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FIEO offers you an opportunity for Online Chat every Wednesday between 3 to 5 pm (IST) with Mr. Ajay Sahai, Director General (FIEO) on issues related with foreign trade. Mr. Sahai has served many important offices in various capacitites. As Jt. DGFT (Policy), during 1996-2003, he was closely associated with the formulation of the Exim Policy. Feel free to seek clarifications/advices from Mr. Sahai on issues related with foreign trade. All that you need to do is to just click ‘FIEO On-Line Chat Service’ at www.fieo.org. Some portions of the Chats held last weeks are reproduced here. |
What is the maximum percentage of commission to foreign agent allowed if exporter is not taking any export benefits like DEPB, duty drawback or any other benefit?
Under Foreign Exchange Management Act (FEMA), there is no restriction on percentage of commission to foreign agent though under FERA there was restriction of upto 12.5% of FOB value of exports, which could have been allowed as commission.
We are EPCG Licence holder and exporting our products through a third party for discharge of EO and the third party also has separate EPCG obligation. The third party mentions only our EPCG Licence No. & date in our shipping documents. Does non-fulfillment of EO against the third party’s own licence have any bearing on our EO discharge?
You should not be worried about the Third Party’s own Export Obligation (EO), which is with reference to some other licence. If you discharge your EO, whether directly or through third party, then the default of EO by third party in respect of a different licence will have no bearing on your fulfillment of EO.
Is the third party’s CA Certificate also required to be submitted to DGFT alongwith other documents (Form ANF-5B and Appendix-26, CA Certificate)?
No. Third party’s CA certificate is not required. Only your CA will certify exports made through third party for discharging EO.
Can a manufacturer avail duty free procurement of inputs if goods manufactured by him are exported by merchant exporter?
Manufacturer has the option to import inputs duty free under advance authorization and export the finished goods through the third party (merchant exporter) adhering to the conditions given in Paragraph 9.62 of the Foreign Trade Policy. Alternatively, the manufacturer can become a supporting manufacturer of merchant exporter who takes advance authorization for duty free imports, which is converted into finished product, by the manufacturer.
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We are exporter of readymade garments and have to engage road/rail transport for transportation of raw material and goods meant for export from factory to port. Are we liable to pay service tax on freight by taking GTA registration?
Yes, you are liable to pay service tax.
The notification no. 41/2007- service tax, dated 06.10.2007, has allowed refund of service tax paid by exporters on specified services mentioned in the notification. There is confusion as to whether the exporters who are claiming duty drawback are entitled to refund of service tax under the above or not.
We have taken up the issue with DoC as this is incorrect. Drawback takes care of input services whereas the said notification allows rebate of output services.
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Is there any exemption from service tax to diplomatic missions and individuals and their family members posted in a diplomatic mission?
Yes, exemption from payment of service tax relating to all taxable services is available to diplomatic missions for official use of services as well as for the personal use or for the use of the family members of diplomatic agents or career consular officers posted in a foreign diplomatic mission or consular post in India, as per notifications 33/2007-ST, dated 23rd May 2007 and 34/2007-ST, dated 23rd May 2007 respectively.
What procedure is required to be followed to avail this exemption?
The foreign diplomatic mission is issued with a certificate by the Protocol Division of the Ministry of External Affairs that it is entitled to exemption from service tax, as stipulated in the certificate, based on the principle of reciprocity. The head of such foreign diplomatic mission or consular post, or any person authorized by him, shall furnish to the provider of taxable service, a copy of such certificate duly authenticated by him or such authorized person, along with an undertaking in original, signed by him or such authorized person, bearing running serial number commencing from a financial year.
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I am exporting shelled peanuts to Bangkok. The peanuts are processed and flavoured in Bangkok and packaged there. Shall I get any duty concession if I import these ready-to-eat packs in India?
Please refer to the India-Thailand FTA, which provides for duty concession on import subject to Rule of Origin criteria. You can access customs notification 85/2004 as amended by 86/2006 to see the list of items eligible for concession when imported from Thailand.
Can I get any benefit if I export raw peanuts? Where can I refer to the FTA? Also, if I source products from China and export them directly, can I claim any drawback or any other export incentive?
If you pay duty on imports, then on re-export you can claim a part of the same as duty drawback provided you are exporting the goods in the same condition. Alternatively, you can import under bond without payment of duty for re-exports.
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We are a 100% EOU. One of our local customers wants to give us raw materials free of cost and wants us to produce and supply finished goods. We are having valid DTA sales permission. Are we allowed to take this input and supply finished goods to the local buyer under 100% EOU scheme? Will the sales duty structure remain the same?
I don’t think as an EOU you can take such jobwork. Kindly confirm it with your Development Commissioner.
At what places is export warehousing facility available now?
The Export warehouses may be established and registered in Ahmedabad, Bangalore, Kolkata, Chennai, Delhi, Hyderabad, Jaipur, Ludhiana, Mumbai, Pune and Raigad (Maharashtra), East Midnapore (West Bengal), Indore (Madhya Pradesh), Ankleshwar (in the district of Bharuch in Gujarat), Navi Mumbai (in the district of Thane in Maharashtra) and Sholinghur (in the district of Vellore in Tamil Nadu.)
Under present Cenvat Rules, credit on capital goods is restricted to 50% during the financial year in which it is received. Some capital goods become scrap within a short period of use i.e. within the financial year it was received. This being the case, can credit be availed in the next financial year without such goods being in possession or use?
Yes. Condition of possession in the next financial year has been relaxed in respect of spares/components etc vide Rule 4(2)(b)
I have a 100% EOU. Am I required to execute separate bonds under Central Excise Act and Customs Act?
You may execute a multi-purpose bond (B 17) and there is no necessity for execution of separate bonds.
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In terms of notification no. 34/ 2006- CE dt. 14.06.2006 read with 41/ 2006- CE dated 13.10.2006, in case of procurement from domestic sources under SFIS; the whole of the excise duty is debited in the license SFIS. It is not clear when the whole of the excise duty is paid by debiting the license (SFIS) then why the supplies under SFIS have been treated as exempted category. As such, the manufacturer should be entitled for benefit of Cenvat credit for the inputs used in the manufacture of output (final product) for the supplies made under SFIS.
Logically, any debiting of duty from any duty free instrument is as good as the duty paid and should be eligible for Cenvat. The same is already permitted under DEPB, which is the same as SFIS so far duty adjustment is concerned. The problem is due to Paragraph 3.12.1 of FTP which exclude this benefit to SFIS. You need to take up the issue with the office of DGFT.
We obtained the EPCG licence in 1998 under 0% duty and at that time export obligation period was 8 years. We have already fulfilled 100% Export Obligation and annual average as per licence in 8 years 5 months. We took 5 months extra time to fulfill the export obligation and we did not apply for the extension in the last block. We have already submitted our application to DGFT for export obligation discharge certificate but we have asked the question for extra time?
Please apply for six months extension as you can get up to 2 years extension under Customs notification 29/97 that has been amended by Customs Notification 58/2001 dated 30th May 2001 since you completed more than 60% of EO in the original period of export obligation.
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What are the rules and regulation of Merchanting trade?
Merchanting trade is allowed by RBI subject to conditions that (a) goods involved in the transactions are permitted to be imported into India, all rules, regulations and directions applicable to export (except export declaration form) and import (except bill of entry) (b) The entire merchant trade transaction is completed within a period of 6 months.(c)The transactions do not involve foreign exchange outlay for a period exceeding three months.(d) Payment is received in time for the export leg.(e) Where the payment for export leg of the transaction precedes the payment for import leg, AD banks should ensure that the terms of payment are such that the liability for the import leg of the transaction is extinguished by the payment received for the export leg of the transaction, without any delay.
