
Exported Duty be paid thereon Indigenous Inputs
Identity of Goods must be capable of being easily identified There is no criteria for such identification since the inputs are
Goods Exported manufactured / processed before their export

Vishal Jain Page 3 Praveen Jain

 Duty Drawback
Use Criteria of DBK shall be allowed even if the Imported Goods are If the goods manufactured [Final Product] from Imported
Goods taken into use and then exported Material and/or Excisable Materials are used in India and
subsequently exported, then no DBK shall be allowed [subject
to certain exceptions]
Value Addition There is NO requirement of Minimum Value Addition There should NOT be any negative Value Addition and
of Goods Minimum Value Addition must be achieved, if specified
Coverage of DBK is available for all goods subject to their DBK is available only in respect of notified goods
Goods identification
DRAWBACK
Coverage of Customs Duties (including IGST and Compensation Customs Duties (excluding IGST and Compensation Cess) as
Duties Cess) only are refunded well as Excise Duties is refunded
Rates of DBK (i) Section 74(1): 98% of the Import Duty paid at the (i) AIR [All Industry Rate]  General Cases;
time of importation (ii) BR [Brand Rate] When no AIR is fixed in DBK Schedule;
(ii) Section 74(2): DBK at Reduced Rate [Notified Rates] (iii) SBR [Special Brand Rate]  When fixed AIR < 80% of the
Actual Duties Incidence
OTHER CONDITIONS FOR DRAWBACK
Time Limit for Section 74(1): 2 Years + 2 Years Extension by CBIC No time limit is there
Export Section 74(2): 1 ½ Years OR 2 Years + 2 Years Extension
by CBIC, as the case may be
Realization of There is no requirement to bring the export proceeds in If the export proceeds are NOT brought in Convertible Foreign
Convertible For- Convertible Foreign Exchange. Exchange within time limit specified in FEMA, 1999, then DBK
Ex so granted shall be recovered
DBK Claim DBK Claim is to be filed separately Shipping Bill / Bill of Export automatically becomes DBK Claim
when LEO is given in case of AIR
DBK Claim is to be filed separately in case of BR / SBR
Person Importer & Exporter should be the SAME person Importer & Exporter should be the SAME person
Goods Imported Goods & Exported Goods should be the SAME Imported Goods & Exported Goods can be SAME goods or
(i.e. Identity of Goods should be the SAME. Assistant / DIFFERENT goods
Deputy Comm. at Port of Export should be satisfied)
Note: Even if imported goods are merely tested though not used, it will be treated as “used” after importation and thus, Section 75 will be applicable.

Vishal Jain Page 4 Praveen Jain

 Duty Drawback
COMMON PROVISIONS FOR DRAWBACK
Section 74 – DBK Section 75 – DBK
Re-export of Imported Goods Imported Goods used in Manufacture of FP & then FP is Exported

Section 75A – Interest on DBK Section 76 – Prohibition on Allowance of DBK

(i) If DBK sanction is belated, then pay Interest @ 6% p.a. along with (i) DBK < Rs.50
DBK DBK >= Market Price of Export Goods
(ii) If DBK sanctioned is erroneous, then recover Interest @ 15% p.a. (ii) Export Goods likely to be smuggled back
along with DBK
Note: DBK of Special Import Duty (like Anti-Dumping Duty, Safe-guard Duty, Anti-Subsidizing Duty, etc.) is also allowed under Section 74/75.

REFUND OF CUSTOMS VS. DRAWBACK UNDER CUSTOMS

Refund of Customs Duty Drawback under Customs
Particulars
Section 27 of Customs Act, 1962 Section 74 & Section 75 of Customs Act, 1962
Refund OR Incentive It is refund of duty It is export incentive
(Duty is paid in excess and thus, refundable) (Refund is of EXCESS DUTY – It is NOT refund)
Procedure Submit Refund Claim Submit DBK Claim (In case of AIR u/s 75, SB/BOE becomes
Automatic DBK Claim once LEO is passed)
Time Limit Generally, 1 year from date of payment of duty Time limit is as per related DBK Rules (3 months + 3 months
+ 6 months where DBK Claim is to be submitted separately)
Applicability of DOUE is applicable and thus, generally refund is DOUE is NOT applicable and thus, DBK is paid directly to
DOUE credited to CWF unless otherwise proved. the Applicant
Non-Applicability of Refund below Rs.100 cannot be claimed (Section 27) DBK below Rs.50 cannot be claimed (Section 76)
Refund OR DBK
Interest on Delayed Interest @ 6% pa if the duty is NOT refunded within 3 Interest @ 6% pa if the DBK is NOT granted within 1 months
Refund OR DBK months from the date of receipt of refund application from the date of filing of DBK Claim (Section 75A)
(Section 27A)
Refund = Rebate of IGST paid for Export under GST + Refund of ITC for Export under GST + Duty Drawback for Export under Customs +
Other Cases of Refund

Vishal Jain Page 5 Praveen Jain

 Duty Drawback

DUTY DRAWBACK UNDER SECTION 74

Re-export of Goods WITHOUT Goods DBK

Use – Section 74(1) Any Goods DBK = 98% of Import Duty (ID)
Note: Time Limit for applying DBK = 2
Yrs. + Extension of 2 Yrs. by CBIC
Re-export of Goods AFTER Use Goods DBK
– Section 74(2) read with (i) Nil
Notification Number 19/1965 (a) Wearing Apparel, Note: NO DBK is admissible at all
(b) Tea Chests,
(c) Unexposed Photographic Films,
Paper & Plates and X-Ray Films
(d) Exposed Cinematography Films
passed by Board of Film Censors
(ii) DBK = ID – [ID * Prescribed Rates] (Deduction Method)
(a) Motor Cars by ANY Person Period of Usage Prescribed Rates
(b) ANY Goods by Individual for During 1 Yr.
st 4% for each quarter OR part of quarter
Personal and Private Use During 2nd Yr. 3% for each quarter OR part of quarter
Note: Time Limit for applying DBK = 2 During 3 Yr.
rd 2.5% for each quarter OR part of quarter
Yrs. + Extension of 2 Yrs. by CBIC During 4th Yr. 2% for each quarter OR part of quarter
(iii) Any Other Goods (Not covered in (i) DBK = ID * Prescribed Rates (Multiplication Method)
and (ii) above) Period of Usage Prescribed Rates
Note: Time Limit for applying DBK = 1 & <= 3 months 95%
½ Yrs. > 3 months <= 6 months 85%
> 6 months <= 9 months 75%
> 9 months <= 12 months 70%
> 12 months <= 15 months 65%
> 15 months <= l8 months 60%
> 18 months Nil

Vishal Jain Page 6 Praveen Jain

 Duty Drawback
Notes:
(i) Re-exporter must be the SAME person who imported the goods
(ii) Exported goods must be the same which were imported earlier (i.e. Identity of goods should be the SAME)
(iii) Re-export need NOT be from same Port of Entry
(iv) Time Limit for filing DBK manually is 3 months from the date of Let Export Order under Section 51 (+ Extension of 3 months by Assitant /
Deputy Comm. + Extension of 6 months by Comm.)
(v) Period of Usage for computing DBK under Section 74(2) is calculated from the Date of Payment of Import Duty till the Date of Entry in
Port for Export with reference to which rate of duty is calculated under Section 16 (i.e. Date of LEO)
(a) In case of Provisional Assessment under Section 18, time limit is counted from date of Provisional Payment of Import Duty and NOT
from date of finalization of Provisional Assessment.
(b) In case of Warehousing, time limit is counted from date of Clearance of Goods for Home Consumption on Payment of Import Duty and
NOT from date when goods are imported in India

Example 1: Period of Usage for DBK u/s 74 (Self-Assessment) Example 2: Period of Usage for DBK u/s 74 (Provisional Assessment)
Particulars Date / Period Particulars Date / Period
Date of Payment of ID 10-04-2019 Date of Payment of ID (Provisional Assessment) 10-04-2019
Date of Entry in Port of Export 30-03-2020 Date of Payment of Diff. ID (Final Assessment) 10-10-2019
Period of Usage (10-04-2019 to 30-03-2020) Date of filing SB/BOE u/s 50 30-06-2020
4 Quarters
(11 Months 20 Days) Date of LEO u/s 51 04-07-2020
Period of Usage (10-04-2019 to 04-07-2020)
5 Quarters
(1 Year 2 Months 24 Days)

Example 3: Wearing Apparel imported by A Ltd. and Exported by A Example 4: Wearing Apparel imported by A Ltd. and Exported by A
Ltd. without Usage  DBK under Section 74(1) Ltd. after Usage  DBK under Section 74(2)
Particulars Amount Particulars Amount
Import Duty paid on Import Rs.1,00,000 Import Duty paid on Import Rs.1,00,000
Period in India (During entire period, such Period in India (Such Wearing Apparel was used
4 Mths. 4 Mths.
Wearing Apparel is NOT used at all) in India)
DBK = Rs.1,00,000 * 98% Rs.98,000 DBK Nil

Vishal Jain Page 7 Praveen Jain

 Duty Drawback
Example 5: Motor Car imported by A Ltd. and Exported by A Ltd. Example 6: Motor Car imported by A Ltd. and Exported by A Ltd.
without Usage  DBK under Section 74(1) after Usage  DBK under Section 74(2)
Particulars Amount Particulars Amount
Import Duty paid on Import Rs.1,00,000 Import Duty paid on Import Rs.1,00,000
Period in India (During entire period, such 2 Yr. 9 Mths. Period of Usage in India (Out of which 1 4 st 2 Yr. 9 Mths.
Motor Car is NOT used at all) 10 Days months, Motor Car was not used) 10 Days
DBK = Rs.1,00,000 * 98% Rs.98,000 DBK = Rs.1,00,000 – (Rs.1,00,000 * 38%) Rs.62,000
Note: It is assumed that CBIC has given extension of time for DBK Note: It is assumed that CBIC has given extension of time for DBK

Example 7: Computer imported by A Ltd. and Exported by A Ltd. Example 8: Computer imported by A Ltd. and Exported by A Ltd.
without Usage  DBK under Section 74(1) after Usage  DBK under Section 74(2)
Particulars Amount Particulars Amount
Import Duty paid on Import Rs.1,00,000 Import Duty paid on Import Rs.1,00,000
Period in India (During entire period, such 1 Yr. 2 Mths. Period of Usage in India (Out of which 1 4
st 1 Yr. 2 Mths.
Computer is NOT used at all) 10 Days months, Computer was not used) 10 Days
DBK = Rs.1,00,000 * 98% Rs.98,000 DBK = Rs.1,00,000 * 65%) Rs.65,000

Vishal Jain Page 8 Praveen Jain

 Duty Drawback

DUTY DRAWBACK UNDER SECTION 75

All Industry Rate (AIR) –  Basics of AIR:

Section 75 read with Rule 3, As ITC of IGST & Compensation Cess is taken on inputs imported by manufacturer, DBK of the same
Rule 4, Rule 5 and Rule 9 of shall NOT be available. Thus, now there is ONLY one category of AIR of DBK, where DBK of Customs
Customs, Central Excise Duties Duty (excluding IGST & Compensation Cess) is claimed.
Drawback Rules, 2017  Rule 3 – Fixation of AIR by Central Government:
(AIR is fixed by Central (i) AIR is fixed by CG considering the average incidence of duty on a representative cross-section of
Government) importer. The duty incidence of inputs is considered.
(ii) DBK admissible shall be reduced taking into account
 the lesser duty paid, if any OR
 the rebate / refund / credit obtained, if any.
(iii) No DBK shall be admissible
 if the said goods are taken into use after manufacture OR
 if the said goods are manufactured using imported materials / excisable materials on which duties
have NOT been paid.
 Rule 4 – Revision of AIR by Central Government:
CG may revise AIR.
 Rule 5 – Relevant Date for AIR:
Export by Filing of SB / BOE  Date of LEO u/s 50
Export by Post  Date of Delivery of Export Goods to Postal Authority
Note: If AIR is allowed from retrospective effect, such new AIR shall be effective from earlier date but
NOT be earlier than date of changes in rate of duty of inputs used in export goods.
 Rule 9 – Upper Limit for DBK as per AIR:
DBK => Market Price in India  No DBK (Section 76)
DBK < Market Price in India  Actual DBK OR 1/3rd of Market Price, whichever is lower (Rule 9)
(a) Notification No. 89/2017 – AIR:
Rate of DBK on FOB or on  Rate of DBK has been expressed as % of FOB Value or Rate per Unit
Quantity quantity of export goods, unless specifically stated otherwise, are

Vishal Jain Page 9 Praveen Jain

 Duty Drawback

inclusive of rate applicable to packing material.

Rates of DBK not to apply  Rates of DBK shall NOT be applicable to export of a product if such
(As Import Duty is NOT product is
paid, DBK is NOT allowed) (a) Manufactured wholly or partly in Warehouse under Section 65
of Customs Act, 1962
(b) Manufactured and exported in discharge of export obligation
against an Advance Authorization (AA) or Duty Free Import
Authorization (DFIA) issued under Duty Exemption Scheme of
FTP
(c) Manufactured and exported by a 100% EOU or by a unit in Free
Trade Zone / SEZ
Brand Rate (BR) and Special  Rule 6 – Fixation of Brand Rate by Principal Comm. / Comm. on Application by Assessee
Brand Rate (SBR) – Section 75 (i) Application for BR is made by Assessee within 3 Months of issuance of Let Export Order under
read with Rule 6, Rule 7 and Section 51 in respect of his product if NO AIR has been fixed in DBK Schedule
Rule 8 of Customs, Central (ii) BR is fixed by Principal Commissioner / Commissioner
Excise Duties Drawback Rules, (iii) BR is applicable only to specific goods exported by specific exporter.
2017  Rule 7 – Fixation of Special Brand Rate by Principal Comm. / Comm. on Application by Assessee
(BR and SBR is fixed by (i) Application for SBR is made by Assessee within 3 Months of issuance of Let Export Order under
Principal Comm. / Comm. on Section 51 in respect of his product if AIR has been fixed in DBK Schedule but AIR < 80% of the
Application by Assessee) Actual Duties Incidence suffered by him
(ii) SBR is fixed by Principal Commissioner / Commissioner
 Rule 6 and Rule 7 – Extension of Time Limit & Fees for BR & SBR
Authority Extension and Fees
Assistant Commissioner /  Extension: 3 Months
Deputy Commissioner  Fees: Lower of 1% of FOB Value or Rs.1,000
Principal Commissioner /  Extension: 6 Months
Commissioner of Customs  Fees: Lower of 2% of FOB Value or Rs.2,000
 Rule 6 and Rule 7 – Procedure for Claim of BR & SBR
(i) Where the exporter desires that he may be granted DBK provisionally, he shall specifically mention
in the application his request for allowance of provisional drawback. The amount of DBK as intended

Vishal Jain Page 10 Praveen Jain

 Duty Drawback

to be claimed by the exported shall be stated in application.

(ii) The concerned officer may, after considering the application, allow provisionally payment of an
amount not exceeding the amount claimed by the exporter. While allowing such provisional DBK, he
may require the exporter to submit a Bond with Surety or Security binding himself
 to refund the amount so allowed provisionally, if for any reason, it is found that DBK was not
admissible OR
 to refund the excess, if any, paid to such manufacturer exporter provisionally, if it is found that a
lower amount was payable as DBK
(iii) It is important to note that
 in case of BR, Bond is required to be executed for entire amount of DBK provisionally granted
under Rule 6;
 in case of SBR, Bond is required to be executed for the difference between DBK as per Rule 3 (i.e.
AIR) and DBK provisionally authorized under Rule 7.
 Rule 8 – Prohibition of DBK of BR & SBR
Situation DBK
Export Value < Value of Imported Materials No DBK
Export Value < Noti. % of Value of Imported Materials No DBK

Example 1: DBK under Section 75 – AIR, BR and SBR (Prohibition Example 2: DBK under Section 75 – AIR, BR and SBR (Prohibition
under Section 76) under Section 76)
Particulars DBK u/s 75 Particulars DBK u/s 75
DBK under S.75 – Rs.30 DBK under S.75 – Rs.50,000
DBK under S.75 – Rs.30,000 MP of Export Goods – Rs.40,000
DBK under S.75 – Rs.50,000
MP of Export Goods – Rs.3,00,000

Example 3: DBK under Section 75 – AIR (Rule 3) Example 4: DBK under Section 75 – AIR (Rule 3)
Particulars DBK u/s 75 Particulars DBK u/s 75
FOB Value declared in SB / BOE (10,000 Units) 5,00,000 FOB Value declared in SB / BOE (10,000 Units) 5,00,000

Vishal Jain Page 11 Praveen Jain

 Duty Drawback

AIR – 20% of FOB Value 1,00,000 AIR – Rs.8 / Unit 80,000

Example 5: DBK under Section 75 – AIR (Rule 3)

Particulars DBK u/s 75
FOB Value declared in SB / BOE (10,000 Units) 5,00,000
AIR – Lower of 20% of FOB or Rs.8 / Unit 80,000

Example 6: DBK under Section 75 – AIR (Prohibition under Section 76) Example 7: DBK under Section 75 – AIR (Restriction under Rule 9)
Particulars DBK u/ 75 Particulars DBK u/ 75
MP of Export Goods Rs.10,000 MP of Export Goods Rs.60,000
FOB Value declared in SB / BOE Rs.1,20,000 FOB Value declared in SB / BOE Rs.1,20,000
AIR of DBK u/s 75 (40% of FOB) Rs.48,000 AIR of DBK u/s 75 (40% of FOB) Rs.48,000
DBK allowed as per Section 76 Nil DBK allowed as per Rule 9 Rs.20,000
Note: As DBK on Export Goods is more than MP of Export Goods, Note: As DBK on Export Goods is less than MP of Export Goods, DBK
DBK u/s 75 is NOT allowed. u/s 75 is allowed (Lower of 1/3 of MP of Export Goods i.e. 20,000 OR
DBK as per AIR i.e. 48,000).

Example 8: DBK under Section 75 – SBR (Rule 7)

Particulars FOB Value AIR (20% of FOB) Import Duty (ID) 80% of ID SBR
Case 1 Rs.1,00,000 Rs.20,000 Rs.18,000 Rs.14,400
Case 2 Rs.1,00,000 Rs.20,000 Rs.24,000 Rs.19,200
Case 3 Rs.1,00,000 Rs.20,000 Rs.30,000 Rs.24,000

Example 9: Bond for SBR (Rule 7) Example 10: Bond for SBR (Rule 7)
Particulars DBK u/ 75 Particulars DBK u/ 75
DBK as per AIR Rs.70,000 DBK as per AIR Rs.70,000
DBK as per SBR Rs.1,00,000 DBK as per SBR Rs.1,00,000
Provisional SBR Claimed Rs.80,000 Provisional SBR Claimed Rs.70,000
Execution of Bond (Rs.80,000 – Rs.70,000) Rs.10,000 Execution of Bond (Rs.70,000 – Rs.70,000) Nil

Vishal Jain Page 12 Praveen Jain

 Duty Drawback

COMMON PROVISIONS FOR DRAWBACK UNDER SECTION 74 & DRAWBACK UNDER SECTION 75

Interest on Drawback – Section

(i) Interest by Department to Assessee for Delayed DBK:
75A If DBK sanction is sanctioned after 1 month of filing of DBK claim, then pay Interest @ 6% p.a. for delay
beyond 1 month along with DBK to Assessee.
(ii) Interest by Assessee to Department for Erroneous DBK:
If DBK sanctioned is erroneous granted, then recover Interest @ 15% p.a. from the date of erroneous
refund along with DBK from Assessee.
Note: If such payment is NOT made within 2 months from the date of demand, then the case will be
transferred to Recovery Cell.
Prohibition & Regulation of (i) Prohibition on DBK: No DBK shall be allowed if
Drawback – Section 76  DBK < Rs.50 OR
 DBK >= Market Price of Export Goods
Note: The market price is as prevailing in India and not the price which exporter expects to receive from
the foreign customer.
(ii) Prohibition or Regulation on DBK: If Export Goods likely to be smuggled back, then Central
Government can prohibit or impose restrictions.

Example 1: Interest on Delayed DBK by Department to Assessee Example 2: Interest on Erroneous DBK by Assessee to Department
Particulars Interest u/s 75A Particulars Interest u/s 75A
DBK Rs.50,000 Erroneous DBK Refunded Rs.20,000
Filing of DBK by Assessee 30-07-20XX Receipt of Excess DBK by Assessee 20-06-20XX
Receipt of DBK by Assessee 20-10-20XX Return of Erroneous DBK by Assessee 20-10-20XX
No. of days of delay (31-08-20XX to 20-10-20XX) 59 days No. of days of delay (20-06-20XX to 20-10-20XX) 122 days
Rate of Interest 6% p.a. Rate of Interest 15% p.a.
Amount of Interest (Rs.50,000 * 6% * 59 / 365) Rs.485 Amount of Interest (Rs.20,000 * 15% * 122 / 365) Rs.1,003

Vishal Jain Page 13 Praveen Jain

 Duty Drawback

VJPJ Education’s Online Store in India – Instamojo

https://www.instamojo.com/vjpjeducation/

Vishal Jain Page 14 Praveen Jain

 Duty Drawback

Hearty Congratulations!!!
Our Beloved Students who shined in November 2019 Exams!!!

CA Monisha Nithiyanandam CA Vaanmathi Soundararaj

(AIR 20) (AIR 40)

CA Tamil Amudhan CA Arun Ram

CA Krishna Mahesh CA Naveen
CA Sathya Narayanan CA Abirami Karunakaran
CA Priyanka CA SreeHarii K
CA Sujith CA S Krupa
CA Daniel Leo CA Abisheik Aravindan
CA Manickam Maalan Bharathi CA Dhanush Rajendran

Vishal Jain Page 15 Praveen Jain

 Duty Drawback

CA Nithin Balaji CA Sarvan Kumar

CA Venketraman CA Santhosh Sivaramalingam
CA Keerthana CA Padmapriya
CA Vinith CA Priyanka Ramasamy
CA Karthik CA Sachin
CA Raghavendar S CA Vijay Shankar
CA Ishwarya Meenakshi CA Mufeed Ahamed
CA Romil Bothra CA Apoorva Shree
CA Payal CA Akhil KV
CA Uttam CA Gaurav
& …………………..
All the Best to those who are very much
Determined to Fight and Win the Race to become CA!!
Believe
Yourself!!
Vishal Jain Page 16 Praveen Jain
 Levy of Customs

Vishal Jain Page 1 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs

LEVY OF CUSTOMS
BIRD’S EYE VIEW

Normal Charging Section

Section 12 Levy of Duty on Import & Export

Special Charging Section Exception to Charging Section

Section 20 Re-Importation of Goods Section 13 Pilferage

Importation of Goods by Sea Abatement in case of Damage or

Section 21 Section 22
(Derelict, Wreck, Jetsam & Flotsam) Deterioration
Remission in case of Total Loss or
Section 23(1)
Destruction
Section 23(2) Relinquishment of Title

Section 24 Denaturing or Mutilation

Vishal Jain Page 2 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs

NORMAL CHARGING SECTION

Levy Assessment Collection

Stage where declaration of liability is made. Procedure of quantifying the amount of Final stage where tax or duty is actually
Person or Properties in respect of which tax  liability.  collected.
or duty is to be levied is identified and Liability to tax or duty does not depend Collection of tax or duty may be postponed
charged upon Assessment to later time for administrative convenience.

Import or Export of Goods – Section 12

Goods + Imported into OR Exported from + India

Customs Duty
Assessable Value Rate of Duty

Import Duty Export Duty

Section 14(1) Section 14(2)
Ist Sch. to CTA, 1975 IInd Sch. to CTA, 1975
Transaction Value Tariff Value [CBIC]

(Valuation Rules & Exchange (Valuation Rules & Exchange Standard Preferential (Export Duty is on very Few
Rate is ALWAYS Required) Rate is NOT Required) Rate Rate Goods)
Notes:
(a) Preferential Rate is always lesser than or equal to Standard Rate for Import Duty.
 For Imports from Most Favored Nations (MFN) (i.e. Import from Member Nations of WTO + Import from Nations having Separate
Bilateral Agreement), Preferential Rate is applied for Import Duty.
 For Imports from Other Nations , Standard Rate is applied for Import Duty.
(b) Even Government is liable to pay Import Duty if it imports any goods. However, imports of goods by Indian Navy, specific equipment
required by Police, Ministry of Defense, Costal Guard, etc. are fully exempt by virtue of specific Exemption Notification subject to
fulfilment of conditions and procedure.

Vishal Jain Page 3 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs

SPECIAL CHARGING SECTION

Re-importation of Goods – Section 20

Goods imported into India even after exportation is also liable to Import Duty

Case A: Goods manufactured in India and exported and re-imported in India

EN 158/95-Customs
Case of Re-Import Conditions for Exemption Exemption Taxable
Situation 1 Re-import of goods within 3 Common Conditions BCD, SWS, IGST Nil
Reimport in India for Repairs / years of export (10 years in case (a) Re-export of goods and GST Cess is
Reconditioning of goods other of export to Nepal) within 6 months (+ 6 fully exempt
than Specified Goods months extension by
(Sales from India Principal Commissioner
Return to India for Repairs or Commissioner) from
Send Back from India after Repairs) date of re-import
Situation 2 Re-import of goods within 1 year (b) Assistant Commissioner BCD, SWS, IGST Nil
Reimport in India for of export / Deputy Commissioner and GST Cess is
Reprocessing / Refining / Note: If any loss is noticed during is satisfied about fully exempt
Remaking / Other Similar such operation, such loss shall be identity of such goods
Process exempted from whole of (though quantity re-
(Sales from India Customs Duties subject to imported is short / low)
Return to India for Reprocess satisfaction of Assistant (c) Importer at the time of
Send Back from India after Reprocess) Commissioner / Deputy importation executes a
Commissioner. Bond

Vishal Jain Page 4 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs
Case B: Goods re-imported without being subjected to re-manufacturing or re-processing through melting, recycling or recasting abroad
EN 45/2017-Customs
Case of Re-Import Conditions for Exemption Exemption Taxable
Situation 1 Export Benefits claimed are as Common Conditions Import Duty on LOWER of
Re-import in India where the follows: (a) Re-import should be in 3 Re-Importation Import Duty on Re-
earlier Export was under (a) Export and claiming Years (+ 2 Years – Importation
Export Benefits Drawback OR Refund of extension) from Export. Taxable Portion OR
(Sales from India Customs / Central Excise / (b) Identity of goods shall [Amount of Drawback
Sales Return to India) State Excise / IGST remain the same (i.e. Re- / Refund OR
(b) Export under Bond / LUT imported goods shall Amount of IGST not
without payment of IGST at NOT be subjected to re- paid at the time of
the time of Export manufacturing, re- export OR
(c) Export under Duty processing through Amount of IGST and
Exemption Scheme (Advance melting, recycling or GST Com. Cess
Authorization / Duty Free Import recasting abroad) leviable at time &
Authorization or Export However, exemption is place of Original
Promotion Capital Goods Scheme)
NOT applicable in below Import]
Situation 2 (a) Export was for repairs. Also, cases: Not Applicable Value = Fair Cost of
Re-import in India is after no Export Benefits was given (a) Re-imported goods had Repairs including
Repairs outside India and on their Export. been exported by EOU Cost of Materials used
where the earlier Export was (b) Ownership of goods shall or Free Trade Zone for repairs (whether
NOT under Export Benefits remain the same (b) Re-imported goods had such costs are actually
(Purchase into India been exported from incurred or not) +
Return outside India for Repairs Public Warehouse or Insurance and Freight
Send Back to India after Repairs) Private Warehouse Charges (both ways)
Situation 3 - (c) Re-imported goods falls BCD, SWS, IGST Nil
Re-import in India in Residuary under Fourth Schedule and GST Cess is
Cases to Central Excise Act, fully exempt
(Taken out of India for Exhibition 1944 (Tobacco &
Send Back to India after Exhibition) Petroleum Products)

Vishal Jain Page 5 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs
Recent Amendment
Clarification regarding applicability of Notification No. 45/2017-Customs on Goods which were exported earlier for exhibition purpose /
consignment basis – CBIC Circular 21/219 – Customs
Clarification  It has clarified vide Circular No. 108/27/2019-GST that the activity of sending / taking the specified goods (i.e. goods sent /
taken out of India for exhibition or on consignment basis for export promotion except the activities satisfying the tests laid
down in Schedule I of the CGST Act, 2017) out of India do not constitute supply within the scope of Section 7 of the CGST
Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as
‘zero rated supply’ as per the provisions contained in Section 16 of the IGST Act, 2017. Also, there is no requirement of
filing any LUT/bond as required under Section 16 of IGST Act, 2017 for such activity of taking specified goods out of India.
 Therefore, no integrated tax is required to be paid for specified goods at the time of taking these out of India, the activity
being not a supply, hence the situation of NN 45/2017-Customs (goods exported under bond without payment of integrated
tax) requiring payment of IGST at the time of re-import of specified goods in such cases is not applicable.
 It is clarified that such cases will fall more appropriately under residuary entry of the said Notification and thus the
exemption is available without any conditions.
 Further, this clarification is also applicable to cases where exports have been made to related or distinct persons or to
principals or agents, as the case may be, for participation in exhibition or on consignment basis, but, such goods exported
are returned after participation in exhibition or the goods are returned by such consignees without approval or
acceptance, as the case may be, the basic requirement of ‘supply’ as defined cannot be said to be met as there has been no
acceptance of the goods by the consignees. Hence, re-import of such goods after return from such exhibition or from such
consignees will be covered under residual entry of the NN 45/2017-Customs, provided re-import happens before 6 months
from the date of delivery challan.

Vishal Jain Page 6 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs
Importation of Goods by Sea – Section 21
Derelict, Wreck, Jetsam & Flotsam brought or coming into India is also liable to Import Duty unless they are entitled to be admitted free of duty

Derelict Wreck Jetsam Flotsam

Vessel or Cargo, abandoned at sea by Vessel or Cargo or any Goods jettisoned from the vessel to save Jettisoned goods, which
those in charge of it (master & crew) property which are cast from sinking (usually done voluntarily in are floating in the sea
without hope on their part of recovering ashore by tides after ship order to lighten vessel in an emergency) Flotsam does not sink
or intention of returning to it. wreck Jetsam gets sunk. but floats.
Coverage of Vessel and Goods inside Vessel Coverage of ONLY Goods

Example 1: Export of Goods  Export Benefit claimed and thereafter Example 2: Export of Goods  Export Benefit claimed and thereafter
Import of Goods  How much Payment of Import Duty? Import of Goods  How much Payment of Import Duty?
Export Benefit Import Duty Taxable Exempt Export Benefit Import Duty Taxable Exempt
100 150 100 50 0 100 0 100
150 100 100 0 100 0 0 0

Example 2: Goods were imported from USA on 1st April 2018 for CIF – Rs.1 Crore and Import Duty - Rs.10 lakhs was paid. Goods were sent for
repairs to USA in May 2020 and reimported in December 2020. Repairs were carried out free of cost. Compute Import Duty.
(a) Freight and Insurance from India to USA – Rs.70,000
(b) Freight and Insurance from USA to India – Rs.95,000
(c) Fair Value of Repair Charges – Rs.2,00,000
(d) Fair Value of Materials used in Repair – Rs.30,000
(e) Rate of BCD is @ 10% and Rate of IGST is @ 18%
Particulars Amount (Rs.)
Assessable Value at the time of Re-Importation (applying EN 45/2017) = Rs.70,000 + Rs.95,000 + Rs.2,00,000 + Rs.30,000 Rs.3,95,000
BCD @ 10% = Rs.3,95,000 * 10% Rs.39,500
SCS @ 10% = Rs.39,500 * 10% Rs.3,950
IGST @ 18% = Rs.4,38,450 * 18% Rs.78,921
Total Import Duty Rs.1,22,371

Vishal Jain Page 7 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs

EXCEPTION TO CHARGING SECTION

Pilferage / Petty Remission on Loss OR Relinquishment of Title Denaturing OR

Particulars Damage OR Deterioration
Loss Destruction of Goods Mutilation
Provision Section 13 Section 22 Section 23(1) Section 23(2) / Section 68 Section 24
Meaning Steal in Small Physical Damage OR Total / Major Loss OR Giving up of Ownership Change of
Quantities Deterioration in Quality Destruction to Central Government Nature of Goods
Existence of Yes Yes No Yes Yes
Goods
Levy / ID is NOT levied on ID is levied but it is collected ID is levied but it is ID is levied but it is not ID is levied but it
Collection of Importer. However, on lesser value remitted collected is collected @
Import Duty ID is levied on (i.e. Abatement of Duty) (i.e. Remission of Duty) lesser RoD on
(ID) Custodian as per denatured or
Section 45 mutilated goods
Right or Right of Importer Permission from Assistant Permission from AC / Right of Importer Permission from
Permission (No onus on Commissioner / Deputy DC (Proof of Loss or (Intimation to be given to Proper Officer
Importer to prove Commissioner (AC / DC) Destruction is to be Comm. of Customs along
Pilferage) given as onus is on with handing over of
Importer) relevant documents)
Place of After unloading but Till Unloading – Damaged / Till Actual Clearance Till PO’s Order for HC Till PO’s Order
Occurrence before PO’s Order Deteriorated Goods for Home (from Customs Station or for HC (from
for Home (During Transportation) Consumption (from Customs Warehouse) Customs Station
Consumption or After Unloading but before Customs Station or (At Customs Station OR or Customs
Warehousing Examination – ONLY Customs Warehouse) At Customs Warehouse) Warehouse)
(At Customs Damaged Goods (At Customs Station (At Customs
Station) (At Customs Station) OR At Customs Station OR At
After Warehousing but before Warehouse) Customs
Actual Clearance for HC – Warehouse)
ONLY Damaged Goods
(At Customs Warehouse)

Vishal Jain Page 8 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs
Notes:
(1) Pilferage – Section 13:
(a) Circumstances in which Pilferage can be claimed
i. There should be evidence of tampering with packages
ii. There should be blank space for missing articles in package and
iii. The missing articles should be unit articles and NOT part articles.
(b) Conditions to claim Pilferage
i. If goods are pilfered after unloading of goods, Section 13 is applicable. However, if goods are pilfered before unloading of goods,
Section 13 is NOT applicable.
ii. If goods are pilfered before Proper Officer’s order unloading of goods, Section 13 is applicable. However, if goods are pilfered after
Proper Officer’s order but before clearance for Home Consumption or Warehousing, Section 13 is NOT applicable.
iii. If goods are restored to importer, then importer shall become liable for payment of Import Duty and Custodian will no more be
liable for Import Duty.
(c) Other Points of Pilferage
i. For “Pilferage” at Customs Station, the liability of Import Duty is on Custodian (Section 45) and NOT on Importer (Section 13). It is
important to note that Section 13 & Section 45 are independent i.e. whether duty is payable by Custodian or not, remission cannot
be denied to Importer by Department.
ii. For “Pilferage” at Customs Warehouse, the liability of Import Duty is on Importer only and NOT on Warehouse-Keeper.
iii. If goods are pilfered at Customs Station but Importer has already paid Import Duty, then remission is allowed in form of Refund.
iv. Section 13 (Pilferage Loss) and Section 23(1) (Total or Major Loss) are mutually exclusive i.e. For Pilferage Loss, only Section 13 can
be used and for Total or Major Loss, only Section 23(1) can be used.
(2) Damage or Deterioration – Section 22:
(a) Meaning of Damage or Deterioration
i. Damage: Physical damage to goods i.e. goods are not fit to be used for purpose for which they were meant.
ii. Deterioration: Reduction in quality of goods due to natural loss
(b) Amount of Duty chargeable after Abatement
i. Import Duty after Damage or Deterioration = (Import Duty before Damage or Deterioration / Value of Goods before Damage or
Deterioration) * Value of Goods after Damage or Deterioration
ii. Value of Goods after Damage or Deterioration
 Value ascertained by Proper Officer (No Sale of Goods) OR

Vishal Jain Page 9 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs
 GROSS Sale Proceeds of Damaged or Deteriorated Goods (Sale of Goods by Proper Officer by Public Auction, Tender OR Any
Other Manner with consent of Importer)
(c) Other Points of Damage or Deterioration
i. Damage or Deterioration of goods should NOT be due to willful act, negligence or default of the owner, his employee or agent.
ii. Damage should happened before or during Unloading
iii. Deterioration may happen
 Before or during Unloading
 After Unloading but before Examination for Assessment at Customs Station
 Before Actual Clearance from Customs Warehouse
(3) Remission on Loss or Destruction – Section 23(1):
(a) Circumstances in which Remission can be claimed
i. Remission is permissible ONLY in case of total loss of goods. This implies that loss is forever and beyond recovery. The loss referred
to this section is generally due to natural causes like fire, flood, etc.
(b) Other Points of Remission
i. Remission is allowed in case of Loss or Destruction at Customs Station or at Customs Warehouse.
ii. Loss or Destruction is to be proved to satisfaction of Assistant Commissioner / Deputy Commissioner and he may pass Remission
Order cancelling payment of duty. However, if Import Duty is already, then remission is allowed in form of Refund.
iii. Section 13 (Pilferage Loss) and Section 23(1) (Total or Major Loss) are mutually exclusive i.e. For Pilferage Loss, only Section 13 can
be used and for Total or Major Loss, only Section 23(1) can be used.
(4) Relinquishment of Title – Section 23(2) / Section 68:
(a) Examples when Importer may opt for Relinquishment of Title
i. Goods may not be according to the specifications,
ii. Goods may have been damaged or deteriorated,
iii. Breach of contract and importer is unwilling to take delivery,
iv. Substantial fall in the market price of goods in India, etc.
(b) Other Points of Relinquishment of Title
i. Relinquishment of Title when done at Customs Station, Section 23(2) is applicable. Relinquishment of Title when done at Customs
Warehouse, Section 68 is applicable.
ii. If any offence is committed under any law, then Relinquishment of Title shall NOT be allowed to the importer.

Vishal Jain Page 10 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs
iii. Importer has to relinquish his title to goods unconditionally and abandon them. Relinquishment is done by endorsing the document
of title (i.e. Bill of Lading / Airway Bill, etc.) along with Invoice to Commissioner of Customs.
iv. Title once relinquished / surrendered CANNOT be reclaimed.
v. Relinquishment of Title relieves importer ONLY from payment of Import Duty; it does NOT from payment of other charges like
custodian charges, etc.
(5) Denaturing / Mutilation – Section 24:
(a) Denaturing
i. Meaning: Change in nature of goods making them unfit for one or more purposes
ii. Example: “Raw Alcohol” @ say 20% is imported but contended to be used as “Industrial Alcohol” @ say 10%  Raw Alcohol will be
denatured & Import Duty @ 10% will be paid
(b) Mutilation
i. Meaning: Destroying Goods in good condition when imported as Waste / Scrap
ii. Example: “Second Hand Machinery” @ say 20% imported but contended to be used as “Waste/Scrap” @ say 10%  Second Hand
Machinery will be mutilated & Import Duty @ 10% will be paid

PILFERAGE OF GOODS U/S 13 VS. LOSS OR DESTRUCTION OF GOODS U/S 23

Particulars Pilferage of Goods u/s 13 Loss or Destruction of Goods u/s 23
Meaning The word “pilferage” means to steal, especially in small The word “lost or destroyed” means total loss of
quantities, petty theft. goods i.e. loss is forever and beyond recovery.
Duty on goods Duty is not at all leviable on such goods. Duty payable on the goods shall be remitted.
Subsequent restoration of Where pilfered goods are restored to the importer after In case of destruction the goods, the restoration of
goods pilferage, the importer is liable to duty. goods is not possible.
Warehoused goods Section 13 provisions are not applicable to warehoused Section 23(1) provisions are also applicable to
goods. warehoused goods.
Onus to prove the pilferage The onus to prove pilferage does not lie on the importer. The importer has to prove loss / destruction to the
or loss / destruction of goods satisfaction of the AC / DC of Customs.
Time of occurrence of The imported goods must have been pilfered after The imported goods are lost / destroyed at any
pilferage or loss / destruction unloading thereof and before the proper officer has time before their clearance for home consumption.
of goods made an order for clearance for home consumption or
deposit in warehouse.

Vishal Jain Page 11 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs
TIME & PLACE OF OCCURRENCE OF VARIOUS EVENTS
Particulars Before or During Unloading At Customs Station At Customs Warehouse
Pilferage / Petty Loss of
-*
Goods (After Unloading & Before PO Order)
Abatement for Damaged
Goods (Before Examination for Assessment)
Abatement for
Deteriorated Goods
Remission on Major /
-*
Total Loss of Goods
Remission on
-*
Destruction of Goods
Relinquishment of Title
NA**
of Goods
Denaturing or
NA**
Mutilation of Goods
Notes:
(a) * In case of Pilferage Loss / Major Loss / Destruction of Goods before unloading, such goods do not reach Customs Frontier of India i.e.
Import Duty on such goods is not levied at all and, hence there is no question of collection of Import Duty on such goods. That being the
situation, question of benefit non-payment of ID (Section 13) or benefit remission of ID (Section 23) does not arise.
(b) ** There cannot be a question of Relinquishment of Title / Denaturing or Mutilation of Goods before unloading of such goods.

Vishal Jain Page 12 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs
Example 1: Import of 1,00,000 Units and 100 Units Pilfered @ CS Example 2: Import of 1,00,000 Units and 100 Units Pilfered @ CWH
Particulars Importer Custodian Particulars Importer WH Keeper
Import Duty on 100 Units Import Duty on 100 Units
Import Duty on 99,900 Units Import Duty on 99,900 Units

Example 3: Import of 1,00,000 Units and 30,000 Units Lost @ CS Example 4: Import of 1,00,000 Units and 30,000 Units Lost @ CWH
Particulars Importer Custodian Particulars Importer WH Keeper
Import Duty on 30,000 Units Import Duty on 30,000 Units
Import Duty on 70,000 Units Import Duty on 70,000 Units

Example 5: Deterioration of Goods after unloading at Customs Station Example 6: Damage of Goods after unloading at Customs Station
Options available to Importer Options available to Importer
Option 1: Relinquishment of Title under Section 23(2)  No Import Option 1: Relinquishment of Title under Section 23(2)  No Import
Duty (but give up the goods to Govt.) Duty (but give up the goods to Govt.)
Option 2: Abatement under Section 22 not available as Deterioration Option 2: Abatement under Section 22  Pay lesser Import Duty on
shall be before unloading of goods Abated Value (and clear the goods for Home Consumption)

Example 7: Import Duty on Abatement

Particulars Assessable Value Import Duty @ 10%
Before Damage / Deterioration of Goods Rs.10,00,000 Rs.1,00,000
After Damage / Deterioration of Goods Rs.8,00,000 * Rs.80,000
Note: Value of Goods after Damage / Deterioration is either determined by PO OR Gross Sale
Proceeds of such Goods if importer is not satisfied with value determined by PO.

Example 8: Import Duty on Short Delivery of Goods

Particulars Quantity
Import of Metal Scrap from USA 6000 M.T.
Importer filed Bill of Entry for Home Consumption and paid Import Duty 6000 M.T.
Actual Quantity available at Docks when Importer went to take delivery 5500 M.T.

Vishal Jain Page 13 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs

from Port Trust Authorities (before clearance for Home Consumption)

Note: There was NO Short Landing of Cargo and thus levy was on 6000 M.T. However, short-
delivery of 500 M.T. was substantiated by Port Trust Authorities through “Weighment Certificate”.
Remission of Import Duty under Section 23
Particulars Levy Collection
Import Duty on 5500 M.T.
Import Duty on 500 M.T.
Note: 500 M.T. was lost when it was in custody of Port Authorities i.e. before clearance for home
consumption was made. Also, the loss of 500 MT of scrap cannot be construed to be pilferage, as loss
of such huge quantity. Thus, importer can apply for remission of import duty on 500 M.T. under
Section 23 in form of refund claim as import duty on 500 M.T. is already paid.

Example 9: Options available for Importer Example 10: Import of 1,00,000 Units and 30,000 Units are lost
Relinquish Particulars Remission
Particulars Remission
ment Destroyed in Warehouse before clearance of Home
Damaged in Warehouse before Consumption
clearance of Home Consumption Destroyed on Wharf before clearance of Home
Deteriorated in Warehouse before Consumption
clearance of Home Consumption Destroyed after clearance from Warehouse

Vishal Jain Page 14 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs

VJPJ Education’s Online Store in India – Instamojo

https://www.instamojo.com/vjpjeducation/

Vishal Jain Page 15 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs

Hearty Congratulations!!!
Our Beloved Students who shined in November 2019 Exams!!!

CA Monisha Nithiyanandam CA Vaanmathi Soundararaj

(AIR 20) (AIR 40)

CA Tamil Amudhan CA Arun Ram

CA Krishna Mahesh CA Naveen
CA Sathya Narayanan CA Abirami Karunakaran
CA Priyanka CA SreeHarii K
CA Sujith CA S Krupa
CA Daniel Leo CA Abisheik Aravindan
CA Manickam Maalan Bharathi CA Dhanush Rajendran

Vishal Jain Page 16 Praveen Jain

Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Levy of Customs

CA Nithin Balaji CA Sarvan Kumar

CA Venketraman CA Santhosh Sivaramalingam
CA Keerthana CA Padmapriya
CA Vinith CA Priyanka Ramasamy
CA Karthik CA Sachin
CA Raghavendar S CA Vijay Shankar
CA Ishwarya Meenakshi CA Mufeed Ahamed
CA Romil Bothra CA Apoorva Shree
CA Payal CA Akhil KV
CA Uttam CA Gaurav
& …………………..
All the Best to those who are very much
Determined to Fight and Win the Race to become CA!!
Believe
Yourself!!
Vishal Jain Page 17 Praveen Jain
Telegram App Link for GST Queries of Students – https://t.me/GST_VJnPJ_CAFinal
 Foreign Trade Policy

Vishal Jain Page 1 Praveen Jain

 Foreign Trade Policy

FOREIGN TRADE POLICY

INTRODUCTION TO FOREIGN TRADE POLICY

MEANING OF FOREIGN TRADE, TRADE POLICY & FOREIGN TRADE POLICY

Foreign Trade Trade Policy

It is the exchange of goods and services between Nations. It is a collection of Rules and Regulations which pertain to Trade.

Foreign Trade Policy i.e. FTP

(earlier called as Export Import Policy i.e. EXIM Policy)

FTP contains the basic principles and points the direction in which India propose to go as to its Foreign Trade.
Through FTP, a country set the direction of its Foreign Trade. And such FTP needs constant monitoring and updation.

FTP is a set of guidelines or instructions or procedures or regulatory requirements

 issued or laid down by the Central Government
 in matters related to Foreign Trade viz. IMPORT of GOODS / SERVICES into India OR EXPORT of GOODS / SERVICES from India.
Note: Importance of International Trade
 International trade enables a nation to specialize in those goods it can produce most cheaply and efficiently. Such goods when sold to other
countries lead to increase in foreign exchange earnings.
 International trade also enables a country to consume more than it would be able to produce if it depended only on its own resources.

Vishal Jain Page 2 Praveen Jain

 Foreign Trade Policy

LEGISLATION GOVERNING FOREIGN TRADE IN INDIA

Government of India

Ministry of Commerce & Foreign Trade (Development & Regulation) Act, 1992  Regulates International Trade
Industry (Rules + Order)  Develops International Trade
 Promotes International Trade
Foreign Trade Policy
(5 Years Policy + Annual Updation)
Director General of Headquarters at Delhi  Assist in Formulation of FTP
Foreign Trade  Implementation of FTP
Several Offices in India  Promotion of Export
(Decision of DGFT is Final and Binding)
 Grants IEC (PAN / GSTIN based on PAN)
 Issues Authorization (Permission / License)
 Monitors Export Obligation (EO)
Notes:
1. Ministry in Ministry of Commerce and Industry
Charge of FTP (i) Foreign Trade (Development & Regulation) Act, 1992: FT (D&R) Act, 1992 provides
 for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from,
India and
 for matters connected therewith or incidental thereto.
(ii) Foreign Trade Policy: FTP is framed under Section 5 of F(D&R) Act, 1992. FTP is framed and amended by Central
Government by notification in Official Gazette.
(a) 5 Years Policy: Ministry of Commerce and Industry, Government of India announces FTP in every 5 years.
Currently, effective FTP is 2015-2020.
(b) Annual Updation: It is updated every year in April in addition to changes that are made throughout the year.
2. Execution of FTP Director General of Foreign Trade (DGFT) acts as advisor and executor
(i) DGFT: Central Government may appoint any person to be DGFT for the purpose of this Act. DGFT
 shall advise Central Government in formulation of FTP and
 shall be responsible for carrying out that FTP

Vishal Jain Page 3 Praveen Jain

 Foreign Trade Policy
(ii) Key Responsibilities of DGFT: FTP is framed under Section 5 of F(D&R) Act, 1992. FTP is framed and amended
by Central Government by notification in Official Gazette.
(a) Authorization: DGFT issues authorization (earlier called as licence) for import/export. ‘Authorization’ means
a permission in terms of the FT(D&R) Act to import or export.
(b) Import Export Code: DGFT also grants Importer Exporter code (IEC) Number to importers and exporters.
Import and export without IEC number is not permitted, unless specifically exempted.
(c) Decision of DGFT is Final and Binding: Decision of DGFT is final and binding in respect of
 interpretation of any provision of FTP,
 classification of any item in ITC (HS),
 content, scope or issue of any authorization issued under the FTP.

Other Authorities involved in Implementation of FTP

(i) Central Board of Indirect Taxes and Customs (CBIC): CBIC under Ministry of Finance has two Departments
namely, Customs and GST which facilitates in implementing the provisions of the FTP.
(a) Customs Department is responsible for clearance of export and import goods after their valuation and
examination. Customs Authorities follow the policy formed by the DGFT while clearing the goods.
(b) GST Department is also involved as GST law also covers international transactions. These are treated as “inter-
state supplies. Thus, Central GST Authorities are also involved in export matters. To avoid dual control, some
taxable persons are under jurisdictions of State GST authorities. In their case, State GST Authorities are
controlling authorities.
(ii) Reserve Bank of India (RBI): RBI under Ministry of Finance is the nodal bank in the country.
(a) RBI formulates the policies related to management of money, including payments and receipts of foreign
exchange.
(b) RBI monitors the receipts and payments for exports and imports.
FTP (Ministry of Commerce) vis a vis Tax Laws (Ministry of Finance)
FTP is closely connected with Customs and GST Law. However, FTP provisions does not override provisions of tax laws.
(i) FTP has policy of duty-free clearance of imported goods for use in manufacture of goods for export. Exemption to ensure duty free
clearance has to be issued under Tax Law. If no such exemption is issued, then policy remains ineffective.
(ii) Further, actual benefit of the exemption depends on the language of exemption notifications issued by CBIC.

Vishal Jain Page 4 Praveen Jain

 Foreign Trade Policy

CONTENTS OF FTP
(SET OF DOCUMENTS WHICH CONSTITUTE FTP)

CONTENTS OF FTP

Indian Trade Classification

Foreign Trade Policy 2015-20 Handbook of Procedures (Harmonized System)
for Import and Export Itesm
Notified by CG Notified by DGFT Notified by DGFT
[under FT (D&R) Act] [in exercise of powers given by FTP] [in exercise of powers given by FTP]

Foreign Trade Policy Handbook of Procedures Input Output Norms ITC (HS) Classification of Export and
2015-2020 Volume I – 2015-2020 Volume II – 2015-2020 Import Norms – 2015-2020

 It provides basic policy  It contains procedural  It contains Standard  It contains Export-Import Policy
 It has 9 chapters aspects of policy Input Output Norms regarding export / import of
 It has many chapters (SION) of various specific item as given in Indian
and also contains goods / products Trade Classification Code based
appendices, forms and  SION are used for the on Harmonized System of
guidelines for Foreign purpose of providing Nomenclature (HSN)
Trade facility to exporters to  ITC(HS) codifies goods based on
make duty-free import 8 digit codes (similar to that used
of inputs required for in Customs / GST classification)
manufacture of export  ITC(HS) is divided in 2 Schedules
goods under  Schedule I (Import Policies):
Exemption / Prohibited, Restricted,
Remission Scheme Canalized and Free Goods
 Schedule II (Export Policies):
Most of goods are Free Goods.

Vishal Jain Page 5 Praveen Jain

 Foreign Trade Policy

STRUCTURE OF FOREIGN TRADE POLICY AND HANDBOOK OF PROCEDURES

Chapter Title in Chapter Title in

Chapters
Foreign Trade Policy Handbook of Procedures
Chapter I Legal Framework and Trade Facilitation Introduction and Trade Facilitation
Chapter II General Provisions regarding Imports and Exports Same as Policy
Chapter III Export from India Schemes (MEIS Scrip / SEIS Scrip) Same as Policy
Chapter IV Duty Exemption Schemes / Duty Remission Schemes Same as Policy
Chapter V Export Promotion Capital Goods Scheme Same as Policy
Chapter VI Export Oriented Units (EOU) Same as Policy
Electronic Hardware and Technology Parks (EHTP)
Software Technology Parks (STP)
Chapter VII Deemed Exports Same as Policy
Chapter VIII Quality Complaints and Trade Disputes Same as Policy
Chapter IX Definitions Miscellaneous Matters

Notes: Provisions relating to Special Economic Zone (SEZ) are contained in separate Act called as Special Economic Zone Act, 2005 and are not
part of FTP. However, provisions of SEZ are closely related to Foreign Trade Policy.

Vishal Jain Page 6 Praveen Jain

 Foreign Trade Policy

ORGANIZATION SET UP

Government of India

Ministry of Commerce and Industry

(Frames FTP)

Director General of Foreign Trade

(Advices CG in framing FTP and implements FTP)

Regional Authorities Committees

(Assists DGFT to implement and monitor policy) (Aid and advise DGFT on policy matters)

Policy Policy
Norms EPCG
Interpretation Relaxation
Committee Committee
Committee Committee
Notes:
(i) Exemption from Policy / Procedures: DGFT may in public interest pass such orders or grant such exemption, relaxation or relief, as he may
deem fit and proper, on grounds of genuine hardship and adverse impact on trade to any person or class or category of persons from any
provision of FTP or any procedure. While granting such exemption DGFT may impose such conditions as he may deem fit after consulting
the Committees as under:
Committees Role of Committees
(a) Norms Committees  Fixation / modification of product norms
(b) EPCG Committee  Nexus with Capital Goods (CG) and benefits under EPCG Schemes
(c) Policy Relaxation Committee (PRC)  All other issues
(ii) Personal Hearing by DGFT for Grievance Redressal:
(a) FTP provides for relaxation of policy and procedures on grounds of genuine hardship and adverse impact on trade. If an importer / an
exporter is aggrieved by any decision taken by Policy Relaxation Committee (PRC), or a decision / order by any authority in DGFT, a
specific request for personal hearing along with the prescribed application fee has to be made to DGFT.
(b) DGFT may consider request for relaxation after consulting concerned Norms Committee, EPCG Committee or Policy Relaxation
Committee (PRC). The decision conveyed in pursuance to the personal hearing shall be final and binding.

Vishal Jain Page 7 Praveen Jain

 Foreign Trade Policy

PROVISIONS RELATING TO IMPORT AND EXPORT

GENERAL PROVISIONS FOR IMPORT AND EXPORT UNDER FTP

Head Particulars
Indian Trade Export and import policies for all goods are indicated against each item in ITC (HS) of Exports Schedule and Imports
Classification Schedule. ITC (HS) is compilation of codes for all goods for export and import.
(Harmonized  Schedule I lays down the Import Policy while Schedule II lays down Export Policy.
System) - ITC (HS)
Exports and imports shall be ‘free’ except when regulated by way of ‘prohibition’, ‘restriction’ or ‘exclusive trading
through State Trading Enterprise (STE)’, as laid down in ITC (HS) of Exports and Imports.
Categorization Imports / Exports Policy for Imports / Exports under Scheme
Prohibited Goods Items prohibited for import / export. No import / export allowed.
Canalized Goods * Items reserved for import / export by STE. Non-STE cannot import / export these goods.
Restricted Goods Items restricted for import / export. Import / export allowed but subject to
conditions like licensing / authorization, etc.
Free Goods Items freely importable / exportable. No prohibition or No reservation for STE or No
restriction.
* Note: Canalized Goods are goods reserved for State Trading Enterprises – STE
(i) State Trading: State trading occurs when there exists a trading organization for which the prices and / or
quantities of international transactions in commodities are determined as an instrument in the pursuit of
government policies.
(ii) State Trading Enterprise: STE are governmental and non-governmental enterprise, including marketing boards,
which have been granted exclusive or special rights or privileges, in the exercise of which they influence through
their purchases or sales the level or direction of imports or exports
 Special Privilege: Grant of Subsidy
 Exclusive Privilege: Monopoly in the production, consumption or trade of certain goods
(iii) Examples of STE in India:
 Food Corporation of India (FCI) – Import of many cereals is only by FCI
 Mineral & Metals Trading Corporation (MMTC) – Import of certain minerals is only by MMTC
 State Trading Corporation of India Ltd (STC)

Vishal Jain Page 8 Praveen Jain

 Foreign Trade Policy
Procedure by DGFT DGFT may specify procedure to be followed by an exporter or importer or by any licencing or any other competent
authority for the purpose of implementing provisions of Foreign Trade Act, the rules and the orders made there-
under and FTP. Such procedures shall be published in Hand Book of Procedures.
Exemption from DGFT may pass such orders or grant such relaxation or relief, as he may deem fit and proper, on grounds of genuine
Policy / Procedure hardship and adverse impact on trade.
by DGFT DGFT may, in public interest, exempt any person or class or category of persons from any provision of FTP or any
procedure and may, while granting such exemption, impose such conditions as he may deem fit.
Transit Facility Transit of goods through India from / or to countries adjacent to India shall be regulated in accordance with bilateral
treaties between India and those countries and will be subject to such restrictions as may be specified by DGFT in
accordance with international conventions.
Mandatory Mandatory Documents required for Import of Goods into India:
Documents for (i) Bill of Lading / Airway Bill / Lorry Receipt / Railway Receipt / Postal Receipt
Export / Import (ii) Commercial Invoice cum Packing List (Commercial Invoice and Packing List can be given as Separate Documents)
(iii) Bill of Entry
Mandatory Documents required for Export of Goods from India:
(i) Bill of Lading / Airway Bill / Lorry Receipt / Railway Receipt / Postal Receipt
(ii) Commercial Invoice cum Packing List (Commercial Invoice and Packing List can be given as Separate Documents)
(iii) Shipping Bill / Bill of Export

IMPORT EXPORT CODE

Import and Export No export or import shall be made by any person without obtaining an IEC number unless specifically exempted.
only with IEC Application process for IEC is completely online and IEC can be generated by the applicant as per the procedure
detailed in the Handbook of Procedure.
Note: Service provider requires IEC if benefit has to availed under FTP.
PAN based IEC GSTIN (which is PAN based) OR PAN is IEC w.e.f. 1st July, 2017:
 Importer / Exporter is GST Registered Entity: GSTIN shall be treated as IEC.
 Importer / Exporter is NOT GST Registered Entity: PAN shall be treated as IEC.
Note: When anyone applies for IEC, his IEC will be same as PAN informed by him.
Proof required for Following proofs are required for IEC:
IEC  Address Proof of applicant entity, and

Vishal Jain Page 9 Praveen Jain

 Foreign Trade Policy

 Cancelled cheque bearing entity's pre-printed name or Bank Certificate.

Following proofs are NO more required for IEC:

 Copy of PAN is not required as PAN data is integrated.
 Photograph in the IEC and requirement of Digital Signature has been dispensed with.
Note: IEC is now PAN-based system generated code and may no longer be treated as identity card for identity
purposes.

AUTHORIZATION UNDER FTP

Authorization Authorization is permission / license to import or export as per provisions of FTP.

Authorization can be based on Authorization may be:

 Value and / or quantity,  Simple permission to import goods: Duty shall be payable on
 Value Addition (VA) to be achieved, import of such goods.
 Actual User Condition,  Permission to import goods duty frees* (like import under Advance
 Export Obligation (EO), Authorization, EPCG Authorization, etc.): The importer shall
 Other Conditions. execute Legal of Undertaking (LUT) / Bank Guarantee (BG) / Bond
with Customs Authorities, as prescribed, before clearance of goods.
* Note: Generally, such duty free imports are allowed subject to condition of fulfilment of Export Obligation (EO).
(i) EO may be in sense of ‘achievement of specified value addition’, or ‘in absolute quantity or value terms’.
(ii) Further, EO must be achieved within the period as specified in the Authorization
Requirement of Authorization is required for following:
Authorization (i) Import / Export of Restricted Goods / Services: Any goods / services, the export or import of which is ‘restricted’
may be exported or imported ONLY in accordance with an license / authorization / permission or in accordance
with the prescribed procedure.
(ii) Export of Special Goods: Special export authorization required for export of items such as Special Chemicals,
Organisms, Materials, Equipment’s and Technologies.
Actual User (i) Import of goods of which require an authorization can be imported only by an Actual User alone unless Actual
Condition for User condition is specifically dispensed with by DGFT. (Actual User is a person who is authorized to use
Import of Goods imported goods in his own premise)

Vishal Jain Page 10 Praveen Jain

 Foreign Trade Policy
requiring (ii) However, goods imported with actual user condition can be transferred for any reasons prescribed under
Authorization Handbook of Procedures.
Grant of (i) No person may claim and Authorization as a right.
Authorization is (ii) DGFT (or RA) shall have power to refuse
NOT right of  to grant or renew the same in accordance with provisions of
Importer / Exporter  FT (D&R) Act, rules made thereunder and FTP.
Validity of (i) Validity Period: Validity period of import or export authorization is a period within which import or export
Authorization permitted under licence / authorization / permission. etc., shall be completed.
(ii) Revalidation: Revalidation of import or export license / certificate / authorization / permission means extending
the validity period for import or export prescribed thereunder. Prescribed fees shall be paid for seeking
revalidation.

PROVISIONS FOR IMPORT UNDER FTP

Import of Goods (i) Import of Free Goods NOT requiring Authorization:
requiring  Goods which are importable without any restriction may be imported by any person.
Authorization (ii) Import of Restricted Goods requiring Authorization:
(Actual User  Import of goods of which require an authorization can be imported only by an Actual User alone unless
Condition) Actual User condition is specifically dispensed with by DGFT. (Actual User is a person who is authorized to
use imported goods in his own premise).
 However, goods imported with actual user condition can be transferred for any reasons prescribed under
Handbook of Procedures.
Import of Second (i) Import of Second Hand Goods requiring Authorization: Import of following Second Hand Goods is restricted
Hand Goods and hence import of such goods require an import authorization from Regional Authority (RA) of DGFT:
requiring (a) Personal Computers, Laptops including their Reconditioned and Refurbished Spares;
Authorization (b) Photocopier Machines, Digital Multifunctional Print & Copying Machine;
(c) Air Conditioners;
(d) Diesel Generating (DG) Set;
(e) All second hand goods other than Capital Goods
(ii) Import of Second Hand Goods NOT requiring Authorization: Following Second Hand Goods are importable
freely without any import authorization:

Vishal Jain Page 11 Praveen Jain

 Foreign Trade Policy

(a) All other Second Hand Capital Goods except aforesaid restricted second hand goods such as personal
computers, laptops, etc.)
(b) Refurbished and reconditioned spares of capital goods are freely importable subject to production of
certificate from Chartered Engineer to the effect that such spares have atleast 80% residual life of original
spare.
Import of Goods (i) Goods already imported / shipped / arrived, in advance, but not cleared from Customs may also be cleared against
requiring an authorization issued subsequently.
Authorization – Pre (ii) However, such goods already imported / shipped / arrived, in advance are
Import or Post  first warehoused against Bill of Entry for Warehousing and
Import  then cleared for home consumption against an authorisation issued subsequently.
Note: The facility is however not available to "restricted items" or “items traded through STEs”.
Re-import of Goods Capital goods, equipment, components, parts and accessories, whether imported or indigenous, except those
repaired Abroad restricted under ITC (HS) may be
NOT requiring  sent abroad for repairs, testing, quality improvement or upgradation or standardization of technology and
Authorization  re-imported without an Authorization.
Import of Goods After completion of projects abroad, project contractors
used in Project  may import, without an authorization,
Abroad NOT  goods including capital goods used in the project provided they have been used for at least 1 year.
requiring
Authorization
Import of Goods (i) Whenever goods are imported duty free or otherwise specifically stated,
requiring LUT or  importer shall execute prescribed Letter of Undertaking (LUT) or Bank Guarantee (BG) or Bond
BG  with Customs Authority before clearance of goods.
(ii)
In case of indigenous sourcing (domestic purchase),
 authorization holder shall furnish Letter of Undertaking (LUT) or Bank Guarantee (BG) or Bond
 to concerned Regional Authority (RA) before sourcing material from indigenous supplier / nominated agency
as per the prescribed procedures.
Import of Samples (i) Import of Samples: Import of samples shall be governed by Handbook of Procedure.
and Gifts (ii) Import of Gifts: Import of gifts shall be ‘free’ where such goods are otherwise freely importable under ITC (HS).
In other cases, import shall be permitted against authorization issued by DGFT.

Vishal Jain Page 12 Praveen Jain

 Foreign Trade Policy
Import of Passenger Bonafide household goods and personal effects may be imported as part of passenger baggage as per limits, terms
Baggage and conditions thereof in the Baggage Rules framed under Customs.
Import of Goods (i) Import through International Courier Terminal or Foreign Post Office are permitted as per Notifications issued by
through Courier / Department of Revenue (DOR).
Post (ii) However, importability of such items shall be regulated by FTP - ITC (HS).

PROVISIONS FOR EXPORT UNDER FTP

Export of Spares Warranty spares (whether indigenous or imported) of plant, equipment, machinery, automobiles or any other goods,
[except those restricted under ITC (HS)] may be exported
 along with main equipment or
 subsequently but within contracted warranty period of such goods subject to approval of RBI.
Export of (i) Goods or part thereof on being exported and found defective / damaged or otherwise unfit for use may be replaced
Replacement Goods free of charge by the exporter.
(ii) Such goods shall be allowed clearance by Customs Authorities, provided that such replacement goods are not
mentioned as restricted items for export in ITC (HS).
Export of Repaired (i) Goods or parts exported and found defective, damaged or otherwise unfit for use may be imported for repair and
Goods subsequently re-exported.
(ii) Such goods shall be allowed clearance without an authorization and in accordance with Customs Notification.
Export of Samples (i) Export of Samples: Export of samples shall be governed by Handbook of Procedure.
and Gifts (ii) Export of Gifts: Goods, including edible items, of value upto Rs.5,00,000 in a licensing year, may be exported as a
gift. However, items mentioned as restricted for exports in ITC (HS) shall not be exported as a gift, without an
authorization.
Export of Passenger (i) Bonafide baggage may be exported.
Baggage (ii) However, items mentioned mentioned as restricted in ITC (HS) shall require an authorization.
Export of Goods (i) Export through International Courier Terminal or Foreign Post Office are permitted as per Notifications issued by
through Courier / Department of Revenue (DOR).
Post (ii) However, exportability of such items shall be regulated by FTP - ITC (HS).
Notes: Value limit for exports through Courier shall be Rs.5,00,000 / Consignment. Value limit stipulated on exports
through Post has been removed. Value limit of Rs.5,00,000 is applicable ONLY in case of exports through Courier.
Movement of (i) Consignments of items meant for exports shall NOT be withheld / delayed for any reason by any agency of

Vishal Jain Page 13 Praveen Jain

 Foreign Trade Policy
Export Goods Central Government / State Government.
(ii) In case of any doubt, authorities concerned may ask for an undertaking from exporter and release such
consignment.
Denomination of (i) All export contracts and invoices shall be
Export Contracts  denominated either in freely convertible currency or Indian rupees but
and Realization of  export proceeds shall be realised in freely convertible currency.
Export Proceeds (ii) However, there are some exceptions where export proceeds can be in Indian rupees (discussed in “Refund Chapter
of GST”).
Non-Realization of (i) Consequence of Non-Realization of Export Proceeds: If an exporter fails to realize export proceeds within time
Export Proceeds specified by RBI, he shall, without prejudice to any liability or penalty under any law in force, be liable to
 return all benefits / incentives availed against such exports and
 action in accordance with provisions of FT (D&R) Act, Rules and Orders made thereunder and FTP.
(ii) Request for write-off by RBI: In case an exporter is unable to realize the export proceeds for reasons beyond his
control (force-majeure), he may approach RBI for writing-off the unrealised export proceeds.
(iii) Realization through Insurance Cover: The payment realized through insurance cover as said below would be
eligible for benefits under FTP.
(a) Payment through ECGC Cover would count for benefits under FTP: Export Credit Guarantee Corporation
(ECGC) covers risk of credit sales in exports.
(b) Payment through General / Private Insurance Companies: Amount of insurance cover for transit loss by
General Insurance and Private Approved Insurance Companies in India would be treated as payment realized
for exports under various export promotion schemes.
Example: Export is made under Advance Authorization Scheme, but the shipment is lost during transit.
However, insurance company has compensated the lost. In such case, the export can be accounted for
fulfilment of export obligation.
Third Party Exports Third Party Exports (as defined in FTP) shall be allowed under FTP. “Third Party Exports” means exports made by
an exporter (merchant exporter) or manufacturer (manufacturer exporter) on behalf of another exporter (person who
otherwise was obliged to export)
In such cases,
(i) Export documents such as Shipping Bills shall indicate name of both Exporter / Manufacturer and Third Party
Exporter.

Vishal Jain Page 14 Praveen Jain

 Foreign Trade Policy

(ii) Bank Realization Certificate (BRC), Guaranteed Remittance Declaration (submitted to RBI), Export Order and
Export Invoice should be in the name of Third Party Exporter.
Example 1: CD Corporation, a merchant exporter, procured order of goods from a customer in USA. It approached
AB Corporation, a manufacturer, for execution of the said order. Shipping Bills relating to the consignment bear the
name of CD Corporation. Bank Realization Certificate, Export Order and Invoice are also in the name of CD
Corporation. Comment whether AB Corporation would be deemed as the exporter under FTP.
The given scenario is a case of third-party exports. Third-party exports means exports made by an exporter or
manufacturer on behalf of another exporter(s). The conditions for being allowed as third-party exports under FTP are:
(a) Export documents such as shipping bills shall indicate name of both exporter or manufacturer (as the case may be)
and third party exporter(s).
(b) BRC, Export Order and Invoice should be in the name of third party exporter.
In the above case, though BRC, Export Order and Invoice are in the name of CD Corporation (third party exporter),
the Shipping Bill does not have the name of AB Corporation (manufacturer). Therefore, AB Corporation will not be
treated as the exporter in this case. CD Corporation shall be treated as exporter of the consignment.

Example 2: Mr. DK is EPCG Authorization Holder (issued to him by DGFT). It entitles him to procure (import) CG
duty-free, with corresponding obligation of exporting goods upto 6 times of ‘duty saved’. Mr. DK imports duty-free
goods, installed them in his factory and start manufacturing of goods.
During April, Mr. DK export goods worth Rs.10 lakhs. These exports are considered towards discharge of his Export
Obligation (EO). During April, Mr. DK manufactures goods but failed to get export order. Mr. DK sells his
manufactured goods to Mr. VK (having export orders with him). Mr. VK exports goods of Mr. DK.
Exports made by Mr. VK (exporter) on behalf of Mr. DK (another exporter) is Third Party Exports if
(a) Export document (i.e. Shipping Bill) indicates name of both manufacturer (Mr. DK) and third party exporter (Mr.
VK);
(b) BRC, Export Order and Invoice should in name of Third Party Exporter (Mr. VK).
Such exports will be considered towards discharge of export obligation of Mr. DK (EPCG Holder).

Vishal Jain Page 15 Praveen Jain

 Foreign Trade Policy
EXPORTERS – REGISTRATION CUM MEMBERSHIP CERTIFICATE
Registration Cum RCMC is certificate evidencing registration of exporter as a member of any Export Promotion Council (EPC).
Membership (i) Export Promotion Council (EPC) are the organization of exporters, set up with the objective to promote and
Certificate (RCMC) develop Indian exports.
(ii) EPC have been set up to promote and develop export of the country. These EPCs are expected to monitor and
encourage exports and to assist and guide the exporter. Their main aim is to project India's image abroad as
reliable supplier of high quality goods and services.
(iii)EPC are non-profit autonomous organizations (registered as companies or registered society)
(iv)Each council is responsible for promotion of a particular group of products.
(v) Few examples of EPC are Engineering Export Promotion Council, Apparel Export Promotion Council, Gem &
Jewellery EPC, etc.
(vi) Some Commodities Board like Coffee Board, Tea Board, Tobacco Board etc. are also considered as EPC.
RCMC from EPC or (i) If an exporter is single product exporter and EPC is available for his product, then RCMC can be obtained from
FIEO that respective EPC.
(ii) If an exporter is single product exporter but no EPC of his product, then RCMC can be obtained from Federation
of Indian Export Organization (FIEO)
(iii) If an exporter is multi product exporter and there are multiple EPCs, then RCMC can be obtained from that EPC
which is concerned with the product of his main line of business. And in case main line of business is yet to be
settled, they have an option to obtain RCMC from FEIO.
RCMC is (i) If an exporter intends to obtain export incentives (any benefit / concession), then RCMC is mandatory for such
Mandatory or exporter.
Optional (ii) If an exporter does NOT intends to obtain export incentives (any benefit / concession), then RCMC is optional for
such exporter.

Vishal Jain Page 16 Praveen Jain

 Foreign Trade Policy
EXPORTERS – STATUS HOLDERS
Meaning of Status Status Holders are business leaders who have excelled in international trade and have successfully contributed to
Holders India’s Foreign Trade.
(i) All exporters of goods, services and technology having an import-export code (IEC) number shall be eligible for
recognition as a status holder.
(ii) Status recognition depends upon Export Performance
Eligible Exporters Status Holder Exporters are Exporters who are granted ‘Status Certificate’ (i.e. recognition based on Export
for Status Holders Performance) in terms of FTP. Exporter who are eligible to claim Status Certificate (i.e. recognition) are
(i) Exporter of Goods (manufacturer exporter as well as merchant exporter)
(ii) Exporter of Services
EOU Units as well as SEZ Units
Status Certificate An exporter will get Status Recognition only when he has achieved specified level of Export Performance. Different
(i.e. Recognition) Status Recognition is given depending upon achievement of Export Performance.
for Status Holders Status Holder Export Performance (FOB Value / FOR Value)
1 Star Export House 30,00,000 USD = 3 Million USD
2 Star Export House 2,50,00,000 USD = 25 Million USD
3 Star Export House 10,00,00,000 USD = 100 Million USD
4 Star Export House 50,00,00,000 USD = 500 Million USD
5 Star Export House 200,00,00,000 USD = 2,000 Million USD
Notes:
(i) Computation of Export Performance:
(a) For Actual Export: Export Performance is counted on the basis of FOB Value (Free on Board Value) of Export
Earnings in Free Foreign Exchange.
(b) For Deemed Export: Export Performance is counted on the basis of FOR Value (Free on Road Value) of Exports
in Indian Rupees shall be converted in US $ at exchange rate notified by CBIC, as applicable on 1st April of
each FY.
Particulars Counting in Export Performance
 Actual Exports and Deemed Exports  Both Actual Exports (FOB Value) and Deemed Exports (FOR
Value) will be counted in Export Performance

Vishal Jain Page 17 Praveen Jain

 Foreign Trade Policy

 Exports made on re-export basis  Re-export will NOT be counted in Export Performance
(Export, Re-import and then Re-export)
 Exports by Holding Company and  Exports by Holding Company and Subsidiary Company will
Subsidiary Company be clubbed for determining Export Performance
 Exports by EOU / SEZ Unit and DTA  Exports by EOU / SEZ Unit and DTA Unit will be clubbed for
Unit determining Export Performance
(ii) Achievement of Export Performance:
(a) For Gem & Jewellery Sector: Export Performance should be during Current Financial Year + Previous 2
Financial Years
(b) For Other Sectors: Export Performance should be during Current Financial Year + Previous 3 Financial Years
Example: PJ Ltd. manufacturing ready-made garments is submitting “Application for Status Recognition” on 30th
September 2018 for 1 Star Trading House. PJ Ltd. shall achieve of export performance of 30,00,000 USD during
Current FY 2018-19 (6 months period upto time of submission of application) and also in Previous 3 FY (FY 2017-
18, 2016-17 and 2015-16).
(iii) Minimum 2 Years Export Performance:
Export Performance is necessary in 2 Years out of 4 Years.
Benefits of Status General Benefits to All Star Houses
Certificate (i.e. (i) Simplified Procedures – Self-Declaration: Authorization and Custom Clearances for both imports and exports on
Recognition) self-declaration basis
(ii) Quick Fixation of Import Export Norms: Fixation of input output norms on priority i.e. within 60 days
(iii) Exemption from BG: Exemption from furnishing of BG in schemes under FTP unless specified otherwise
anywhere in FTP.
(iv) Relaxation in FEMA: Permitted period for realization of export proceeds is more compared to what is permissible
period for non-status holder.

(v) Free of Cost Exports for Export Promotion: Allowed to export on FOC (Free of Cost) basis subject to limit
mentioned below:
Export of Annual Limit for Export Promotion (FOC)
(a) Gem and Jewellery Sector Lower of following:
(b) Articles of Gold and Precious Metals Sector  2% of Average Annual Export Realization during

Vishal Jain Page 18 Praveen Jain

 Foreign Trade Policy

Preceding 3 Licensing Years;

 Rs.1 Crore
Supplies of Pharma Products, Vaccines and  8% of Average Annual Export Realization during
Lifesaving Drugs to Health Programs of Preceding 3 Licensing Years;
International Agencies such as UN, WHO and
Government Health Programmes
(a) Pharma Products by Pharmaceutical  2% of Average Annual Export Realization during
Companies Preceding 3 Licensing Years;
(b) Any other case
Important Note: Such FOC supplies shall not be entitled to any export incentives under any Export Promotion
Scheme.
Example: AJ Ltd., ready-made garments exporter, is a status holder. Its average export realization during
preceding 3 licensing years had been Rs.1,500 lakhs. It wants to export certain goods for export promotion on free
of cost basis which are worth Rs.32 lakhs. Can it do so?
Entitlement of exports for Export Promotion on FOC basis is 2% * 1500 lakhs = Rs.30 lakhs. Thus, only exports
worth Rs.30 lakhs can be made on FOC basis for export promotion. Balance exports of Rs.2 lakhs shall be made on
normal basis.

Special Benefits to Notified Star Houses

(i) Establishment of Export Warehouses: 2 Star / 3 Star / 4 Star / 5 Star Export Houses shall be permitted to establish
Export Warehouses as per Department of Revenue (DOR) guidelines. Goods can be taken to Warehouse for
subsequent export therefrom without payment of taxes.
(ii) Benefit of ‘Authorized Economic Operator’ (AEO): 3 Star / 4 Star / 5 Star Export Houses shall be entitled to get
benefit of AEO operating under Accreditation Programme of CBIC
(iii) Self-Certification as to ‘Made In India’ to qualify for Preferential Treatment: Manufacturers who are 3 Star / 4
Star / 5 Star Export Houses will be enabled to self-certify their manufactured goods as originating from India with
a view to qualify for preferential treatment under different
 Preferential Trade Agreements (PTA)
 Free Trade Agreement (FTA)
 Comprehensive Economic Partnership Agreements (CECA)

Vishal Jain Page 19 Praveen Jain

 Foreign Trade Policy

REWARD SCHEMES
REWARD SCHEMES – MEIS & SEIS

Merchandise Exports from India Scheme (MEIS) Service Exports from India Scheme (SEIS)

MEIS is for Exporter of Goods Reward Scheme SEIS is for Exporter of Services
MEIS is to promote manufacture and export of Notified Objective of SEIS is to encourage and maximize export of Notified
Goods to Notified Countries Reward Scheme Services to Any Country
Exporter of Goods holding IEC Eligible Person Exporter of Services
under Reward (a) Holding IEC AND
Scheme (b) Current Year Minimum Net Forex Earning is
 10,000 $ for Individual / Sole Proprietorship
 15,000 $ for All Other Persons
Taking goods outside India to a place outside India Meaning of (a) Supply of a Service from India TO any Other Country
Export under (b) Supply of a Service from India TO Service Consumers
Reward Scheme of any Other Country in India
Export of Notified Goods TO Notified Countries Coverage of Export of Notified Services
(Group A Country / Group B Country / Group C Country Reward Scheme TO Any Country or
+ Landing Certificate act as proof of export) TO Service Consumers of any Other Country in India
Scrip Value MEIS is equal to Benefit of Reward Scrip Value SEIS is equal to
Notified Rate (Generally 7%) Scheme Notified Rate (Generally 5%)
* *
FOB Value (Lower of FOB Value declared in Shipping Bill Annual Net For-Ex Earnings
OR FOB Value as actually realized)
Claim for scrip under MIES is submitted for each Claim of Reward Claim for scrip under SIES is submitted for each Year in
Shipment in Form ANF-3A (Shipment-wise) Scheme Form ANF-3B (Annual basis)

Vishal Jain Page 20 Praveen Jain

 Foreign Trade Policy
Common Points for MEIS and SEIS
(A) Form of Rewards – Scrip: Rewards / incentives provided under these Schemes are provided in the form of Scrip (which is the Export
Incentive).
(i) Duty Credit Scrip is earned as a specific % of exports.
(ii) Duty Credit Scrip is just like “E-Credit Ledger” or “E-Wallet”
(iii) Duty Credit Scrip is used for payment of duty / tax and some other amounts. And if such duty / tax has been paid using Credit Scrip,
then such goods are duty paid goods.

(B) Utilization of Scrip:

(i) Importable Items using Scrip: All items (freely importable or restricted) can be imported under these Scrips. However, there are
certain items which are not allowed for import using these Scrips.
(ii) Validity Period for using Scrip: Duty credit scrip issued shall be valid for 24 months from the date of issued and must be valid on the
date on which actual debit of duty is made. Revalidation of duty credit scrip is NOT permitted unless covered by Handbook of
Procedures.
(iii)Payment of Taxes / Duties / Other Payment using Scrip: Following payment can be paid using Duty Credit Scrip
(a) Payment of Customs Duties for import of inputs or goods including Capital Goods as per Department of Revenue (DOR)
Notification except for payment of Customs Duties for import of specified items can be paid through the duty credit scrip
(b) Payment of Excise Duties on domestic procurement of inputs or goods including Capital Goods as per Department of Revenue
(DOR) Notification can be paid through the Duty Credit Scrip
(c) Any Customs Duty becoming payable on account of any default in fulfillment of Export Obligations (EO) under Advance
Authorization Scheme or EPCG Scheme, etc. can be paid through the Duty Credit Scrip
However, interest and penalty CANNOT be paid through the Duty Credit Scrip
(d) Application Fee (payable under FTP) can be paid through the Duty Credit Scrip
(e) Composition Fee (payable under FTP) can be paid through the Duty Credit Scrip
Important Note: Duty Credit Scrip CANNOT be used to pay GST (CGST + SGST/UTGST OR IGST on Domestic Purchases or IGST
on Imports). Duty Credit Scrip CANNOT be used to even to pay GST Compensation Cess on Domestic Purchases of on Imports.

(C) Transferability of Scrip: Scrip is freely transferrable

(i) Scrip is movable property and thus goods as per Section 2(52) of CGST Act, 2017
(ii) Sale of scrip is supply of goods and thus GST is levied. However, GST rate on scrip at present is 0%.

Vishal Jain Page 21 Praveen Jain

 Foreign Trade Policy
MERCHANDISE EXPORTS FROM INDIA SCHEME (MEIS)
MEIS (Notified Exports of notified goods to notified markets are rewarded under Merchandise Exports from India Scheme (MEIS).
Goods to Notified Notes:
Countries) (i) Where MEIS is available to all countries, then ‘proof of landing of goods’ shall NOT be required. Where MEIS is
available to notified countries only, then ‘proof of landing of goods’ shall be required.
(ii) All exporters while filing export shipments under Shipping Bills are required to declare his intent to claim
benefit under MEIS. It is mandatory as per Handbook of Procedures.
Eligible Exporter MEIS is applicable to all exporter of goods holding IEC i.e. Normal Export Units as well as Dedicated Export Units –
EOU / SEZ.
Notes: Ineligible Categories under MEIS
(i) Supplies made from DTA Units to SEZ Units. For example, if DTA Unit selling to SEZ Unit which is further
selling to USA, then this supply is not eligible export in hands of DTA Unit for purposes of MEIS; however, this
supply is eligible export in hands of SEZ Unit for purposes of MEIS.
(ii) Deemed Exports
(iii) Export Products which are subject to Minimum Export Price or Export Duty
(iv) Exports through Trans-shipment, meaning thereby exports that are originating in third country but trans-
shipped through India.
(v) Export of Imported Goods covered under ‘Import for Export’ provisions.
(vi) SEZ / EOU / EHTP / STP / FTWZ Products exported through DTA units
(vii) Exports made by units in FTWZ
Scrip Value Scrip Value shall be specified % of FOB Value of notified goods exported to notified markets. Basis of computation of
scrip value shall be lower of following
(i) FOB Value of exports as declared in the Shipping Bill OR
(ii) FOB Value of exports realized
Note: Exports of goods through Notified Courier or Foreign Post Office of FOB Value Rs.5,00,000 per Consignment
shall be entitled for rewards under MEIS. If the value of exports is more than Rs.5,00,000 per Consignment, then MEIS
reward would be limited to FOB Value of Rs.5,00,000 per Consignment.

Example: Determine reward under MEIS from the following information where rate of reward is 7%
(i) Export of Item A: FOB Value declared in Shipping Bill is Rs.6,00,000. FOB Value realized due to exchange gains is Rs.6,30,000.

Vishal Jain Page 22 Praveen Jain

 Foreign Trade Policy
(ii) Export of Item B: FOB Value declared in Shipping Bill is Rs.2,00,000. FOB Value realized due to exchange loss is Rs.1,80,000.
(iii) Export of Item C through Foreign Post Office: FOB Value is Rs.5,50,000.
(iv) Export of Item D through Courier: FOB Value is Rs.4,50,000
(v) Export of Item E liable to Export Duty: FOB Value is Rs.2,00,000
(vi) Supplies of Item A made to SEZ Units: Rs.1,00,000
Computation of MEIS Reward – Duty Credit Scrip
Particulars Amount (Rs.)
(i) Export of Item A (Lower of Declared FOB Value - Rs.6,00,000 OR Realized FOB Value - Rs.6,30,000) 6,00,000
(ii) Export of Item B (Lower of Declared FOB Value - Rs.2,00,000 OR Realized FOB Value - Rs.1,80,000) 1,80,000
(iii) Export of Item C through Foreign Post Office (FOB Value - Rs.5,50,000 subject to maximum of Rs.5,00,000) 5,00,000
(iv) Export of Item D through Courier (FOB Value - Rs.4,50,000 subject to maximum of Rs.5,00,000) 4,50,000
(v) Export of Item E liable to Export Duty: FOB Value is Rs.2,00,000 Ineligible
(vi) Supplies of Item A made to SEZ Units: Rs.1,00,000 Ineligible
Total FOB Value 17,30,000
MEIS Reward @ 7% (Scrip Value under MEIS) 1,21,100

SERVICE EXPORTS FROM INDIA SCHEME (SEIS)

SEIS’ (Notified Exports of notified services to any market are rewarded under Service Exports from India Scheme (SEIS).
Services to All
Countries)
Eligible Exporter SEIS is applicable to all service providers in India. In order to be eligible for Duty Credit Scrip Entitlement under
SEIS, following conditions shall be satisfied:
(i) Holder of IEC: Service Provider shall have to have an active IEC at the time of rendering such services for which
rewards are claimed.
(ii) Requirement of ‘For-Ex Earning’: Claim for SEIS Scrip is made on Annual basis. For being eligible, Service
Provider shall fulfil the following criteria as to Minimum Forex Earning in the year of rendering service (i.e.,
Current Year)
(a) Service Provider being Individual / Sole Proprietorship: Minimum “Net Forex Earning” in the year of
rendering service shall be 10,000 $

Vishal Jain Page 23 Praveen Jain

 Foreign Trade Policy

(b) Other Service Provider: Minimum “Net Forex Earning” in the year of rendering service shall be 15,000 $
Notes:
 For-Ex through International Credit Cards shall be considered: Free Foreign Exchange earned through
International Credit Cards and other instruments, as permitted by RBI shall also be taken into account for
computation of value of exports.
 Deemed Net Forex Earning (NFE) – Receipts in Indian Rupees may also be considered: Payment in Indian
Rupees for service charges earned on specified services, shall be treated as receipt in Deemed Foreign
Exchange as per guidelines of RBI. The list of such services is indicated in Appendix 3E.
(iii) Location of Service Provider: Service Provider must be located in India.
Note: Supply of service through commercial presence in any other Country or through presence of natural
persons in any other Country is NOT eligible for SEIS benefit.
(iv) Mode of Export of Service: Service may be provided in any of following 2 modes only:
(a) Cross Border Trade: Supply of a service from India TO any other country
(b) Consumption Abroad: Supply of a service from India TO service consumers of any other country in India.
(Firms providing educational services to NRI Students making payment in For-Ex are eligible under SEIS.
Also, Hospitals providing health care services to Foreigners visiting India for medical treatment in India
making payment in For-Ex are eligible under SEIS)
Note: If DTA Unit supplying services to SEZ Unit which is further supplying services to USA, then this supply is
not eligible export in hands of DTA Unit for purposes of SEIS; however, this supply is eligible export in hands of
SEZ Unit for purposes of SEIS.
Scrip Value Scrip Value shall be 3% / 5% on the Net Foreign Exchange earned from notified services. It is to be noted that general
rate of rewards is 5%.
Computation of Net Foreign Exchange Earning
Gross Earnings of Foreign Exchange relating to Service Sector in the FY (Refer Note i & Note ii) XXX
Less: Total expenses / payment / remittances of Foreign Exchange relating to Service Sector in (XXX)
the FY (Refer Note ii)
Net Foreign Exchange Earnings XXX
Notes:
(i) For-Ex Earnings unrelated to provisioning of service shall not be considered: Foreign exchange remittances
other than those earned for rendering of notified services would not be counted for entitlement. Thus, other

Vishal Jain Page 24 Praveen Jain

 Foreign Trade Policy

sources of foreign exchange earnings such as equity or debt participation, donations, receipts of repayment of
loans etc. and any other inflow of foreign exchange, unrelated to rendering of service, would be ineligible
(ii) For-Ex Earnings and For-Ex Expenses in capacity of SP shall only be considered: If the IEC holder is a
manufacturer of goods as well as service provider, then the For-Ex earnings and For-Ex expenses / payment /
remittances shall be taken into account for service sector only.

Example: VJ Ltd., a service exporter of specified service, requires you to compute its Duty Credit Scrip entitlement for the current FY under
SEIS assuming that notified rate for SEIS is 5%. VJ Ltd. has provided specified service during current year as follows:
(i) Supply from India to US: 50,000 $
(ii) Supply from India to Service Consumer of China and Russia in India: 20,000 $
(iii) Supply from India through Commercial Branch in a city of Australia: 10,000 $
(iv) Supply from India through presence of employees in a city of Japan: 5,000 $.
The total expenses / payments of VJ Ltd. relating to aforesaid supplies are:
(a) 5% of Gross Receipts in Foreign Exchange and
(b) Another 10% of Gross Receipts in India Rupees
VJ Ltd. also informs that it has received Loans of 5,000 $ from US.
Computation of SEIS Reward – Duty Credit Scrip
Particulars Gross FE ($) Expenses in FE ($) Net FE ($)
(i) Supply from India to US: 50,000 $ 50,000 (50,000 *5%) = (2,500) 47,500
(ii) Supply from India to Service Consumer of China and Russia in India: 20,000 $ 20,000 (20,000 *5%) = (1,000) 19,000
(iii) Supply from India through Commercial Branch in a city of Australia: 10,000 $ Ineligible Ineligible Ineligible
(iv) Supply from India through presence of employees in a city of Japan: 5,000 $ Ineligible Ineligible Ineligible
(v) Loan from US Ineligible Ineligible Ineligible
Net Foreign Exchange Earnings 66,500 $
SEIS Reward @ 5% (Scrip Value under MEIS) 3,325 $
Note: VJ Ltd. is eligible for SEIS benefit as its Net Free Foreign Exchange Earnings is US $ 66,500 (i.e. above the requisite threshold limit of US $
15,000 for Body Corporates).

Vishal Jain Page 25 Praveen Jain

 Foreign Trade Policy

EXPORT PROMOTION SCHEMES

EXPORT PROMOTION SCHEMES – DUTY REMISSION SCHEME & DUTY EXEMPTION SCHEME

Duty Remission Scheme Duty Exemption Scheme

Under Duty Remission Scheme, first tax / duty is collected Export Promotion Under Duty Exemption Scheme, tax / duty is NOT
and then, later on the same is refundeds Scheme collected and thus, no question of refund
Duty Remission Scheme enables post export Objective of Duty Exemption Scheme enables duty free import of
replenishment / remission of duty paid on inputs used in Export Promotion inputs required for production and export of export
export product. Scheme product.
[Post-Export Benefit] [Pre-Export Benefit]
Duty Drawback (DBK) Scheme under Customs Law Types of Export Advance Authorization (AA) Scheme
Inputs imported on payment of import duty, then used in Promotion Inputs can be imported without payment of duty and then
manufacture of export goods and finally import duty Scheme used in manufacture of export goods. No question of
refunded in cash. refund of import duty.

Duty Remission Schemes under GST Law Export Promotion Capital Goods (EPCG) Scheme
Export product is exported on payment of IGST (using Capital Goods can be imported without payment of duty
ITC or Cash). Thereafter, IGST is refunded in Cash and then used in manufacture of export goods. No
Export product is exported without payment of IGST question of refund of import duty.
under Bond / LUT. Thereafter, Unutilized ITC is refunded
in Cash
Notes: Exporter, after obtaining an export order, will generally import or locally procure goods that are required for the manufacture of the
products to be exported.
(i) Option 1: Procure duty paid inputs, then manufacture export goods and export the same. Finally, claim Duty Drawback after export.
(ii) Option 2: Obtain AA / EPCG and procure duty free inputs / capital goods (where there is an obligation attached as to export). Then
manufacture export goods and export the same. Finally, Export Obligation has to be discharged.

Vishal Jain Page 26 Praveen Jain

 Foreign Trade Policy
DUTY REMISSION SCHEME
DUTY DRAWBACK
Duty Drawback (i) Duty paid inputs used for manufacture of goods in India which are exported. DBK is given of duty paid on
(DBK) Scheme inputs used in manufacture of such goods.
(ii) DBK under Section 75 of Customs Act, 1962 covers import duty paid on imported inputs. Section 75 gives DBK of
Customs Duties (whether Normal Customs Duties or Special Customs Duties) but does NOT gives DBK of IGST
and GST Cess, which are also part of Customs Duties.
Rate of Duty DBK under Section 75 is granted as per any of following rates:
Drawback under (i) All Industry Rate (AIR):
Duty Drawback  AIR fixed for most of the export products (Notional rates are notified by Central Government)
Scheme  It is applicable to all exporters exporting a particular item.
 Processing of DBK is fast and documentation is less as the rates are notified.
(ii) Brand Rate (BR):
 BR is fixed / determined for export of items where AIR is not fixed and exporter applies for fixation of DBK
rates.
 It is applicable to a particular exporter.
(iii) Special Brand Rate (BR):
 SBR is available in those cases where the amount of DBK (available by application of AIR) is less than 80% of
the actual duties / taxes suffered by the exporter and exporter applies for fixation of DBK rates.
 It is applicable to a particular exporter.

DUTY EXEMPTION SCHEME

ADVANCE AUTHORIZATION FOR INPUTS
Advance AA Scheme enables an exporter to import duty free INPUTS required for manufacture of the Export Product.
Authorization (AA) Note: AA is issued with Actual User Condition i.e. AA and / or materials imported thereunder shall NOT be
Scheme transferrable.
Eligible Inputs for Eligible Inputs
Advance Eligible Inputs which can be imported duty free using AA Scheme are
Authorization (AA) (i) Only those inputs, which are physically incorporated in export product, are allowed duty free import under AA
Scheme Scheme. Normal allowance for wastage has to be made.

Vishal Jain Page 27 Praveen Jain

 Foreign Trade Policy

(ii) In addition, fuel, oil, catalyst which is consumed / utilized in the process of production of export product, are
also be allowed duty free import under AA Scheme.
(iii) Mandatory Spares upto 10% of CIF Value which are required to be exported / supplied with resultant product
are also allowed duty free import under AA Scheme.
Ineligible Inputs
Ineligible Inputs which CANNOT be imported duty free using AA Scheme are
(i) Prohibited items as it is mentioned in ITC (HS)
(ii) Items reserved for imports by STE.
(iii) Energy
Eligible Exporters AA can be issued either to
for Advance (i) Manufacturer Exporter or
Authorization (AA) (ii) Merchant Exporter tied to Supporting Manufacturer(s).
Scheme Manufacturer Exporter tied to Supporting Manufacturer can also apply and obtain AA.
Notes: "Supporting Manufacturer" is one who manufactures goods / products or any part / accessories / components
of a good / product for a merchant exporter
Example: Mr. SRK (merchant exporter) may apply and obtain AA undertaking EO and entitling the supporting
manufacturer, Mr. STR to procure inputs duty free.
Steps for Advance The following are important steps for AA:
Authorization (AA) (i) Filing application for AA to Regional Authority of DGFT
(ii) Obtaining AA (within 7 days of application) from DGFT
(iii) Execution of Bond / Bank Guarantee (BG) with Customs prior to starting import.
(iv) Making import of goods free of duty under AA (valid upto 12 months from issuance of AA)
(v) Exports under AA to fulfil Export Obligation i.e. EO (within 18 months from issuance of AA). Exporter may
request for extension of Export Obligation Period (EOP) with DGFT, if needed.
(vi) Update EO fulfilment with DGFT and intimate Customs (within 2 months from expiry of AA)
(vii) Filing application for redemption of AA
(viii) Issuance of Export Obligation Discharge Certificate (EODC) by DGFT (who will also forward EODC to Customs
for Cancellation of Bond / BG)
(ix) Cancellation of Bond / BG executed for import under AA with Customs.
Basis for Issuance AA is issued for inputs in relation to resultant product on the following basis:

Vishal Jain Page 28 Praveen Jain

 Foreign Trade Policy
of Advance (i) AA is issued as per notified Standard Input-Output Norms (SION) which available in Handbook of Procedures
Authorization (AA) (ii) AA is issued on the basis of Self-Declaration,
– SION or Self-  where there is no SION or no valid Ad-hoc Norms for an export product or
Declaration  where SION / Ad-hoc Norms have been notified / published but exporter intends to use additional inputs in
the manufacturing process, based on self-declaration by applicant.
Wastage so claimed shall be subject to Wastage Norms as decided by Norms Committee. Applicant shall submit
an undertaking to abide by decision of Norms Committee.
(iii) AA can be applicant specific where prior fixation of Norms is done by the Norms Committee
(iv) AA can be on the basis of Self-Ratification ONLY by exporters holding Authorized Economic Operator (AEO)
Certificate under Accreditation Programme of CBIC
 where there is no SION or no valid Ad-hoc Norms for an export product or
 where SION / Ad-hoc Norms have been notified / published but exporter intends to use additional inputs in
the manufacturing process, based on self-ratification by applicant.
Regional Authority may issue AA and such case need NOT be referred to Norms Committee for ratification of
Norms.
Export Obligation Inputs so procured duty free shall carry an obligation to manufacture and export final product, failing which exporter
for Advance shall be liable to action (recovery of duty + interest + penalty etc.) under FTP.
Authorization (AA) Export Obligation (EO) under AA Scheme is in terms of quantity as well as value.
Scheme (i) Export Obligation (EO) in terms of QUANTITY:
 EO in terms of quantity will be subject to norms prescribed under in Standard Input Output Norms (SION) as
notified by DGFT.
 Where DGFT has not notified SION for any particular import and export product, then EO in terms of
quantity can also be subject to ‘Ad-hoc Norms’ as prescribed by the Norms Committee on request by the AA
Holder.
(ii) Export Obligation (EO) in terms of VALUE:
 EO in terms of value will depend on the Minimum Value Addition prescribed for the export product.
 In general, 15% Value Addition is prescribed for all the export products, unless different Value Addition
terms are prescribed by DGFT. (For Tea, 50% Value Addition is prescribed)
Computation of Value Addition
Value Addition = (Export Value – Import Value) * 100 / Import Value = (A – B) * 100 / B

Vishal Jain Page 29 Praveen Jain

 Foreign Trade Policy

Export Value = A = FOB Value of Actual Export realized + FOR Value of Deemed Export
Note:
 Actual Exports (Supply to China)  FOB Value shall be considered
 Deemed Exports (Supply to 100% EOU)  FOR Value shall be considered
Import Value = B = CIF Value of Inputs covered by Authorization + Value of any other input used on which
benefit of DBK is claimed or intended to be claimed.
Note: Facility of AA shall also be available where some or all of the inputs are supplied
Free of Cost (FOC) to Indian exporter by Foreign buyer. In such cases, Notional CIF
Value (as declared before Customs) for such items shall be added to the CIF Value
(Import) and also to the FOB Value (Export) to arrive at Value Addition.
Example 1: Dhanush Ltd. has imported inputs without payment of duty under Advance Authorization. CIF
Value of such inputs is Rs.50,00,000. The inputs are processed and final product is exported. The exports made by
Dhanush Ltd. are subject to general rate of value addition prescribed under AA Scheme. No other input is used
by Dhanush Ltd. in the processing. What should be the minimum FOB Value of the exports made by Dhanush
Ltd. as per provisions of AA.
 General Minimum Value Addition (%) under AA = 15%
 Minimum FOB Value of Exports that is required under AA in order to satisfy Minimum Value Addition
condition = CIF Value of All Inputs + 15% = Rs.50,00,000 + 15% = Rs.57,50,000

Example 2: Compute Value Addition from following details:

(i) Value of inputs covered by Advance Authorization (i.e. Duty Free Import) = Rs.50 lakhs.
(ii) Value of inputs on which DBK facility is claimed (i.e. Duty Paid Import for which subsequent refund will be
claimed) is Rs.25 lakhs.
(iii) FOB Value of Export = Rs.90 lakhs
 Export Value = Rs.90 lakhs
 Import Value = (Rs.50 lakhs + Rs.25 lakhs) = Rs.75 lakhs
 Value Addition (%) = [(90 – 75) * 100 / 75] = 20%
Note: In case of part duty free imports and part duty paid imports, both Advance Authorization and Duty
Drawback will be available. Duty Drawback can be obtained for any duty paid material, whether imported or
indigenous, used in goods exported, as per DBK rate fixed by Department of Revenue, Ministry of Finance.

Vishal Jain Page 30 Praveen Jain

 Foreign Trade Policy

Advance Authorization can be used for importing duty free material.

Example 3: AB Ltd., an exporter engaged in export of ready-made garments. AB Ltd. has got an export order
worth FOB Value – Rs.500 lakhs. What should be the Maximum CIF Value of imports in order to fulfil Minimum
Value Addition condition?
 General Minimum Value Addition (%) under AA = 15%
 Maximum Permissible CIF Value of Imports that is permissible under AA in order to satisfy Minimum Value
Addition condition = [FOB Value of Exports * 100 / (100+15)] = Rs.500 lakhs * 100 / 115 = Rs.434.78 lakhs

Example 4: FOB Value of exports of MSD Ltd. = Rs.500 lakhs. Foreign buyer has supplied goods Free of Cost to
the exporter (MSD Ltd.) for use in manufacture of goods exported. Notional Value of such goods is Rs.100 lakhs.
What should be the Maximum CIF Value of Actual Imports so as to fulfil Minimum Value Addition condition?
 General Minimum Value Addition (%) under AA = 15%
 Maximum Permissible CIF Value of Imports that is permissible under AA in order to satisfy Minimum Value
Addition condition = [FOB Value of Exports * 100 / (100+15)] = Rs.500 lakhs * 100 / 115 = Rs.434.78 lakhs
 Maximum Permissible CIF value of Imports shall consist of Actual Imports as well as Notional Value of Free
of Cost inputs supplied by foreign buyer. Thus, Maximum Permissible Value of Actual Imports = Rs.434.78
lakhs – Rs.100 lakhs = Rs.334.78 lakhs
Categories of Various categories of authorizations are as follows:
Advance (i) Advance Authorization for Physical Exports (including SEZ Supplies) and Supply against AA, i.e.
Authorization (AA) Intermediate Supplies:
 Supply to SEZ is considered as ‘Actual Export’: DTA supplier is entitled to obtain AA for duty free
procurement of inputs for manufacture and supply of goods to SEZ.
 AA for Intermediate Supply: AA for intermediate supply is issued to those who intend to supply goods to
another AA Holder who will manufacture the final products to be exported. Export Obligation imposed on
duty free import (or local procurement) on the AA Holder of an ‘Advance Authorization for Intermediate
Supplies’ will be fulfilled by way of supplies to another AA Holder who will export the final product.
Application for grant of AA for Intermediate Supply may be made on the basis of a tie-up arrangement with
an ultimate exporter holding an AA. Such application can be made along with an application for AA (by the
manufacturer exporter) or after issuance of AA (to the manufacturer exporter)

Vishal Jain Page 31 Praveen Jain

 Foreign Trade Policy
Example: Mr. PJ, a manufacturer exporter of ready-made garments, has obtained AA (with EO of ready-made
garments). Mr. VJ, a manufacturer of fabric, in respect of supplies intended to be made to Mr. PJ (AA Holder
with EO for ready-made garments), Mr. VJ can apply and obtain AA for Intermediate Supplies. This AA for
intermediate supplies by Mr. VJ will entitle him to procure his inputs duty-free.
Export Obligation of Mr. VJ (AA Holder for Intermediate Supplies) shall be discharged by way of supplies to
Mr. PJ (AA holder with EO for ready-made garments). Mr. VJ’s EO is denominated and discharged in Indian
Rupees.
(ii) Advance Authorization for Deemed Exports:
 Certain transactions are Deemed Export transactions as per FTP. For example, supplies to EOU, supply
against International Competitive Bidding (ICB), supply to Notified Projects, etc.)
 DTA Supplier is entitled to obtain AA for duty free procurement of inputs for materialization of such
Deemed Exports

Special Note: Advance Authorization on Annual Requirement

(i) AA on Annual Requirement based on SION only: AA can also be issued for annual requirements. However,
such AA is issued only for items notified in SION i.e. it is NOT available on self-declaration basis.
(ii) AA on Annual Requirement only if there is Export Performance: Only those exporters who are having past
“Export Performance” (atleast in the Preceding 2 FY) are entitled for this AA for Annual Requirement.
(iii) Value Limit on AA for Annual Requirement: Entitlement in terms of CIF Value of Imports shall be HIGHER of
 Rs.1 Crore OR
 300% of [FOB Value of Exports + FOR Value of Deemed Export] in Preceding FY
Example: Compute the entitlement of Advance Authorization for Annual Requirement for an exporter having
export performance in past 5 years. In last FY, FOB Value of Physical Export was Rs.50 Lakhs and FOR Value for
Deemed Exports is Rs.10 lakhs
Since exporter has export performance in past 2 years, he is entitled to AA for Annual Requirement. The
entitlement shall be higher of following two:
 Rs.1 Crore or
 300% of (Rs.50 lakhs + Rs.10 lakhs) = Rs.1.8 Crores
Thus, his entitlement for duty free import of goods shall be to extent of CIF Value of imported goods being Rs.1.8
Crores.

Vishal Jain Page 32 Praveen Jain

 Foreign Trade Policy
Duties exempted Under AA Scheme, following duties are exempted by virtue of Exemption Notification:
under Advance (i) Normal Customs Duties are exempted under AA Scheme:
Authorization (AA) (a) BCD
Scheme (b) Social Welfare Surcharge
(c) CVD and Special CVD (at present levied only on limited goods)
(ii) Special Customs Duties are exempted under AA Scheme:
(a) Safeguard Duty
(b) Anti-Dumping Duty
(c) Anti-Subsidizing Duty or Counter-Vailing Duty on Subsidized Articles

(iii) IGST and GST Compensation Cess within Customs Duty are also exempted under AA Scheme:
(a) IGST levied under Section 3(7) of CTA, 1975 on import of goods and
(b) GST Compensation Cess levied under Section 3(9) of CTA, 1975 on import of goods.
Notes:
 Such exemption from IGST and GST Compensation Cess is ONLY upto 31st March 2020.
 Goods imported against an AA will be exempt from the IGST and GST Compensation Cess subject to the
conditions that the Export Obligation (EO) would be fulfilled by making Physical Exports alone i.e. if a
person has imported the goods by claiming the exemption from IGST and GST Compensation Cess under the
AA, then he cannot fulfil his EO by way of Deemed Exports i.e. by supplying the goods to an EOU etc.
Domestic AA Holder can procure inputs from indigenous / domestic supplier in lieu of direct import. Specified procedure to be
Procurement of followed for the same.
Inputs AA Holder Note: Supplier making supply to such AA Holder
(i) Such supply qualifies as ‘Deemed Export’ under FTP. (Refer Deemed Export in FTP)
Accordingly, such supplier may claim related benefits on such supply like entitlement of AA for making such
Deemed Export or Duty Drawback on such supply (called as Deemed DBK), etc.
(ii) Such supply may also qualify as ‘Deemed Export’ under GST law. (Refer Refund Chapter – Section 147 of CGST
Act, 2017)
Accordingly, GST charged on such supply shall be refundable. (Refer Refund Chapter – Section 54 of CGST Act,
2017 + Rule 89 of CGST Rules, 2017).

Vishal Jain Page 33 Praveen Jain

 Foreign Trade Policy
DUTY EXEMPTION SCHEME
DUTY FREE IMPORT AUTHORIZATION FOR INPUTS
Purpose and Scope DFIA is issued to allow duty free import of inputs used in production of export goods.
of DFIA Scheme Notes:
(i) DFIA Scheme is issued to allow duty free import of inputs. In addition, import of oil and catalyst which is
consumed / utilized in the process of production of export product, may also be allowed under DFIA Scheme.
(ii) DFIA Scheme can be obtained ONLY for the products covered under SION.
Duties exempted (i) Exemption under DFIA Scheme is only and only to BCD
under DFIA (ii) All other Customs Duties including IGST and GST Compensation Cess shall be payable
Scheme
Post Export Benefit DFIA is allowed on post-export basis i.e. it is Replenishment of Inputs used in manufacture of export goods.
under DFIA Notes:
Scheme (i) Under AA Scheme, a person can import the inputs first and make the export of resultant products later on.
(ii) Under DFIA Scheme, he can export the goods and then import the inputs as replenishment of the inputs used in
the manufacture of the export products.
ADVANCE AUTHORIZATION SCHEME VS. DUTY FREE IMPORT AUTHORIZATION SCHEME
Particulars Advace Authorization (AA) Scheme Duty Free Import Authorization (DFIA) Scheme
Minimum Value 15% (in general) 20% (in general)
Addition
SION Fixed  AA Scheme is applicable  DFIA Scheme is applicable
SION NOT Fixed  AA Scheme is applicable  DFIA Scheme is NOT applicable
Exemption from Duties  BCD and Other Customs Duties are exempted  Only BCD is exempted
 IGST and GST Compensation Cess is also  Other Customs Duties (including IGST and GST
exempted but till 31-03-2020 Compensation Cess) are payable
Transferability AA is NOT transferrable DFIA is transferrable

DUTY EXEMPTION SCHEME

EXPORT PROMOTION CAPITAL GOODS FOR CAPITAL GOODS
Export Promotion Objective of the EPCG Scheme is to facilitate import of Capital Goods for producing quality goods and services to
Capital Goods enhance India’s export competitiveness. EPCG scheme under FTP enables up-gradation of technology of the

Vishal Jain Page 34 Praveen Jain

 Foreign Trade Policy
(EPCG) Scheme indigenous industry.
EPCG Authorization Scheme enables an exporter to import duty free CAPITAL GOODS required for manufacture of
the Export Product. It is important to note that even an EXPORTER OF SERVICE can also obtain EPCG
Authorization.
Notes: EPCG Authorization is issued with Actual User Condition i.e. EPCG Authorization and / or capital goods
imported thereunder shall NOT be transferrable.
Eligible Capital Eligible Capital Goods
Goods for Export (i) Capital Goods (whether in assembled condition or in CKD / SKD form)
Promotion Capital (ii) Computer Systems and Software which are a part of the Capital Goods being imported
Goods (EPCG) (iii) Spares
Scheme (iv) Moulds & Dies, Jigs, Fixture, Tools and Refractories for Furnace Lining
(v) Catalysts for initial charge plus one subsequent charge
Notes: The above CG should satisfy below conditions:
(a) CG imported shall have nexus with export goods. Nexus certificate shall be obtained from Chartered Engineer.
Such nexus should be there with export goods can with pre-production process or production process or post-
production process.
(b) CG may assembled or unassembled i.e. CG may be imported in CKD / SKD form and then, assembled in India.
(c) CG may be new or old i.e. Second Hand CG may also be imported.
Eligible Exporters EPCG can be issued either to
for Export (i) Manufacturer Exporter or
Promotion Capital (ii) Merchant Exporter tied to Supporting Manufacturer(s).
Goods (EPCG) (iii) Service Providers
Scheme (iv) Common Service Provider (CSP) subject to prescribed condition
Notes: "Supporting Manufacturer" for EPCG shall be the one in whose premises / factory Capital Goods are imported
/ procured under EPCG Authorization is installed.
Example: Mr. SRK (merchant exporter) may apply and obtain EPCG undertaking EO and entitling the supporting
manufacturer, Mr. STR to procure and install Capital Goods duty free in his factory.
Steps for Export The following are important steps for EPCG:
Promotion Capital (i) Filing application for EPCG to Regional Authority of DGFT
Goods (EPCG) (ii) Obtaining EPCG (within 3 days of application) from DGFT

Vishal Jain Page 35 Praveen Jain

 Foreign Trade Policy

(iii) Execution of Bond / Bank Guarantee (BG) with Customs prior to starting import.
(iv) Making import of CG free of duty under EPCG (valid upto 18 months from issuance of EPCG)
(v) Import is with Actual User Condition
(vi) Exports under EPCG to fulfil Export Obligation (EO) in addition to maintaining Average Level of Exports
(a) 1st Block of 4 Years: Minimum 50% of Specific Export Obligation
(b) 2nd Block of 2 Years: Balance 50% of Specific Export Obligation
Exporter may request for extension of Export Obligation Period (EOP) with DGFT, if needed.
(vii) Filing application for redemption of EPCG along with necessary documents
(viii) Issuance of Export Obligation Discharge Certificate (EODC) by DGFT (who will also forward EODC to Customs
for Cancellation of Bond / BG)
(ix) Cancellation of Bond / BG executed for import under EPCG with Customs.
Export Obligation CG so procured duty free shall carry an obligation to manufacture and export final product, failing which exporter
for Export shall be liable to action (recovery of duty + interest + penalty etc.) under FTP.
Promotion Capital Export Obligation (EO) under EPCG Scheme is in terms of VALUE. EO in terms of Values are of 2 types as follows:
Goods (EPCG) (i) Specific Export Obligation (SEO) in terms of VALUE: SEO, specific to each EPCG Authorization shall be 6 times
Scheme of Duty Saved on import of CG
(a) Computation of Duty Saved: Duty Saved where EPCG Holder opts to pay IGST and Compensation Cess on
imported CG
 ITC claimed for IGST and Compensation Cess paid: Duty Saved = Customs Duties not paid + IGST and
Compensation Cess of which ITC is availed
 ITC NOT claimed for IGST and Compensation Cess paid: Duty Saved = Customs Duties not paid
(b) Time Limit for achieving SEO:
Period from the date of EPCG Authorization Proportion of Total Export Obligation (EO)
 1st Block of 4 Years  Minimum 50%
 2nd Block of balance 2 Years  Balance
Special Note: If EPCG Authorization Holder has fulfilled 75% or more of the SEO and 100% of the AEO till
date, if any, within 3 Years, then remaining EO shall be condoned and the authorization redeemed by
concerned Regional Authority.
Example: AJ Ltd. obtains EPCG Authorization and imports CG on import of which it saved duty of Rs.10
Crores.

Vishal Jain Page 36 Praveen Jain

 Foreign Trade Policy

 SEO = 6 times Duty Saved on import of CG = 6 * Rs.10 Crores = Rs.60 Crores

 Achievement of SEO:
 In 1st block of 4 Years: AJ Ltd. must achieve SEO of atleast Rs.30 Crores (50% * Rs.60 Crores)
 In 2nd block of 2 Years: AJ Ltd. must achieve balance SEO
(ii) Average Export Obligation (AEO) in terms of VALUE: AEO, based on past export levels is arithmetic mean of
exports of last 3 years. SEO (as mentioned above) shall be, over and above, the Average Level of Exports
achieved by the applicant in the preceding 3 licensing years for the same and similar products within the overall
EO Period.
Example: AJ Ltd. has export turnover of Rs.10 Crores, Rs.20 Crores and Rs.30 Crores during the preceding 3
years. In 4th Year, AJ Ltd. obtains EPCG Authorization and imports CG on import of which it saved duty of Rs.10
Crores.
 SEO = 6 times Duty Saved on import of CG = 6 * Rs.10 Crores = Rs.60 Crores
 AEO = [(10 Crores + 20 Crores + 30 Crores) / 3] = Rs.20 Crores
Thus, EPCG Authorization Holder shall, while maintaining the Average Export Obligation (AEO) each year,
fulfil the Specific Export Obligation (SEO) over the prescribed block period.

Computation of Export Obligation

(i) Export only of goods / services for which EPCG Authorization granted shall be counted. Export of other
products not manufactured out of such CG shall not be counted.
(ii) Export = Physical Exports + Certain Deemed Exports.
Notes: All the following will be considered towards calculation of Export Obligation
(a) Shipments under which inputs were imported duty free (i.e. AA Scheme, DFIA Scheme, DBK Scheme)
(b) Shipments under Reward Schemes (i.e. MEIS / SEIS)
(c) Foreign Exchange received for Research & Development Services
(d) Royalty Payment received by EPCG Holder in Free Convertible Currency
(e) Payment received in Indian Rupee for such services as notified in Appendix 3E.
Export Obligation Project Import is special scheme under Indian Customs which allow import of project as goods at concessional rate.
for Export EPCG Authorization can also be issued for import of CG under Scheme for Project Imports
Promotion Capital (i) Export Obligation for such EPCG Authorizations would be 6 times of Duty Saved
Goods (EPCG) (ii) Duty Saved would be difference between the Effective Duty under Project Imports and Concessional Duty under

Vishal Jain Page 37 Praveen Jain

 Foreign Trade Policy
Scheme for Project the EPCG Scheme.
Import Note: Other aspects of Export Obligation remain the same as mentioned above.
Example: PK Ltd., a manufacture, wants to import CG in CKD condition from a foreign country and assemble the
same in India. Import of the CG will be under Project Imports. CG will be used for pre-production processes. The final
products of PK Ltd. would be supplied in SEZ. PK Ltd. wishes to sell CG imported by it as soon as the production
process starts. PK Ltd. seeks your advice whether it can avail the benefit of EPCG Scheme for importing the intended
CG.
EPCG Scheme:
EPCG permits exporters to procure CG at concessional rate of customs duty / zero customs duty. In return, exporter is
under an obligation to fulfil the Export Obligation (EO). EO means obligation to export product(s) covered by
Authorization in terms of quantity or value or both, as may be prescribed / specified by Regional Authority.
Eligibility of Import of CG under EPCG Scheme:
(i) Import of CG in CKD condition is allowed. CG may be assembled in India. Thus, CG imported in CKD condition
is eligible.
(ii) CG may be for use in pre-production, production or post-production. Thus, CG intended for use in pre-
production process is eligible.
(iii) Import of CG under EPCG Scheme is subject to ‘Actual User Condition’. Importer of CG under EPCG Scheme are
not allowed to be disposed off till Export Obligation is fulfilled.
Obligation of Export Performance (EO):
(i) Under EPCG Scheme, EO shall be ‘6 times’ of the duty saved. Duty saved would be difference between the
effective duty under Project Imports and concessional duty under the EPCG scheme.
(ii) Supply to SEZ is ‘eligible exports’ for purposes of EPCG Scheme.
(iii) EO shall be fulfilled. Till fulfilment of ‘EO’, CG cannot be disposed off.
Therefore, based on the above discussion, PK Ltd. can import the CG under EPCG Scheme. However, it has to make
sure that it does not sell the CG till the export obligation is completed.
Duties exempted Under EPCG Scheme, following duties are exempted by virtue of Exemption Notification:
under Export (i) Normal Customs Duties are exempted under EPCG Scheme:
Promotion Capital (a) BCD
Goods (EPCG) (b) Social Welfare Surcharge
Scheme (c) CVD and Special CVD (at present levied only on limited goods)

Vishal Jain Page 38 Praveen Jain

 Foreign Trade Policy
(ii) Special Customs Duties are exempted under EPCG Scheme:
(a) Safeguard Duty
(b) Anti-Dumping Duty
(c) Anti-Subsidizing Duty or Counter-Vailing Duty on Subsidized Articles

(iii) IGST and GST Compensation Cess within Customs Duty are also exempted under EPCG Scheme:
(a) IGST levied under Section 3(7) of CTA, 1975 on import of goods and
(b) GST Compensation Cess levied under Section 3(9) of CTA, 1975 on import of goods.
Notes:
 Such exemption from IGST and GST Compensation Cess is ONLY upto 31st March 2020.
 CG imported against an EPCG will be exempt from the IGST and GST Compensation Cess subject to the
conditions that the Export Obligation (EO) would be fulfilled by making Physical Exports alone i.e. if a
person has imported the goods by claiming the exemption from IGST and GST Compensation Cess under the
EPCG, then he cannot fulfil his EO by way of Deemed Exports i.e. by supplying the goods to an EOU etc.
Domestic EPCG Holder can procure CG from indigenous / domestic supplier in lieu of direct import. Specified procedure to be
Procurement of followed for the same.
Inputs EPCG Note 1: Supplier making supply to such EPCG Holder
Holder (i) Such supply qualifies as ‘Deemed Export’ under FTP. (Refer Deemed Export in FTP)
Accordingly, such supplier may claim related benefits on such supply like entitlement of AA for making such
Deemed Export or Duty Drawback on such supply (called as Deemed DBK), etc.
(ii) Such supply may also qualify as ‘Deemed Export’ under GST law. (Refer Refund Chapter – Section 147 of CGST
Act, 2017)
Accordingly, GST charged on such supply shall be refundable. (Refer Refund Chapter – Section 54 of CGST Act,
2017 + Rule 89 of CGST Rules, 2017).
Note 2: Counting of Export Obligations in case of Domestic Procurement of CG
(i) Export Obligation shall be reckoned with reference to (notional Customs duties saved on FOR Value)
(ii) Export Obligation shall be as follows:
(a) Specific Export Obligation: 75% of what is otherwise applicable i.e. 4.5 times of Duties Saved
Note: In case of direct imports, EO shall be reckoned with reference to Actual Customs Duties saved amount
on CIF Value. In case of domestic sourcing, EO shall be reckoned with reference to Notional Customs Duties

Vishal Jain Page 39 Praveen Jain

 Foreign Trade Policy

saved on FOR Value.

(b) Average Export Obligation: 100% of what is otherwise applicable i.e. it remains same.

DUTY EXEMPTION SCHEME

POST EXPORT EPCG DUTY CREDIT SCRIP FOR CAPITAL GOODS
Eligibility of Post (i) Post Export EPCG Duty Credit Scrip(s) shall be available to exporters who intend to import Capital Goods on full
Export EPCG Duty payment of applicable duties in cash and choose to opt for this scheme.
Credit Scrip (ii) Later on, Basic Customs Duty paid on Capital Goods shall be remitted in the form of freely transferable Duty
Credit Scrip(s), similar to MEIS / SEIS Duty Credit Scrip(s).
Export Obligation Export Obligation based on Value shall be of 2 types:
under Post Export (i) Specific Export Obligation (SEO): SEO under this Scheme shall be 85% of the applicable SEO (i.e. 85% of 6 times
EPCG Duty Credit Duty Saved) under the EPCG Scheme.
Scrip (ii) Average Export Obligation (AEO): AEO continues to remain unchanged i.e. same as AEO under the EPCG
Scheme.
Other Points of Post (i) Pro-Rata Remission: Duty remission of BCD (in form of Duty Credit Scrip) shall be in proportion to the EO
Export EPCG Duty fulfilled.
Credit Scrip (ii) Utilization of Scrip granted under this Scheme is same as MEIS / SEIS Scrip(s): All provisions for utilization of
MEIS / SEIS Scrip(s) issued under FTP shall also be applicable to Post Export EPCG Duty Credit Scrip(s).

Vishal Jain Page 40 Praveen Jain

 Foreign Trade Policy

EXPORT ORIENTED UNIT SCHEMES

EOU V. SEZ UNIT

100% EOU SEZ Unit

EOUs are governed by provisions of Foreign Trade Policy Governing SEZs are governed by provisions of SEZ Act, 2005
Provisions
No restrictions i.e. EOUs can exist anywhere Locational Locational restrictions i.e. SEZs Unit shall be located only
Restrictions within SEZ (Specified Area)
Service Unit Operational Units Service Unit
Manufacturing Unit Manufacturing Unit
Trading Unit Trading Unit

Basics of EOU Export Oriented Units (EOUs) are Dedicated Export Units undertaking to export their entire production except
permissible sales into Domestic Tariff Area (DTA).
Similar principles as applicable for EOU are applicable for the following:
(i) Electronic Hardware Technology Park (EHTP) Scheme
(ii) Software Technology Park (STP) Scheme
(iii) Bio-Technology Park (BTP) as notified by DGFT on recommendation of Department of Biotechnology
Conditions for (i) Dedicated Exports: An undertaking to export their entire production of goods and services except permissible
Eligibility for EOU sales in DTA.
(ii) Eligible Activities: The following activities are eligible
(a) Manufacture of Goods (including Repair, Re-making, Reconditioning, Re-engineering)
(b) Rendering of Services
Note: Trading Units are not covered under these Schemes.
(iii) Minimum Investment: Only projects having a minimum investment of Rs.1 Crore in Plant and Machinery shall

Vishal Jain Page 41 Praveen Jain

 Foreign Trade Policy

be considered for establishment as EOUs.

Notes:
(a) Minimum Investment is NOT applicable for Handicrafts, Agriculture, Floriculture, Aquaculture, Animal
Husbandry, Information Technology Services, Brass Hardware and Handmade Jewellery Sectors.
(b) Board of Approval (BOA) may also allow establishment of EOUs with a lower investment criteria.
Eligible Exports by Following are eligible exports by EOU:
EOU (i) All Goods and Services except Prohibited Exports: EOU / EHTP / STP / BTP Unit may export all kinds of goods
and services except items that are prohibited in ITC (HS).
(ii) Export of Special Goods: Export of Special Chemicals, Organisms, Materials, Equipment and Technologies shall
be subject to fulfilment of the conditions indicated in ITC (HS).
Export Obligations (i) EOU shall be a Positive Net Foreign Exchange Earner except some sector specific units which shall fulfil a higher
by EOU value addition criteria.
(ii) Net Foreign Exchange (NFE) Earning shall be calculated cumulatively in blocks of 5 years starting from
commencement of production.
Duty exemption to (i) Duty Exemption on Procurement of Goods (including Capital Goods)
EOU Procurement of Goods Duty Exemption
Import of Goods by EOU Exemption of Customs Duty
(Import of Goods is Inter-State  Basic Customs Duty is exempted under EN 52/2003 – Customs
Supply  BCD + IGST + GST
Cess is leviable) Exemption of IGST & GST Cess (ONLY upto 31st March 2020)
 IGST leviable under Section 3(7) of CTA, 1975 is exempted under EN
79/2017 – Customs
 GST Compensation Cess leviable under Section 3(9) of CTA is exempted
under EN 79/2017 – Customs
Domestic Procurement of Supply of goods by DTA to EOU would be on payment of applicable GST
Goods from DTA by EOU taxes. Also, Supply to EOU would qualify as ‘Deemed Export’ as per Section
(Supply of Goods by DTA to 147 of CGST Act, 2017
EOU is Intra-State Supply or  First, GST shall be paid on such ‘Deemed Export’ transactions. (CGST +
Inter-State Supply  GST is SGST / IGST)
leviable)  Thereafter, such GST paid is refundable under GST as per Section 54 of

Vishal Jain Page 42 Praveen Jain

 Foreign Trade Policy

CGST Act, 2017 read with Rule 89 of CGST Rules, 2017. This refund can
be claimed by either DTA Supplier (making Deemed Export Supply) or
Recipient EOU (receiving Deemed Export Supply)
Claim by DTA Supplier:
 DTA Supplier shall not collect GST to the Recipient EOU.
 DTA Supplier when submitting Refund Application shall give an
undertaking from Recipient EOU to the effect that it has no objection
as to DTA Supplier claiming refund.
Claim by Recipient EOU:
 Supplier shall collect GST to the Recipient EOU.
 Recipient EOU shall not book any ITC of GST charged and it shall
apply for refund of GST.
(ii) Duty Exemption on Procurement of Services
Procurement of Services Duty Exemption
Import of Services  Recipient EOU shall pay IGST on Import of Services under RCM as per
(Import of Services is Inter- Section 5(3) of IGST Act, 2017
State Supply  IGST is  Thereafter, ITC of IGST is admissible to EOU
leviable) Also, Refund of ITC can be claimed by EOU (post export by EOU)

Domestic Procurement of  DTA Supplier shall pay GST (CGST + SGST or IGST) on Supply of
Services from DTA by EOU Services under FCM
(Supply of Goods by DTA to  Thereafter, ITC of IGST is admissible to EOU
EOU is Intra-State Supply or Also, Refund of ITC can be claimed by EOU (post export by EOU)
Inter-State Supply  GST is
leviable)
Notes: Some of the other benefits apart from Duty Exemption that EOUs get are as follows:
(i) EOU gets 9 months period to realize Foreign Exchange
(ii) 100% FDI is allowed in EOUs, etc.
Supply by EOU to Supply by EOU to DTA (within permissible limits) shall be subject to payment of applicable GST and GST Cess, if
DTA any. EOU must also return benefits availed earlier, if it makes supplies into DTA.

Vishal Jain Page 43 Praveen Jain

 Foreign Trade Policy
Exit from EOU (i) With approval of Development Commissioner, an EOU may opt out of scheme. Such exit shall be subject to
Scheme payment of applicable IGST / CGST / SGST / UTGST and Compensation Cess, if any, and industrial policy in
force.
(ii) If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.
Conversion to EOU (i) DTA to EOU: Existing DTA Units may also apply for conversion into an EOU / EHTP / STP / BTP Unit.
Schemes (ii) EHTP / STP to EOU or vice versa: Existing EHTP / STP Units, who have applied for conversion / merger to EOU
Unit and vice-versa, can avail exemptions in duties and taxes as applicable.
(iii) Conversion Application to be place before Board of Approval for decision in Certain Cases: Applications for
conversion into an EOU / EHTP / STP / BTP Unit from existing DTA units,
 having an investment of Rs.50 crores and above in Plant and Machinery or
 exporting Rs.50 crores and above annually,
shall be placed before BOA for a decision.

Vishal Jain Page 44 Praveen Jain

 Foreign Trade Policy

DEEMED EXPORTS
DEEMED EXPORTS

Supply by Manufacturer Supply by Main Contractor / Sub Contractor

(a) Supply of goods against AA Scheme / AA Scheme for Annual (a) Supply of goods to United Nations (UN) or International
Requirement / DFIA Scheme Organization (IO) for their official OR
(b) Supply of capital goods against EPCG Scheme Supply to projects funded by UN or IO approved by Government
(c) Supply of goods to EOUs / STPs / EHTPs / BTPs of India;
(b) Supply of goods to Nuclear Projects through Competitive
Bidding (National / International)
(c) 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
(d) 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
Note: Deemed Export benefit is for Main Contractors as well as Sub-Contractors
Supply by Main Contractor directly to  Deemed Exports
Designated Agencies / Projects / Units
Supply by Sub-Contractor to Main  Deemed Exports (Payment for such supply shall be made to Sub-Contractor by Main
Contractor Contractor)
Supply by Sub Contractor directly to  Deemed Exports provided Sub-Contractor is indicated either originally or subsequently in the
Designated Agencies / Projects / Units Main Contract and Payment Certificate is issued by Project Authority in name of Sub-
Contractor. (Payment for such supply shall be made directly to Sub-Contractor by Project
Authority)

Vishal Jain Page 45 Praveen Jain

 Foreign Trade Policy
Example: Mr. DK manufactured goods in India and got a contract to supply CG within India to M/s RJ Export Ltd. who is holding EPCG
Authorization. Due to some operational problems, Mr. DK sub-contracted supply of CG to Mr. VK with proper authorization from M/s RJ
Exports Ltd. and included the name of Mr. VK in the main contract of supply before he started supply of goods. Can Mr. VK claim the benefit
of deemed export for supplies made?
As per FTP, supply of domestically manufactured goods by an Indian sub-contractor (Mr. VK) to any Indian / Foreign Main Contractor (Mr.
DK) directly at the designated project’s site shall also be eligible for deemed export benefit provided name of sub-contractor is indicated either
originally or subsequently (but before the date of supply of such goods) in the main contract. In such cases, payment shall be made directly to
the Sub-Contractor (Mr. VK) by the Project Authority (M/s RJ Exports Ltd.). Since aforesaid conditions are fulfilled, Mr. VK can also claim
benefit of deemed exports.

Meaning of "Deemed Exports" refer to those transactions in which

Deemed Exports (i) goods supplied do not leave country, and
(ii) payment for such supplies is received either in Indian rupees or in free foreign exchange.
It is important to note that the goods supplied for Deemed Exports must have been manufactured in India.

Deemed Export transaction is one which fulfils following conditions:

(i) Goods are manufactured in India
(ii) Such goods are supplied to specific categories of consumers OR to specified projects (i.e. Domestic goods are
supplied to those who are otherwise eligible to duty free import of goods such as AA Holder, EPCG Holder, etc.)
Special Note: Deemed Exports under GST includes only the supplies notified under Section 147 of the CGST Act,
2017 on the recommendations of the GST Council. The benefits of GST and conditions applicable for such benefits
would be as specified by the GST Council and as per relevant rules and notification. Here in this chapter, discussion
has been restricted to “Deemed Exports” for the purpose for FTP.
Objective of (i) Objective of ‘Deemed Exports’ is to ensure that the Domestic Suppliers are not in disadvantageous position vis-à-
Deemed Exports vis Foreign Suppliers in terms of fiscal concessions.
(ii) The underlying theory is that Foreign Exchange Saved must be treated at par with Foreign Exchange Earned, by
placing Domestic Manufacturers at par with Foreign Supplier.
(a) By deeming such supplies export, such supplies are made duty-free.
(b) Duty-free domestic supplies will encourage the customer to opt for Domestic Supplies instead of Import and
thus, it will have effect of import substitution and it will save outflow of foreign exchange.

Vishal Jain Page 46 Praveen Jain

 Foreign Trade Policy

(c) Finally, it will neutralize the selection between Domestic Supplies and Imports (as both made duty-free now –
Imports were duty-free because of Authorizations issued under FTP and Domestic Supplies becomes duty-
free because of grant of status of ‘Deemed Exports’ under FTP)
Exemption and Recent Amendment
Remission Scheme Deemed exports shall be eligible for all / any of the following benefits subject to specified terms and conditions):
for Deemed Exports (i) Advance Authorization / AA for Annual Requirement / DFIA (Duty free procurement of Inputs): Exemption
from Customs Duties on inputs used in manufacture and supply of Deemed Exports category on basis of AA /
DFIA.
(ii) Deemed Export Duty Drawback (Duty paid procurement and subsequent refund): DBK in form of BCD on
inputs used in manufacture and supply of Deemed Exports category shall be given on Brand Rate basis upto
submission of documents evidencing actual payment of BCD.
However, DGFT has amended the said provision and provided that refund of drawback on the inputs used in
manufacture and supply under the deemed exports category can be claimed
 on 'All Industry Rate' of Duty Drawback Schedule notified by Department of Revenue from time to time
provided no CENVAT credit has been availed by supplier of goods on excisable inputs OR
 on 'Brand Rate basis' upon submission of documents evidencing actual payment of basic custom duties.

Vishal Jain Page 47 Praveen Jain

 Foreign Trade Policy

VJPJ Education’s Online Store in India – Instamojo

https://www.instamojo.com/vjpjeducation/

Vishal Jain Page 48 Praveen Jain

 Foreign Trade Policy

Hearty Congratulations!!!
Our Beloved Students who shined in November 2019 Exams!!!

CA Monisha Nithiyanandam CA Vaanmathi Soundararaj

(AIR 20) (AIR 40)

CA Tamil Amudhan CA Arun Ram

CA Krishna Mahesh CA Naveen
CA Sathya Narayanan CA Abirami Karunakaran
CA Priyanka CA SreeHarii K
CA Sujith CA S Krupa
CA Daniel Leo CA Abisheik Aravindan
CA Manickam Maalan Bharathi CA Dhanush Rajendran

Vishal Jain Page 49 Praveen Jain

 Foreign Trade Policy

CA Nithin Balaji CA Sarvan Kumar

CA Venketraman CA Santhosh Sivaramalingam
CA Keerthana CA Padmapriya
CA Vinith CA Priyanka Ramasamy
CA Karthik CA Sachin
CA Raghavendar S CA Vijay Shankar
CA Ishwarya Meenakshi CA Mufeed Ahamed
CA Romil Bothra CA Apoorva Shree
CA Payal CA Akhil KV
CA Uttam CA Gaurav
& …………………..
All the Best to those who are very much
Determined to Fight and Win the Race to become CA!!
Believe
Yourself!!
Vishal Jain Page 50 Praveen Jain