FOREIGN TRADE POLICY 2023 | CA Raghav Goel

Foreign Trade Policy

CONCEPT 1. FTP Basics

w.e.f. 1st April 2023

Period of FTP It does not have any Last Date.

Governing Union Ministry of Commerce and Industry

Ministry
Governing Act Foreign Trade (Development and Regulation) Act, 1992

Role of DGFT To issue authorization for import or export.

Decision of DGFT is final and binding in respect of any authorization issued under
the FTP.

CONCEPT 2. MAJOR FEATURES OF FTP

Features 1. Export-Import is generally free unless specifically regulated.

2. Export and Import goods are broadly categorized as
a. Free (i.e. general goods freely import or export without any authorization).
b. Restricted (i.e. goods allowed to import or export only with authorization).
c. Prohibited (i.e. goods are not allowed to import or export)
3. There are restrictions on exports and imports for various strategic, health, and
other reasons.
4. Exports are promoted through various promotional schemes.
5. There should be no taxes on exports.
6. Capital goods can be imported at NIL duty for the purpose of exports under the
scheme of Export Promotion Capital Goods (EPCG) Scheme.
7. EOU’S and SEZ units are exempt from payment of taxes.
8. Deemed exports concept introduced.
9. Duty credit scrip’s schemes are designed to promote exports of some specified
goods to specified markets and to promote export of specified services.

CONCEPT 3. SCOPE OF FTP

Scope 1. Legal Framework and Trade Facilitation

2. General Provisions Regarding Imports and Exports
3. Developing Districts as Export Hubs
4. Duty Exemption / Remission Schemes
5. Export Promotion Capital Goods (EPCG) Scheme
6. Export Oriented Units (EOUs), Electronics Hardware Technology Parks
(EHTPs), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs)
7. Deemed Exports
8. Quality Complaints and Trade Disputes
9. Promoting Cross Border Trade in Digital Economy
10. SCOMET: Special Chemicals, Organisms, Materials, Equipment and
Technologies
11. Definitions

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CONCEPT 4. Policy Interpretation Committee

PIC A Policy Interpretation Committee (PIC) may be constituted to aid and advise
DGFT.

Composition 1. DGFT: Chairman

2. All Additional DGFTs in Headquarters: Members
3. All Joint DGFTs in Headquarters looking after Policy matters: Members
4. Joint DGFT (PRC/PIC): Member Secretary
5. Any other person / representative of the concerned Ministry / Department,
to be co-opted by the Chairman.

PRC: Policy Relaxation Committee

PIC: Policy Interpretation Scheme

CONCEPT 5. Different Committees

List of
Committees

CONCEPT 6. Personal Hearing by DGFT for Grievance Redressal

When Importer/exporter is aggrieved by any decision taken by Policy Relaxation

Committee (PRC), or a decision/order by any authority in DGFT.

Step 1: A specific request for Personal Hearing (PH) along with prescribed fee has to be
made to DGFT.

Step 2: DGFT may consider request for relaxation after consulting concerned Norms
Committee, EPCG Committee or Policy Relaxation Committee (PRC) and the
decision conveyed in pursuance to the personal hearing shall be final and binding.

CONCEPT 7. Hand Book of Procedures (HBP) and Appendices & Aayat Niryat Forms (ANF):

To be notified DGFT
by

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CONCEPT 8. National Committee on Trade Facilitation (NCTF)

Established India has ratified the World Trade Organization’s Trade Facilitation Agreement
because of (TFA) in April 2016.

Objective To facilitate coordination and implementation of the TFA provisions, an inter-

ministerial body i.e. National Committee on Trade Facilitation (NCTF) has been
constituted.

4 pillars of 1. Transparency
NCTF 2. Technology
3. Simplification
4. Infrastructure

Aims • Improvement in Ease of Doing Business through reduction in transaction cost

and time
• Reduction in cargo release time
• A paperless regulatory environment
• A transparent and predictable legal regime
• Improved investment climate through better infrastructure

CONCEPT 9. Free passage of Export Consignment

Major Consignments of items meant for exports shall not be withheld/ delayed for any
provision reason by any agency of Central/ State Government.

In case of In case of any doubt, authorities concerned may ask for an undertaking from
Doubt exporter and release such consignment.

CONCEPT 10. Niryat Bandhu

Hand Holding DGFT is implementing the Niryat Bandhu Scheme for mentoring new and
Scheme for potential exporter on foreign trade through
new export/ • counseling,
import • training and
entrepreneurs • outreach programmes

CONCEPT 11. DGFT Online Customer Portal

DGFT Portal Export Import related information including Acts, Rules, Policy and Procedures
etc. are available online at DGFT portal [Link]

CONCEPT 12. Online facilities

e-RCMC DGFT has created a common digital platform for application of issuance, renewal,
amendment and related processes pertaining to Registration Cum Membership
Certificate (RCMC)/ Registration Certificate (RC) issued by Registering
Authorities in electronic form.

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e-CoO Online facility for e-Certificate of Origin (e-CoO)

QCTD Online facility to file Quality Control and Trade Disputes (QCTD).

Helpdesk 24 X 7 Helpdesk Facility

CONCEPT 13. Electronic record of export proceeds through eBRC & EDPMS

e-BRC e-BRC (Electronic Bank Realisation Certificate) has enabled DGFT to capture
details of realisation of export proceeds directly from the Banks through secured
electronic mode.

EDPMS RBI has also developed a comprehensive IT-based system called Export Data
Processing and Monitoring System (EDPMS) for monitoring of export of goods
and software and facilitating Authorized Dealer banks to report various returns
through a single platform.

CONCEPT 14. Authorized Economic Operator (AEO) Programme

AEO Authorized Economic Operator (AEO) programme’ has been developed by

Programme Indian Customs to enable business involved in the international trade to reap the
following benefits:

Benefits (i) Secure supply chain from point of export to import;

(ii) Ability to demonstrate compliance with security standards when contracting
to supply overseas importers /exporters;
(iii) Enhanced border clearance privileges in Mutual Recognition Agreement
(MRA) partner countries;
(iv) Minimal disruption to ßow of cargo after a security related disruption;
(v) Reduction in dwell time and related costs; and
(vi) Customs advice / assistance if trade faces unexpected issues with Customs
of countries with which India have MRA.

CONCEPT 15. Towns of Export Excellence (TEE)

What is TEE Selected towns which are contributing handsomely to India’s exports by
producing goods of specified amount may be granted recognition as TEE.

Advantage of They will be provided targeted support and infrastructure development to

TEE maximize their export competitiveness and enable them to move up the value
chain and also to tap new markets by granting specified privileges to them.

CONCEPT 16. Status Holder Certification

Status Holder The objective behind certifying certain exporter firms as ‘Status Holder’ is to
recognize such exporter firms as business leaders who have excelled in
international trade and have successfully contributed to country’s foreign trade.

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Categories

Basis of The export performance shall be counted on the basis of FOB of export earnings
computing in freely convertible foreign currencies or in Indian Rupees.
export
performance

Duration of For granting status, an export performance would be necessary in all the three
export preceding financial years.
performance

Transferability Export performance is not transferrable among IEC holders.

of export
performance

Re-export Export made on re-export basis shall not be counted for recognition.

SCOMET items Export of items under authorisation, including Special Chemicals, Organisms,
Materials, Equipment and Technologies (SCOMET) items, would be included for
calculation of export performance.

Grant of double For calculating export performance for grant of One Star Export House Status
weightage category,
• exports by IEC holders under Micro and Small Enterprises,
• manufacturing units having ISO/BIS certification,
• units located in Northeastern States including Sikkim and Union
Territories of Jammu, Kashmir and Ladakh and
• export of fruits and vegetables

shall be granted double weightage once in any of these categories.

Privileges of (a) Authorisation and Customs Clearances for both imports and exports may be
Status Holders granted on self-declaration basis;

(b) Input-Output norms may be fixed on priority within 60 days by the Norms
Committee;

(c) Exemption from furnishing of Bank Guarantee for Schemes under FTP.

(d) Exemption from compulsory negotiation of documents through banks.

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(e) Two star and above Export houses shall be permitted to establish Export
Warehouses as per Department of Revenue guidelines.

(f) The status holders would be entitled to preferential treatment and priority in
handling of their consignments.

g) Manufacturers who are also status holders (Three Star/Four Star/Five Star)
will be enabled to self-certify their manufactured goods (as per their Industrial
Entrepreneurs Memorandum (IEM) / Industrial License (IL) / Letter of Intent (LOI)
as originating from India with a view to qualify for preferential treatment under
specified agreements.

(h) Status holders shall be entitled to export freely exportable items (excluding
Gems and Jewelry, Articles of Gold and precious metals) on free of cost basis for
export promotion subject to an annual limit of Rupees One Crore or @2% of
average annual export realization during preceding three licensing years,
whichever is lower.

For export of pharma products by pharmaceutical companies, the annual limit

would be 2% of the average annual export realisation during preceding three
licensing years.

In case of supplies of pharmaceutical products, vaccines and lifesaving drugs to

health programmes of international agencies such as UN, WHO-PAHO and
Government health programmes, the annual limit shall be upto 8% of the
average annual export realisation during preceding three licensing years.

Such free of cost supplies shall not be entitled to Duty Drawback or any other
export incentive under any export promotion scheme.

CONCEPT 17. Miscellaneous provisions for TRADE FACILITATION AND EASE OF DOING BUSINESS

Atma Nirbhar DGFT Regional Authorities will be engaging with all the relevant State and Central
Bharat, Vocal agencies to take forward initiative of Atma Nirbhar Bharat, Vocal for local and
for local and Make in India in each district.
Make in India

Quality Committee on Quality complaints and Trade Disputes (CQCTD) will be

complaints and responsible for enquiring and investigating into all issues like complaints/ trade
Trade Disputes disputes between foreign buyer/supplier and Indian exporter/importer in
respect of
• quality of goods/services/technology supplied or
• unethical commercial dealings
• including non-supply/ partial supply/ wrong supply/ non- payment;
• non- adherence to delivery schedules, etc.

National Export Export of dual-use items, including software and technologies, having potential
Control List civilian/ industrial applications as well as use in weapons of mass destruction is
regulated under FTP. It is either prohibited or is permitted under an
Authorization unless specifically exempted.

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CONCEPT 18. Indian Trade Classification (Harmonized System) [ITC (HS)]

Schedule I - Schedule I of the ITC-HS code is divided into 21 sections and each section is
Import Policy - further divided into chapters.
ITC(HS) 2023
The total number of chapters in the schedule I is 98. The chapters are further
divided into sub-heading under which different HS codes are mentioned.

Schedule II - Export Policy Schedule II of the ITC-HS code contains 97 chapters giving all the
Export Policy - details about the guidelines related to the export policies.
ITC(HS) 2023

CONCEPT 19. State Trading Enterprises (STEs)

STE State Trading Enterprises (STEs) are governmental and non-governmental

enterprises, including marketing boards, which deal with goods for export and
/or import.

Role of STE Any good, import or export of which is governed through exclusive or special
privilege granted to State Trading Enterprise (STE), may be imported or exported
by the concerned STE as per conditions specified in ITC (HS).

Examples Some of the STEs are

✔Food Corporation of India,
✔Oil and Natural Gas Corporation Ltd,
✔National Fertilizers Limited,
✔Indian Rare Earth Ltd.,
✔National Dairy Development Board,
✔National Agricultural Cooperative Marketing Federation of India (NAFED),
State Cooperative Marketing Federation, etc

CONCEPT 20. Importer-Exporter Code (IEC):

IEC or e-IEC An IEC is a 10-character alpha-numeric number allotted to an entity (firm/

company/LLP etc.) and is mandatory for undertaking any export/import
activities.

IEC shall be same as Permanent Account Number (PAN) and shall be separately
issued by DGFT based only on an online application.

IEC details have to be electronically updated every year, even if there are no
changes; failing which it will be de-activated till updation.

CONCEPT 21. Mandatory documents for export/ import of goods

For Export of 1. Bill of Lading/ Airway Bill/ Lorry Receipt/ Railway Receipt/Postal Receipt
goods from 2. Commercial Invoice cum Packing List
India 3. Shipping Bill/Bill of Export/ Postal Bill of Export

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For Import of 1. Bill of Lading/Airway Bill/Lorry Receipt/ Railway Receipt/Postal Receipt

goods into India 2. Commercial Invoice cum Packing List
3. Bill of Entry

CONCEPT 22. Penal action and placing of an entity in Denied Entity List (DEL)

Grounds of In following situations, a person shall be liable to penal action:

Action
(i) Authorization holder: -
• Violation of condition of such authorization
• Fails to fulfil export obligation
• Fails to deposit the requisite amount within the period specified in
demand notice.
(ii) any information/particulars furnished by applicant subsequently found
untrue / incorrect

Denied Entity (i) Firm may be refused grant or renewal of a licence / authorization
List (DEL): /certificate/scrip/any instrument bestowing financial/fiscal benefits, and

(ii) all new licenses, authorizations, scrips, certificates, instruments etc. will be
blocked from printing/ issue/renewal.

DEL orders may be placed in abeyance for max 60 days, for reasons to be
recorded in writing by the concerned RA.

A firm’s name can be removed from DEL, by the concerned RA if the firm
completes Export Obligation/ pays penalty/ fulfils requirement of demand
notice(s) issued by the RA/submits documents required by the RA.

CONCEPT 23. Provisions relating to import of goods

“Actual user” Goods which are importable freely without any ‘restriction’ may be imported by
condition any person. However, if such imports require an authorisation, actual user alone
may import such good(s) unless said condition is specifically dispensed with by
DGFT.

Samples: Import of samples of even ‘restricted’ items, is allowed without import

authorization. Exceptions are defense / security items, seeds, bees, and new
drugs; these need authorization.

Duty free import of samples upto ₹3,00,000 for all exporters shall be allowed.

Import of Gifts Import of goods, including those purchased from e-commerce portals, through
post or courier, where Customs clearance is sought as gifts, is prohibited except
for life saving drugs/ medicines and Rakhi (but not gifts related to Rakhi).

Explanation:
1. Rakhi (but not gifts related to Rakhi) will be covered under rule that reads “no
duty shall be collected if the amount of duty leviable is equal to or less than Rs.
100/-”

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2. Import of goods as gifts with payment of full applicable duties is allowed.

Import through - Bona-fide household goods and personal effects

Passenger - Samples of such items that are otherwise freely importable under FTP may also
Baggage be imported as part of passenger baggage without an Authorisation subject to
Baggage Rules.
- Exporters coming from abroad are also allowed to import drawings, patterns,
labels, price tags, buttons, belts, trimming and embellishments required for
export, as part of their passenger baggage, without authorization subject to
value limit as laid down in FTP or Customs.

Re – import of Capital goods, equipment, components, parts and accessories, whether

goods repaired imported or indigenous, except those restricted under ITC (HS) may be sent
abroad abroad for repairs, testing, quality improvement or upgradation or
standardization of technology and re-imported without an Authorisation.

Import of goods Project contractors after completion of projects abroad, may import without an
used in projects Authorisation, goods including capital goods used in the project, provided they
abroad: have been used for at least one year.

Import of Import of new / second hand prototypes / second hand samples may be allowed
Prototypes on payment of duty without an Authorisation to an Actual User (industrial)
engaged in production of or having industrial license / letter of intent for
research in item for which prototype is sought for product development or
research, as the case may be, upon a self- declaration to that effect, to the
satisfaction of Customs authorities.

Import of Import of any form of metallic waste, scrap will be subject to the condition that
Metallic Waste it will not contain hazardous, toxic waste, radioactive contaminated waste/scrap
and Scrap: containing radioactive material, any types of arms, ammunition, mines, shells,
live or used cartridge or any other explosive material in any form either used or
otherwise.

Removal of A SEZ unit/Developer/ Co-developer may be allowed to dispose of in DTA any

Scrap/Waste waste or scrap, including any form of metallic waste and scrap, generated during
from SEZ: manufacturing or processing activity, without an Authorization, on payment of
applicable Customs Duty.

Other • Goods for import into India can be sold on the high seas, subject to FTP/other
Provisions laws in force.
Related to
Imports: • Merchanting trade means shipment of goods from one foreign country to
another foreign country without touching Indian ports, involving an Indian
intermediary. This is allowed, subject to RBI guidelines, except for goods in
the CITES12 and SCOMET lists.

CITES (shorter name for the Convention on International Trade in Endangered

Species of Wild Fauna and Flora, also known as the Washington Convention) is a
multilateral treaty to protect endangered plants and animals from the threats of
international trade.

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• Import of capital goods under lease financing does not require any specific
permission from the DGFT.

• For imported goods, Bank Guarantee / Letter of Undertaking/ Bond (BG/

LUT /Bond) is to be executed with customs in case of duty-free import or
otherwise required, before clearance of goods.

• For indigenously sourced goods, an authorisation-holder has to execute

LUT/BG/Bond with the RA concerned, before sourcing such material.

CONCEPT 24. Import policy for Second Hand Goods

[Link]. Second Hand Capital Import Policy Conditions, if any

Goods
(a) i. Desktop Computers; Restricted Importable against
ii. Refurbished/re- Authorisation
conditioned spares of
refurbished parts of
Personal Computers/
Laptops;
iii. Air Conditioners;
iv. Diesel generating sets

(b) All electronics and IT Restricted Importable against an

Goods notified authorization
under the Electronics and
IT Goods (Requirements of
Compulsory Registration)
Order, 2012

(c) Refurbished / Free Subject to production of

reconditioned spares Chartered Engineer
of Capital Goods certificate to the effect
that such spares have at
least 80% residual life of
original spare

(d) All other second-hand Free

capital goods
{other than (a) (b) &
(c) above}

[Link]. Other than Capital Goods Import Policy Conditions, if any

(a) Second Hand Goods Restricted Importable against
other than capital Authorisation
goods
(b) Second Hand Goods Free Subject to condition that
imported for the waste generated during
purpose of repair/ the repair / refurbishing of

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refurbishing / imported items is treated

reconditioning or as per domestic Laws/
reengineering Rules/ Orders/
Regulations/ technical
specifications/
Environmental / safety and
health norms and the
imported item is re-
exported back as per the
Customs Notification.

CONCEPT 25. Provisions relating to export of goods

Free Exports: All goods may be exported without any restriction except to the extent that
such exports are regulated.

Benefits for Supporting manufacturer is one who manufactures goods/products or any

Supporting part/ accessories/ components of a good/ product for a merchant
Manufacturers: exporter/manufacturer exporter under a specific Authorisation.

For any benefit to accrue to the supporting manufacturer, the names of both
supporting manufacturer as well as the merchant exporter must figure in the
concerned export documents, especially in tax invoice / shipping bill / bill of
export/ airway bill.

Third Party • Third party exports is allowed under FTP.

Exports:
• Third-party exports mean exports made by an exporter/manufacturer on
behalf of another exporter(s).

• In such cases, export documents such as shipping bills shall indicate names
of both manufacturer exporter/manufacturer and third- party
exporter(s).

• Bank Realisation CertiÞcate (BRC), Self-Declaration Form (SDF), export

order and invoice should be in the name of third-party exporter.

Question: LM Corporation, a merchant exporter, procured order of goods from a customer in USA. It
approached ST Corporation, a manufacturer, for execution of the said order. The shipping bills relating
to the consignment bear the name of LM Corporation. Bank Realization Certificate, GR declaration,
export order and invoice are also in the name of LM Corporation. Comment whether ST Corporation
would be deemed as the exporter under FTP.

Answer: 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:
(i) Export documents such as shipping bills shall indicate name of both manufacturing exporter/
manufacturer and third-party exporter(s).
(ii) BRC, GR declaration, export order and invoice should be in the name of third party exporter.

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In the above case, though BRC, GR declaration, export order and invoice are in the name of LM
Corporation (third party exporter), the shipping bill does not have the name of ST Corporation
(manufacturer).
Therefore, ST Corporation will not be treated as the exporter in this case.

Export of Exports of bonafide trade and technical samples of goods of freely importable
Samples: items are allowed without any limit.

Export of Gifts: Goods including edible items, of value not exceeding 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 Authorisation.

Export of • Bonafide personal baggage may be exported either along with passenger
Passenger or, if unaccompanied, within 1 year before or after passenger’s departure
Baggage: from India.

• However, items mentioned as restricted for exports in shall not be exported

as a gift, without an Authorisation.

• Samples that freely exportable can be exported as part of passenger

baggage. Authorisation will be required for restricted items.

• Samples of freely exportable items may be exported as part of passenger

baggage without an authorisation.

Import for • Goods that are freely importable as well as freely exportable can be imported
Export: and then exported in same or substantially the same form, without any
authorisation.

• Goods including capital goods (both new and second hand) can be imported
under customs bond and then cleared for export against freely convertible
foreign currency provided they are freely exportable. This includes goods that
are ‘restricted’ for import.

• Capital goods that are freely importable and freely exportable can be
imported for export upon execution of LUT/BG with the customs authorities.

• Goods of other than Indian origin that are ‘restricted’ for export (other than
‘prohibited’ or SCOMET items) but ‘free’ for import can be imported for exports
in same or substantially the same form. Such goods shall be kept in bonded
warehouse and re-exported from there.

• Goods that are imported against payment in freely convertible foreign

currency can be exported only against payment in freely convertible foreign
currency, unless otherwise notified.

Payments and All export contracts and invoices shall be denominated either in freely
Receipts on convertible currency or Indian rupees but export proceeds shall be realized in
Imports / freely convertible currency.
Exports:
However, export proceeds against specific exports may also be realized in
rupees, provided it is through a freely convertible Vostro account of a non-

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resident bank situated in any country other than a member country of Asian
Clearing Union (ACU) or Nepal or Bhutan.

Non-realisation If an exporter fails to realize export proceeds within time specified by RBI, he
of export shall be liable to return all benefits/ incentives availed against such exports and
proceeds: shall be liable to penal action under FT (D&R) Act and the FTP. However, if such
non realization is for reasons beyond his control, he may approach RBI for
writing off the unrealized amount.

Export Credit ECAs provide financial support to exporters. They support exports by insurance,
Agencies (ECAs): guarantee and also direct lending. For instance, Export Credit Guarantee
Corporation of India Ltd. (ECGC), Exim Bank, etc

Export • Export Promotion Councils (EPCs) are organizations of exporters, set up to

Promotion promote and develop Indian exports.
Councils:
• Each Council is responsible for promotion of a particular group of products/
projects/services.

• EPCs are also eligible to function as Registering Authorities to issue

Registration-cum-Membership Certificate (RCMC).

• RCMC is required to be furnished by any person, applying for an

Authorisation to import/ export under the FTP (except ‘Restricted’ items)
or applying for any other benefit or concession under FTP.

Approved Approved Exporters will be entitled to self-certify their manufactured goods as

Exporter Scheme originating from India with a view to qualifying for preferential treatment under
for Self- different Preferential Trade Agreements [PTAs], Free Trade Agreements [FTAs],
Certification of Comprehensive Economic Cooperation Agreements [CECA] and Comprehensive
Certificate of Economic Partnerships Agreements [CEPA] which are in operation. Self-
Origin: certification will be permitted only for the goods that are manufactured as per
the IEM/IL/LOI issued to manufacturers.

CONCEPT 26. EXPORT PROMOTION SCHEMES UNDER FTP

List of schemes DUTY EXEMPTION SCHEMES

1. Advance Authorization Scheme
2. Duty Free Import Authorization (DFIA) Scheme,

DUTY REMISSION SCHEMES

1. Duty Drawback scheme
2. RODTEP
3. ROSCTL

OTHERS
1. Export Promotion Capital Goods Scheme (EPCG)
2. EOU, EHTP, STP & BTP Schemes and
3. Deemed Exports
4. SEZ Scheme

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CONCEPT 27. Advance Authorization Scheme

Meaning Advance Authorisation is issued to allow duty free import of input, which is
physically incorporated in export product (making normal allowance for
wastage). In addition, fuel, oil, catalyst which is consumed / utilized in the
process of production of export product, may also be allowed.

Eligible • Advance Authorisation can be issued either to a manufacturer exporter or

Applicant / merchant exporter tied to supporting manufacturer.
Export:
• Advance Authorisation for pharmaceutical products manufactured through
Non-Infringing (NI) process shall be issued to manufacturer exporter only.

Eligible Supply Advance Authorisation is issued for procurement of inputs for the following
kinds of supply:-
• Physical export (including export to SEZ)
• Intermediate supply; and/or
• Deemed exports
• Supply of ‘stores’ on board of foreign going vessel / aircraft, subject to
condition that there is specific SION in respect of item supplied.

Basis of issuance Advance Authorization is issued for inputs in relation to resultant product, on
of Advance the following basis:
Authorisation • As per Standard Input Output Norms (SION) notified); or
• On the basis of self-declaration or
• Applicant-specific prior fixation of norm by the Norms Committee or
• On the basis of Self Ratification Scheme

Self-Ratification Where there is no SION/valid Adhoc Norms for an export product or where SION
Scheme has been notified but exporter intends to use additional inputs in the
manufacturing process, eligible exporter can apply for an Advance
Authorisation under this scheme on self-declaration and self-ratification basis.

Eligibility to opt An exporter (manufacturer or merchant), who holds AEO Certificate under
for Advance Common Accreditation Programme of CBIC is eligible to opt for this scheme.
Authorisation
A status holder who is a manufacturer cum actual user and holds valid 2- star or
above status and who has already submitted its application for grant of AEO on
CBIC’s AEO portal is also eligible to apply for this scheme subject to the specified
conditions.

Pre-import Imported inputs are subject to pre-import condition and they should be
condition physically incorporated in the export product (making normal allowance for
wastage).

Invalidation Regional Authority shall issue Invalidation Letter when domestic supplier
letter intends to obtain duty free material for inputs through Advance Authorisation
for supplying resultant product to another Advance Authorisation / DFIA /EPCG
Auhtorisation

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Advance Regional Authority shall issue Advance Release Order if the domestic supplier
Release Order intends to seek refund of duties exempted through Deemed Exports
(ARO) mechanism.
Holder of an Advance Authorisation / Duty Free Import Authorisation can
procure inputs from indigenous supplier/ State Trading Enterprise/
EOU/EHTP/BTP/ STP in lieu of direct import. Such procurement can be against
Advance Release Order (ARO), or Invalidation Letter.

Validity Period Import of goods under the Advance Authorisation must be made within 12
for Import months from the date of issue of Authorisation.

Re-validation for another period of 12 months can be allowed once only.

Application for re- validation can be made online.

Export “Export Obligation” means obligation to export product or products covered by

Obligation Authorisation or permission in terms of quantity, value or both, as may be
Period and its prescribed or specified by Regional or competent authority.
Extension:
The Export Obligation Period (EOP) of Advance Authorisations issued for such
items shall be 90 days from the date of clearance of import [Link]
extension is allowed in it.

Advance
Authorisation
for Annual
Requirement
and Eligibility
Condition:

SION Advance Authorisation for Annual Requirement shall only be issued for items
requirement notified in Standard Input Output Norms (SION). And it shall not be available in
case of ad hoc norms under self-declaration Authorisations where SION does
not exist.

Advance Exporters having past export performance (in at least preceding two financial
Authorization years) shall be entitled for Advance Authorisation for Annual requirement.
for Annual
requirement

Value Addition VA = (A-B)/B x 100

(VA):
Where A = FOB value of export realised/FOR value of Supply received
B = CIF value of inputs covered by Authorisation, plus value of any other input
used on which benefit of Duty Drawback is claimed or intended to be claimed.

Minimum Value (i) Minimum value addition required to be achieved under Advance
Addition Authorisation is 15%.
(ii) Export Products where value addition could be less than 15% are given in
Appendix 4D of FTP (i.e. petroleum products etc).
(iii) Minimum value addition for Gems & Jewellery Sector is separately given
given in paragraph 4.60 of Handbook of Procedures.

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 FOREIGN TRADE POLICY 2023 | CA Raghav Goel

(iv) In case of Tea, minimum value addition shall be 50%.

(v) In case of spices, minimum value addition shall be 25%.

Example:

Jigsaw Puzzle has imported inputs, having CIF value of ₹25,00,000 without
payment of duty under Advance Authorisation. Inputs are supplied free of
cost valued at ₹5,00,000 to meet eventualities of quality issues arising during
manufacture. On manufacturing, the products are supplied to units in SEZ and
realization is in Indian currency. Jigsaw Puzzle wants to know what should be
the minimum value addition under Advance Authorisation scheme.

Minimum FOB value of supply to SEZ = ₹34,50,000 [₹25,00,000 + ₹5,00,000) x

115%

Import of Spares that are required to be supplied with the export product can be imported
mandatory duty-free under the advance authorisation up to a value of 10% of the CIF value
spares of the authorisation.

Exemptions Imports under Advance Authorisation are exempted from payment of Basic
from Duty under Customs Duty, Additional Customs Duty, Education Cess, Anti- dumping Duty,
this scheme Countervailing Duty, Safeguard Duty, Transition Product Specific Safeguard
Duty, wherever applicable Imports under Advance Authorisation for physical as
well as deemed exports are also exempt from whole of the Integrated Tax u/s
3(7) and Compensation Cess u/s 3(9) of the Customs Tariff Act, 1975

Admissibility of Duty drawback as per rate determined and fixed by Customs authority is
Drawback available for duty paid imported or indigenous inputs (not specified in the
norms) used in the export product. For this purpose, applicant shall indicate
clearly details of duty paid input in the application for Advance Authorisation.

Actual User Advance Authorisation and / or material imported under Advance Authorisation
Condition for shall be subject to Actual User condition. The same shall not be transferable
Advance even after completion of export obligation. However, Authorisation holder will
Authorisation: have option to dispose of product manufactured out of duty-free input once
export obligation is completed.

If input tax credit facility on input has been availed for the exported goods, even
after completion of export obligation, the goods imported against such Advance
Authorisation shall be utilized only in the manufacture of dutiable goods
whether within the same factory or outside (by a supporting manufacturer).

Waste / Scrap arising out of manufacturing process, as allowed, can be disposed

off on payment of applicable duty even before fulfilment of export obligation.

Free of Cost Advance Authorisation shall also be available where some or all inputs are
Supply by supplied free of cost to exporter by foreign buyer. In such cases, notional value
Foreign Buyer: of free of cost input shall be added in the CIF value of import and FOB value of
export for the purpose of computation of value addition. However, realization
of export proceeds will be equivalent to an amount excluding notional value of
such input.

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CONCEPT 28. Duty Free Import Authorization (DFIA) Scheme

Meaning Duty Free Import Authorisation is issued to allow duty free import of inputs.

In addition, import of oil and catalyst which is consumed/ utilised in the process
of production of export product, may also be allowed.

Import of Tyre under DFIA scheme is not allowed.

Provisions applicable to Advanced Authorisation are broadly applicable in case

of DFIA.

However, DFIA shall be issued only for products for which Standard Input and
Output Norms (SION) have been notified.

Duties Duty Free Import Authorisation shall be exempted only from payment of Basic
Exempted: Customs Duty (BCD).

Drawback as per rate determined and fixed by Customs authority shall be

available for duty paid inputs, whether imported or indigenous, used in the
export product.

Eligibility i. Duty Free Import Authorisation shall be issued on post export basis for
products for which Standard Input Output Norms have been notified.

ii. Merchant Exporter shall be required to mention name and address of

supporting manufacturer of the export product on the export document viz.
Shipping Bill/ Bill of Export / Tax Invoice for export prescribed under the GST
rules.

iii. Application is to be filed with concerned Regional Authority before effecting

export under Duty Free Import Authorisation.

iv. No Duty-Free Import Authorisation shall be issued for an input which is

subjected to pre-import condition or where SION prescribes ‘Actual User’
condition or prescribes pre import condition for such an input.

Minimum Value Minimum value addition of 20% shall be required to be achieved.

Addition

Validity Export shall be completed within 12 months from the date of online filing of
&Transferability application and generation of file number.
of DFIA
Regional Authority shall issue transferable DFIA with a validity of 12 months
from the date of issue.

No further revalidation shall be granted by Regional Authority. Separate DFIA

shall be issued for each SION.

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CONCEPT 29. Common provisions applicable to Advance Authorisation and DFIA:

Accounting of 1. Wherever SION permits use of either (a) a generic input or (b) alternative
Input: input, unless the name of the specific input together with quantity [which
has been used in manufacturing the export product] gets indicated /
endorsed in the relevant shipping bill and these inputs, so endorsed, within
quantity specified and match the description in the relevant bill of entry,
the concerned Authorisation will not be redeemed.

2. The above provisions will also be applicable for supplies to SEZs and supplies
made under Deemed exports.

Importability / No export or import of an item shall be allowed under Advance Authorisation /

Exportability of DFIA if the item is prohibited for exports or imports respectively.
items that are
Prohibited/ Export of a prohibited item may be allowed under Advance Authorisation
Restricted / STE provided it is separately so notified, subject to the conditions given therein.

Items reserved for imports by STEs cannot be imported against Advance

Authorisation / DFIA.

However, those items can be procured from STEs against ARO or Invalidation
letter.

Items reserved for export by STE can be exported under Advance Authorisation
/ DFIA only after obtaining a No Objection Certificate from the concerned STE.

Import of restricted items shall be allowed under Advance Authorisation/DFIA

unless specifically disallowed.

Export of restricted / SCOMET items however, shall be subject to all

conditionalities or requirements of export authorisation or permission.

domestic Holder of an Advance Authorisation / Duty Free Import Authorisation can

Sourcing of procure inputs from indigenous supplier/ State Trading
Inputs Enterprise/EOU/EHTP/BTP/ STP in lieu of direct import.

Such procurement can be against Advance Release Order (ARO), or Invalidation

Letter

Currency for Export proceeds shall be realized in freely convertible currency or in Indian
realisation of Rupees wherever permitted under FTP.
export proceeds
Export to SEZ Units shall be taken into account for discharge of export obligation
provided payment is realised from Foreign Currency Account of the SEZ unit.

Export to SEZ Developers / Co-developers can also be taken into account for
discharge of export obligation even if payment is realised in Indian Rupees.
Authorisation holder needs to file Bill of Export for export to SEZ unit/ developer
/ co-developer in accordance with the procedures given in SEZ Rules, 2006.

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Re-import of Goods exported under advance authorisation/ duty free import authorisation
exported goods may be re-imported in same or substantially same form subject to the specified
under Duty conditions.
Exemption/
Remission
Scheme:

CONCEPT 30. Duty Remission Scheme

CONCEPT 31. Export Promotion Capital Goods Scheme (EPCG)

Meaning Export Promotion Capital Goods Scheme (EPCG) permits exporters to import
capital goods for pre-production, production and postproduction at zero
customs duty or procure them indigenously without paying duty in the
prescribed manner. In return, exporter is under an obligation to fulfil the export
obligation.

Applicability of Capital goods imported under EPCG Authorisation for physical exports are also
IGST and exempt from IGST and Compensation.
Compensation
cess: In case integrated tax and compensation cess are paid in cash on imports under
EPCG, incidence of the said integrated tax and compensation cess would not be
taken for computation of net duty saved provided, input tax credit is not availed.

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Actual User Imported capital goods shall be subject to Actual User condition till export
Condition: obligation is completed and Export Obligation Discharge CertiÞcate (EODC) is
granted.

Validity: Authorisation shall be valid for import for 24 months from the date of issue of
Authorisation. Revalidation of EPCG Authorisation shall not be permitted.

Indigenous A person holding an EPCG authorisation may source capital goods from a
Sourcing of domestic manufacturer either through Invalidation letter or through Advance
Capital Goods Release Order. Such domestic manufacturer shall be eligible for deemed export
and benefits to benefits. Such domestic sourcing shall also be permitted from 100% EOUs.
Domestic
Supplier:
Export Import under EPCG scheme shall be subject to an export obligation equivalent
Obligation (EO) to 6 times of duties, taxes and cess saved on capital goods to be fulfilled in 6
consist of years reckoned from the date of issue of authorization.
average export
obligation and Exports under Advance Authorisation, DFIA, Duty Drawback, RoSCTL and
specific export RoDTEP Schemes would also be eligible for fulfilment of EO under EPCG Scheme.
obligation. Exports made from DTA units shall only be counted for calculation and/or
fulfilment of AEO and/or EO.

EO can also be fulfilled by the supply of Information Technology Agreement

(ITA-1) items to DTA, provided realization is in free foreign exchange. Both
physical exports as well as specified deemed exports shall also be counted
towards fulfilment of export obligation.

Specific EO is over and above the Average EO.

Incentives for In cases where Authorization holder has fulflled 75% or more of specific export
fulÞlment of obligation and 100% of Average Export Obligation till date, if any, in half or less

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export than half the original export obligation period specified, remaining export
obligation: obligation shall be condoned, and the Authorization redeemed.

In case of direct imports, EO shall be reckoned with reference to actual

duty/Taxes/Cess saved amount. In case of domestic sourcing, EO shall be
reckoned with reference to notional Customs duty /Taxes/Cess saved on FOR
value.

CONCEPT 32. RODTEP

Meaning The Government had recently announced the introduction of a new scheme
“Remission of Duties and Taxes on Exported Products” (RoDTEP) to replace the
Merchandise Exports from India Scheme (MEIS) available to exporters of goods.

RoDTEP has been made effective for exports from 1st January 2021 in respect
of those exports where intention to claim the benefit has been manifested on
the shipping bills.
RoDTEP Being WTO-compliant, the RoDTEP scheme can make available from the
Benefits: government benefits to the exporters seamlessly.
(a) The scheme is more exhaustive in that certain taxes that were not covered
under the previous scheme are also included in the list, for example, education
cess, state taxes on oil, power and water.
(b) It will add more competitiveness in the foreign markets, with assured duty
benefits by the Indian Government.
(c) It will also help exporters meet international standards and promote
business growth etc.

Objective of The Scheme’s objective is to refund, currently un-refunded duties and taxes.
RODTEP Scheme The scheme has been introduced with an objective to neutralize the taxes and
duties suffered on exported goods which are otherwise not credited or remitted
or refunded in any manner and remain embedded in the export goods. This
scheme provides for rebate of all hidden Central, State, and Local
duties/taxes/levies on the goods exported which have not been refunded under
any other existing scheme namely:

1. Mandi Tax,
2. Municipal Taxes,
3. Property Taxes,
4. VAT,
5. Coal Cess,
6. Central Excise duty on fuel,
7. Electricity duty on purchase of electricity,
8. Stamp duty on export documents; etc.

will now be refunded under this particular scheme

All the items under the MEIS and the RoSCTL (Rebate of State and Central Taxes
and Levies) are now under the purview of the RoDTEP Scheme.

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RODTEP Scheme 1. RoDTEP support will be available to eligible exporters at a notified rate as a
Operating percentage of Freight On Board (FOB) value. Rebate on certain export products
Principles will also be subject to value cap per unit of the exported
product. However, for the purpose of calculation of duty credit, value of
exported shall be least of the following:
(a) FOB value of said goods, or
(b) 1.5 times of the market price of the goods.

2. Identified export sectors and rates under RoDTEP cover 8555 tariff lines in
addition to similar support being extended to apparel and made-ups exports
under RoSCTL scheme of Ministry of Textiles.

3. Employment Oriented Sectors like Marine, Agriculture, Leather, Gems &

Jewellery etc. are covered under the Scheme. Other sectors like Automobile,
Plastics, Electrical / Electronics, Machinery etc. also get support. The entire
valve chain of textiles also gets covered through RoDTEP & RoSCTL.
4. Rebate under the Scheme shall not be available in respect of duties and taxes
already exempted or remitted or credited.

5. The determination of ceiling rates under the scheme will be done by a

Committee in the Department of Revenue/Drawback Division with suitable
representation of the DoC/DGFT, line ministries and experts, on
the sectors prioritized by Department of Commerce and Depart of Revenue.

6. No provision for remission of arrears or contingent liabilities is permissible

under the Scheme to be carried over to the next financial year.

7. The rebate allowed is subject to the receipt of sale proceeds within time
allowed under the Foreign Exchange Management Act, 1999 failing which such
rebate shall be deemed never to have been allowed. The rebate would not be
dependent on the realisation of export proceeds at the time of issue of rebate.
However, adequate safeguards to avoid any misuse on account of non-
realisation and other systemic improvements as in operation under Drawback
Scheme, IGST and other GST refunds relating to exports would also be
applicable for claims made under RoDTEP Scheme.

Mechanism of (a) Scheme would be implemented through end to end digitalization of issuance
Issuance of of rebate amount in the form of a transferable duty credit/electronic scrip (e-
Rebate scrip), which will be maintained in an electronic ledger by the Central Board of
Indirect Taxes and Customs (CBIC).

(b) Necessary rules and procedure regarding grant of RoDTEP claim under the
scheme and implementation issues including manner of application, time
period for application and other matters including export realisation, export
documentation, sampling procedures, record keeping etc. would be notified by
the CBIC, Department of Revenue on an IT enabled platform with a view to end
to end digitalisation.

(c) Necessary provisions for recovery of rebate amount where foreign exchange
is not realised, suspension / withholding of RoDTEP in case of frauds and misuse,
as well as imposition of penalty will also be built suitably by CBIC.

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Eligible Sectors The following sectors are eligible to avail of benefits under the scheme.
for RoDTEP 1. All sectors shall be covered under the scheme. Labour-intensive sectors will
Scheme be accorded a priority.
2. Both manufacturer exporters and merchant exporters (traders) are eligible.
3. There is no turnover threshold for availing benefits under the scheme.
4. Re-exported products are not eligible under this scheme.
5. The exported products should have India as their country of origin to be
eligible for benefits under the scheme.
6. Special Economic Zone Units and Export Oriented Units are also eligible.
7. The scheme also applies to goods that have been exported via courier
through e-commerce platforms.

Ineligible (i) Exports of imported goods as per para 2.46 of FTP i.e. Import for Export;
categories under (ii) Exports through trans-shipments, meaning thereby exports originating in
the Scheme for third country but trans-shipped through India;
claiming benefit: (iii) Export products which are subject to minimum export price or export duty;
(iv) Products which are restricted for exports
(v) Products which are prohibited for exports
(vi) Deemed Exports;
(vii) Supplies of products manufactured by DTA units to SEZ/FTWZ units;
(viii) Products manufactured in EHTP and BTP;
(ix) Products manufactured partly or wholly in a warehouse
(x) Products manufactured or exported in discharge of export obligation against
advance Authorization or Duty Free Import Authorization (DFIA) or Special
Advance Authorization issued under a duty exemption scheme of relevant
Foreign Trade Policy;
(xi) Products manufactured or exported by a unit licensed as 100% Export
Oriented Unit (EOU)
(xii) Products manufactured or exported by any of the units situated in Free
Trade Zone (FTZ), Export Processing Zones (EPZ) or Special Economic Zone (SEZ);
(xiii) Products manufactured or exported availing the benefit of jobbing
transactions;
(xiv) Exports for which electronic documentation in ICEGATE EDI has not been
generated or Exports from Non-EDI port; and
(xv) Goods which have been taken into use after manufacture (i.e. second-hand
goods);

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RoDTEP vs MEIS

The process of
generating and
claiming scrips
as per the
RoDTEP scheme
is shown
below.

The common documents required for RoDTEP Scheme include

~~ Shipping bills,
~~ Digital Signature Certificate (DSC) – Class 3,
~~ Electronic Bank Realisation Certificate (eBRC), and
~~ RCMC Certificate.

Electronic Bank Realisation Certificate: An eBRC (electronic Bank Realisation

Certificate) refers to a digital certificate for those engaged with the export
business. It is granted by the designated bank as confirmation that the
concerned exporter has received payment against the exports of goods or
services.

Registration Cum Membership Certificate: As per the Foreign Trade Policy, a

RCMC is required to avail benefits under the policy. The certificate mainly
benefits the exporters and helps reduce immediate liabilities relating to
shipping.

Utilization of The created and approved Scrips can either be used for debiting Basic Customs
Duty Credit Duty for own imports or the approved Scrip can be transferred to another IEC
holder who is also created RODTEP Ledger under his log in Credentials.

CONCEPT 33. 100% EOU

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Meaning

1. EOU scheme is administered by Ministry of Commerce and Industry.

2. STP/EHTP Scheme is administered by Ministry of Information Technology.

3. Bio Technology Park (BTP) is established on the recommendation of

Department of Biotechnology

Trading units are 1. Only projects having a minimum investment of ₹1 crore in plant &
not covered machinery shall be considered for establishment as EOUs.
under these
schemes. 2. However, Board of Approvals (BoA) may allow establishment of EOUs with
a lower investment criteria also.

3. Approval for setting up of units under EOU scheme shall be granted by the
Units Approval Committee within 15 days as per prescribed criteria.

4. In other cases, approval may be granted by Board of Approval (BoA) set up

for this purpose.

5. On approval, concerned authority will issue a Letter of Permission

(LoP)/Letter of Intent (LoI) which will have initial validity of 2 years
(extendable by 2 years and further extension, if necessary, by BoA), by
which time unit should have commenced production.

Other 1. Exemption from industrial licensing for manufacture of items reserved for
Entitlements micro and small enterprises.

2. Export proceeds will be realized within 9 months.

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3. Units will be allowed to retain 100% of its export earnings in the EEFC
(Exchange Earners' Foreign Currency) account.

4. Unit will not be required to furnish bank guarantee at the time of import or
going for job work in DTA subject to fulfilment of specified conditions.

5. 100% FDI investment permitted through automatic route similar to SEZ

units.

Positive Net EOU/EHTP/STP/BTP unit must be a positive net foreign exchange earner. NFE
Foreign Earnings shall be calculated cumulatively in blocks of 5 years, starting from
Exchange (NFE) commencement of production. Items of manufacture for export specified in
earnings: LoP/LoI alone shall be taken into account for calculation of NFE.

Positive NFE = A - B > 0

‘A’ is FOB value of exports;

‘B’ is CIF value of imported inputs, capital goods and value of all payments made
in foreign exchange by way of commission/royalty etc. plus goods are obtained
from another EOU/SEZ/international exhibition held in India or bonded
warehouse.

In case units not able to achieve NFE due to any reason 5 years block period,
may be extended suitably by BoA.

In case of adverse market conditions 5 years period can be extendable up to 1

year.

Units Approval Committee shall monitor performance of EOU’s with regard to

NFE earnings.
Sales to DTA Up to 50% of FOB value of exports (including sales made to SEZ unit from Foreign
units: Exchange Account of such unit), subject to fulfilment of positive NFE, on
payment of concessional duties.

In case of units manufacturing and exporting more than one product, sale of any
of these products into DTA, up to 90% of FOB value of export of the specific
products is permitted, provided total DTA sales does not exceed the overall
entitlement of 50% of FOB value of exports for the unit.

In case of new EOUs, advance DTA sale will be allowed not exceeding 50% of its
estimated exports for first year (2 years for pharmaceutical units).

CONCEPT 34. Deemed Exports

Deemed Exports Goods manufactured in India and supplies from DTA to EOU, EHTP, STP & BTP
(i.e., Supply of units will be regarded as deemed exports and DTA supplier shall be eligible for
goods from DTA export incentives.
to EOU):

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The following A. Goods supplied by a manufacturer:

supplies 1. Supply of goods against Advance Authorization/Advance Authorization for
considered as Annual Requirement/ DFIA.
deemed 2. Supply of goods to units located in EOU/STP/BTP/EHTP.
exports: 3. Supply of capital goods against EPCG authorization.
4. Supply of marine freight containers by 100% EOU provided said containers
are exported within 6 months by another 100% EOU.

B. Goods supplied by a Main contractor/sub-contractor:

1. Supply of goods to projects or turnkey contracts financed by multilateral or
bilateral agencies/Funds notified by Department of Economic Affairs (DEA),
under International Competitive Bidding.
2. Supply of goods to any project where import is permitted at zero customs
duty.
3. Supply of goods to mega power projects against International Competitive
Bidding.
4. Supply to goods to UN or international organisations.
5. Supply of goods to nuclear projects through competitive bidding (need not
be international competitive bidding).

BENEFITS FOR 1. Advance Authorization/Advance Authorization for Annual requirement/DFIA

DEEMED 2. Deemed Export Drawback
EXPORTS 3. Domestic supplies to EOUs would be treated as deemed exports under
Section 147 of CGST/SGST Act and refund of tax paid on such supplies given to
the supplier or recipient as the case may be.

All supplies notified as supply for deemed exports are subject to levy of taxes.
However, the refund of tax paid on the supply regarded as deemed export is
admissible to either the supplier or the recipient.

CONCEPT 35. SEZ

What is SEZ? 1. SEZs are like a separate island within territory of India.

2. SEZs are projected as duty free area for the purpose of trade, operation,
duty and tariffs.

3. Goods and services coming to SEZ units from domestic tariff area are
treated as exports from India and goods and services rendered from SEZ to
the DTA are treated as import into India.

Proposal of SEZ Any proposal for setting up of SEZ unit in the Private/Joint/State Sector is routed
through the concerned State government who in turn forwards the same to the
Department of Commerce with its recommendations for consideration.

Incentives for 1. Duty free import/domestic procurement of goods for development,

SEZ Units operation and maintenance of SEZ units.

2. Single window clearance for Central and State level approvals.

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3. Exemption from State sales tax and other levies as extended by the
respective State Governments.
4. SEZs have been exempted from payment of IGST on imports. Supplies to
SEZs by DTA units also exempted from IGST (i.e. zero-rated supply).

Penalties DGFT can cancel his IEC number.

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Question Answer Bank

Question 1.
Mr. Ayush Bhandari wants to import samples from US. State in brief policy for import of samples.
Answer:
Import of samples of even ‘restricted’ items, is allowed without import authorisation. Exceptions are
defence / security items, seeds, bees, and new drugs; these need authorisation. Duty free import of
samples upto ` 3,00,000 for all exporters shall be allowed subject to terms and conditions of customs
notification as amended.

Question 2.
State salient aspects of Advance authorisation for annual requirements to exporters.
Answer:
Annual Advance authorisation would be issued to exporters having past export performance in at least
preceding two financial years, to enable them to import the inputs required by them on annual basis.

Advance authorization for annual requirement shall only be issued for items, notified in SION and not
on basis of ad hoc norms under self-declared authorisations where SION does not exist. Annual

Advance Authorisation in terms of CIF value of imports will be granted upto 300% of FOB value of
physical exports in preceding financial year and/or FOR value of deemed exports in preceding year or
` 1 crore, whichever is higher.

Question 3.
Mr. X is desirous to know the benefits of deemed exports under FTP. You are required to discuss the
same with reference to FTP.
Answer:
Deemed exports shall be eligible for any/ all of following benefits in respect of manufacture and supply
of goods, qualifying as deemed exports, subject to specified terms and conditions:
a. Advance Authorisation/ Advance Authorisation for Annual requirement/ DFIA

b. Deemed Export Drawback 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
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.

c. Refund of terminal excise duty for specified excisable goods Supply of goods will be eligible for
refund of terminal excise duty provided recipient of goods does not avail CENVAT credit/rebate on
such goods and supply is eligible under that category of deemed exports

Question 4.
Discuss the key similarities and differences between Advance Authorization and DFIA (Duty Free
Import Authorization) schemes.
Answer:
In both DFIA and Advance Authorization schemes, import of inputs, oil and catalyst which are
consumed/ utilised in the process of production of export product are permitted without payment of
customs duty. Validity period for both the schemes is 12 months from the date of issue.

Key differences between DFIA and Advance Authorisation schemes are as follows –

(i) ‘Advance Authorisation’ is not transferable. DFIA is transferable after export obligation is fulfilled.

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 FOREIGN TRADE POLICY 2023 | CA Raghav Goel

(ii) Advance Authorisation scheme requires 15% value addition, while in case of DFIA, minimum 20%
value addition is required.

(iii) Advance Authorisation and / or material imported under Advance Authorisation is subject to
‘Actual User’ condition. No DFIA shall be issued for an input which is subject to pre-import condition
or where SION prescribes ‘Actual User’ condition or certain other specified inputs with pre import
condition.

(iv) DFIA cannot be issued where SION (Standard Input Output Norms) prescribes actual user condition
[as the material is transferable after fulfilment of export obligation]. Advance Authorisation can be
issued even if SION for that product is not fixed. DFIA can be issued only if SION has been fixed for that
product to be exported.

(v) Duty Free Import Authorisation shall be exempted only from payment of Basic Customs Duty (BCD).
Drawback as per rate determined and fixed by Customs authority shall be available for duty paid
inputs, whether imported or indigenous, used in the export product. Imports under Advance
Authorisation are exempted from payment of Basic Customs duty, Additional Customs duty, Education
cess, Anti- dumping duty, Countervailing duty, Safeguard duty and Transition Product Specific
Safeguard duty, wherever applicable.

However, specified deemed exports are not exempted from payment of applicable anti-dumping duty,
countervailing duty, safeguard duty and transition product specific safeguard duty, if any. Imports
under Advance Authorisation for physical as well as deemed exports are also exempt from whole of
the Integrated Tax and Compensation Cess.

Question 5.
Discuss the privileges granted under FTP to Status Holders.
Answer:
Status holders are eligible for privileges as under:
(a) Authorisation and custom clearances for both imports and exports on self-declaration basis.
(b) Fixation of Input Output Norms on priority i.e. within 60 days by Norms Committee.
(c) Exemption from compulsory negotiation of documents through banks. Exception are remittance/
receipts.
(d) Exemption from furnishing of Bank Guarantee in Schemes under FTP unless otherwise specified.
(e) Two Star Export Houses and above are permitted to establish export warehouses.
(f) Manufacturers who are also status holders (Three Star/Four Star/Five Star) will be enabled to self-
certify their manufactured goods (as per their Industrial Entrepreneurs Memorandum (IEM) /
Industrial License (IL) /Letter of Intent (LOI)) as originating from India with a view to qualify for
preferential treatment under specified agreements.
(g) Status holders shall be entitled to export freely exportable items on free of cost basis for export
promotion subject to a specified annual limit.
(h) The status holders would be entitled to preferential treatment and priority in handling of their
consignments by the concerned agencies.

Question 6.
With reference to the provisions of FTP, discuss giving reasons whether the following statements are
true or false: (i) If any doubt arises in respect of interpretation of any provision of FTP, the said doubt
should be forwarded to CBIC, whose decision thereon would be final and binding. (ii) IEC is a unique
12 digit PAN based alphanumeric code allotted to a person for undertaking any export/ import
activities.
Answer:

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(i) False. If any question or doubt arises in respect of interpretation of any provision of the FTP, said
question or doubt ought to be referred to DGFT whose decision thereon would be final and binding.

(ii) False. IEC is a unique 10-digit alphanumeric number allotted to a person for undertaking export/
import activities.

Question 7.
Two exporters namely, Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. have achieved the status of Status
Holders (One Star Export House) in the current financial year. Both the exporters have been regularly
exporting goods (other than Gems and Jewellery) every year. What would have been the minimum
export performance of the two exporters to achieve such status? Both the exporters want to establish
export warehouses in accordance with the applicable guidelines. What should be their export turnover
to enable them to establish export warehouses?
Answer:
Status Holders are exporter firms recognised as business leaders who have excelled in international
trade and have successfully contributed to country’s foreign trade. All exporters of goods, services and
technology having an import-export code (IEC) number shall be eligible for recognition as a status
holder. Status recognition depends upon export performance

In order to be categorized as One Star Export House, an exporter needs to achieve the export
performance of 3 million US $ [FOB/ FOR (as converted)] during current and all the three preceding
financial years.

Thus, export performance of Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. would have been at least 3
million US $ [FOB/ FOR (as converted)] during current and all the three preceding FYs.

Further, Two Star Export Houses and above are permitted to establish export warehouses.

Therefore, Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. can establish export warehouses in India only if
they achieve the status of Two Star Export House and above. In order to achieve said status, export
performance of the exporters during current and previous three financial years should be as indicated
below:

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Question 8.
FIintex Manufacturers manufactures goods by using imported inputs and supplies the same under Aid
Programme of the United Nations. The payment for such supply is received in free foreign exchange.
Can FIintex Manufacturers seek Advance Authorization with reference to the provisions of Foreign
Trade Policy for the supplies made by it?
Answer:
Supply to goods to UN or international organisations for their official use or supplied to projects
financed by them are ‘deemed exports’. Advance Authorization can be issued for supplies made to
such ‘deemed exports’. Therefore, Flintex Manufacturers can seek an Advance Authorization for the
supplies made by it.

Question 9.
XYZ Ltd. has imported inputs without payment of duty under Advance Authorization. The CIF value of
such inputs is ` 10,00,000. The inputs are processed and the final product is exported. The exports
made by XYZ Ltd. are subject to general rate of value addition prescribed under Advance Authorization
Scheme. No other input is being used by XYZ Ltd. in the processing. What should be the minimum FOB
value of the exports made by the XYZ Ltd. as per the provisions of Advance Authorization under FTP?
Answer:
Advance Authorization necessitates exports with a minimum of 15% value addition (VA). VA = [(A –
B)/B x 100] A = FOB value of export realized, B = CIF value of inputs covered by authorization.
Therefore, the minimum FOB value of the exports made by XYZ Ltd. should be ` 11,50,000 to attain
15% VA

Question 10.
‘A’ has used some duty paid inputs in its export products. However, for the rest of the inputs, he wants
to apply for the Advance Authorization. Can he do so? Explain with reference to the provisions of
Foreign Trade Policy
Answer:
Yes, ‘A’ can do so. In case of part duty free and part duty paid imports, both Advance Authorization
and drawback will be available. Drawback can be obtained for any duty paid material, whether
imported or indigenous, used in goods exported, as per drawback rate fixed by DoR, Ministry of
Finance (Directorate of Drawback). Advance Authorization can be used for importing duty free
material. Details about duty paid material must be mentioned in the application for Advance
Authorization.

Question 11.
List out any six export incentives given to manufacturers under the FTP policy.
(6 marks; 2013 - June)
Answer:
Export incentives for manufacturers under FTP policy Broadly, the export incentives for manufacturers
are -
(a) Indigenous inputs without payment of excise duty or rebate if duty paid.
(b) No excise charged on final product or rebate if duty paid.
(c) Imported inputs without payment of customs duty, or rebate if duty paid.
(d) No export duty on export of final product.
(e) Bank finance on priority basis and at concessional rate of interest.
(f) Import of capital goods at concessional rate (under EPCG scheme).
(g) Exemptions/relaxations from income tax.
(h) Exemption from sales tax or VAT on final product (refund of CST paid on inputs in case of EOU.
No CST for supply to SEZ and SEZ units).
(i) Usance bills of exchange executed by an exporter in relation to export transaction are fully
exempt from stamp duty - SO 804(E) dt. 8-7-2004.

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Question 12.
With reference to the provisions of Foreign Trade Policy, discuss, giving reasons, whether the following
statements are true or false:
(i) If any doubt arises in respect of interpretation of any provision of FTP, the said doubt should be
forwarded to CBIC. Decision of CBIC thereon would be final and binding.
(ii) Waste generated during manufacture in an SEZ Unit can be freely disposed in DTA on payment of
applicable customs duty, without any authorization.
Answer:
(i) False. If any question or doubt arises in respect of interpretation of any provision of the
FTP, said question or doubt ought to be referred to DGFT whose decision thereon would
be final and binding.
(ii) True. Any waste or scrap or remnant including any form of metallic waste & scrap
generated during manufacturing or processing activities of an SEZ Unit/ Developer/ Co-
developer are allowed to be disposed in DTA freely, without any authorization, subject to
payment of applicable customs duty.

Question 13.
Under Foreign Trade Policy (FTP), explain what is Board of Trade (BOT)? (4 marks; 2018 - Dec)
Answer:
BOT is committee constituted to advice government on relevant issue connected with foreign trade
like
1. To advice government on policy measures for increasing export.
2. To review export performance of various sectors.
3. To examine existing institutional framework for import and export.
4. To review policy and procedures for import and export
5. To examine issues which are considered relevant for promotion of India's foreign trade
Commerce and industry minister will be the chairman of BOT Government shall also nominate
approve upto 25 persons of whom atleast 10 will be expert in trade policy BOT will meet atleast once
in every quarter.

Question 14.
What are the contents of FTP 2023?
Answer:
[Link] Framework and Trade Facilitation
[Link] Provisions Regarding Imports and Exports
[Link] Districts as Export Hubs
[Link] Exemption / Remission Schemes
[Link] Promotion Capital Goods (EPCG) Scheme
[Link] Oriented Units (EOUs), Electronics Hardware Technology Parks (EHTPs), Software
Technology Parks (STPs) and Bio-Technology Parks (BTPs)
[Link] Exports
[Link] Complaints and Trade Disputes
[Link] Cross Border Trade in Digital Economy
[Link]: Special Chemicals, Organisms, Materials, Equipment and Technologies
[Link]

Question 15.
Answer the following questions with reference to the provisions of Foreign Trade Policy:
(i) FIintex Manufacturers manufactures goods by using imported inputs and supplies the
same under Aid Programme of the United Nations. The payment for such supply is

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received in free foreign exchange. Can FIintex Manufacturers seek Advance Authorization
for the supplies made by it?
(ii) XYZ Ltd. has imported inputs without payment of duty under Advance Authorization. The
CIF value of such inputs is ₹ 10,00,000. The inputs are processed and the final product is
exported. The exports made by XYZ Ltd. are subject to general rate of value addition
prescribed under Advance Authorization Scheme. No other input is being used by XYZ Ltd.
in the processing. What should be the minimum FOB value of the exports made by the
XYZ Ltd. as per the provisions of Advance Authorization?
(iii) 'A' has used some duty paid inputs in its export products. However, for the rest of the
inputs, he wants to apply for the Advance Authorization. Can he do so? Explain.
Answer:
(i) Supply to goods to UN or international organisations for their official use or supplied to
projects financed by them are 'deemed exports'. Advance Authorization can be issued for
supplies made to such 'deemed exports'. Therefore, Flintex Manufacturers can seek an
Advance Authorization for the supplies made by it.
(ii) Advance Authorization necessitates exports with a minimum of 15% value addition (VA).
VA = [(A - B)/B x 100]
A = FOB value of export realized, B = CIF value of inputs covered by authorization.
Therefore, the minimum FOB value of the exports made by XYZ Ltd. should be ₹ 11,50,000
to attain 15% VA.
(iii) Yes, 'A' can do so. In case of part duty free and part duty paid imports, both Advance
Authorization and drawback will be available. Drawback can be obtained for any duty
paid material, whether imported or indigenous, used in goods exported, as per drawback
rate fixed by DoR, Ministry of Finance (Directorate of Drawback). Advance Authorization
can be used for importing duty free material. Details about duty paid material must be
mentioned in the application for Advance Authorization.

Question 16.
Niryat Ltd. has imported inputs without payment of duty under Advance Authorization. The CIF value
of such inputs is ₹ 25,00,000. The inputs are processed and the final product is exported. The exports
made by Niryat Ltd. are subject to general rate of value addition prescribed under Advance
Authorization Scheme. No other input is being used by Niryat Ltd. in the processing. What should be
the minimum FOB value of the exports made by the Niryat Ltd. as per the provisions of Advance
Authorization?
Answer:
Advance Authorization necessitates exports with a minimum value addition of 15% value addition
(VA).
VA = [(A - B)/B x 100] where,-
A = FOB value of export realized,
B = CIF value of inputs covered by authorization. Therefore, the minimum FOB value of the exports
made by Niryat Ltd. should be ₹ 28,75,000.

Question 17.
Compute entitlement advance authorisation for annual requirement for an exporter having export
performance in past five years and last financial year's details being:
(i) Physical export (FOB ₹ 45 lakh);
(ii) Deemed Exports (FOR ₹ 5 lakh).
Answer:
Since exporter has export performance in at least past 2 years, it is eligible for advance authorisation
for annual requirement.
The Entitlement would be :
> 300% of the 45 lakh + ₹ 5 lakh) = ₹ 150 lakh; or > ₹ 1 crore,

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whichever is higher i.e., ₹ 150 lakh.

Question 18.
Ram Infra has imported inputs, having CIF value of ₹ 25,00,000 without payment of duty under
Advance Authorization. Inputs are supplied free of cost valued at ₹ 5,00,000 to meet eventualities of
quality issues arising during manufacture.
On manufacturing, the products are supplied to units in SEZ and realization is in Indian currency.
Ram Infra wants to know whether it is entitled to Advance Authorization scheme and what should be
the minimum value addition.
And you are required to compute FOR value of supplies to SEZ.
Ram Infra has manufactured and supplied goods to international organizations in India from imported
inputs for their office use. The payment for such supply is received in Indian currency. Can Advance
Authorization be denied as payment has not been received in free foreign exchange?
Answer:
Supplies to SEZ unit is entitled to Advance Authorization even payment received in Indian currency.
Value addition = 15%
Minimum FOB value of supply to SEZ = ₹ 34,50,000 [₹ 25,00,000 + ₹ 5,00,000) x 115%]
Note: Items are supplied free of cost by foreign buyer, its notional value will be added in the CIF value
of import and FOB value of export for purpose of calculating value addition.
Advance Authorization can be issued for supplies made to international organizations in India (like
United Nations Organisations or under Aid Programme of the United Nations or other multilateral
agencies) and such supplies need to be paid for in free foreign exchange.
In the given case Ram Infra is not entitled for Advance Authorization since, payment has not been
received in free foreign exchange.

Question 19.
Explain in brief
(i) What are the purposes for which Advance Authorization can be issued?
(2 marks; 2012 - June)
(ii) What is the maximum limit of duty free import of mandatory spares under Advance
Authorization? (1 mark; 2012 -
June)
(iii) What is the basis of determination of Annual Advance Authorization for annual
requirements of any exporter? What is the maximum value of Annual Advance
Authorization can be issued? (1+1=2 marks; 2012 - June)
Answer:
(i) Advance Authorization can be issued to a manufacturer exporter or merchant exporter tied to a
supporting manufacturer for
(1) Physical export,
(2) Intermediate supplies
(3) Main contractor for supply of goods under deemed export (except for export under advance
authorization and marine freight containers)
(4) Supply of stores on board of foreign going vessel/aircraft.
(5) Supply to UNO or under an aid programme of UN.
(ii) Duty free import of mandatory spares upto 10% of CIF Value which are required to be exported
with resultant products is allowed.
(iii) Annual Advance Authorization would be issued to exporters having past export performance to
enable them to import their requirement of input on annual basis. It will be granted up to 300% of
FOB value of exports in preceding financial year.

Question 20.
Under Indian FTP, write a brief note on Advance Authorisation. (4 marks; 2018 - June)

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Answer:
Advance Authorisation:
1. It is issued to allow duty free import of input, which are physically incorporated in export
product (making normal allowance for wastage). In addition fuel, oil, catalysts which are
consumed/ utilised to obtain export product may also be allowed.
2. Import of mandatory spares which are required to be exported/supplied with resulted
product can be allowed duty free to the extent of 10% of CIF value of Authorisation.
3. Inputs Imported under Advance Authorisation are exempted from payment of Basic customs
duty, additional customs duty, education cess, antidumping duty and safe guard duty if any.
4. Advance Authorisation can be issued to manufacturer exporter, merchant exporter, deemed
exporter, export of SEZ, UNO, supply of 'stores' on board of foreign going vessel/ aircraft
provided that there is specific SION in respect of item supplied.
5. Advance Authorisation and/or materials imported under Advance Authorisation shall be
subject to 'Actual user'condition. However holder of Advance Authorisation will have option
to dispose off product manufactured out of duty free input once export obligation is
completed.
6. Advance Authorisation can also be issued for Annual requirement if exporter having past
export performance (in atleast preceding two years) and entitlement in terms of CIF value of
import shall be upto 300% of FOB value of physical export and/or FOR value of deemed export
in proceeding financial year Or ? 1 crore which ever is higher.
7. Minimum value addition required to be achieved under Advance Authorisation is 15% in case
of tea product minimum value addition shall be 50%.

Question 21.
Answer the following questions with reference to the provisions of Foreign Trade Policy:
(i) M/s. B. Ltd. Manufactures goods by using imported inputs and supplies the same under
Aid Programme of the United Nations. The payment for such supply is received in free
foreign exchange. Can M/s. B. Ltd. seek Advance Authorization in relation to the supplies
made by it? (2 marks; 2014 -
Dec)
(ii) LMN Ltd., has imported inputs without payment of duty under Advance Authorization.
The CIF value of such inputs is ? 20 lakhs. The inputs are processed and the final product
is exported. The exports made by LMN Ltd., are subject to general rate of value addition
prescribed under Advance Authorization Scheme. No other input is being used by LMN
Ltd. in the processing. What should be the minimum FOB value of the exports made by
the LMN Ltd. as per the provisions of Advance Authorization? (1 mark; 2014 - Dec)
Answer:
(i) Advance Authorisation can be issued for supplies made to United Nations Organisations
or under Aid Programme of the United Nations or other multilateral agencies and such
supplies need to be paid for in free foreign exchange. Therefore, B Ltd. can seek an
Advance Authorisation for the supplies made by it as per provisions of Foreign Trade Policy
2009-14.
(ii) Advance Authorisation necessitates exports with a minimum value addition of 15%.
Therefore, minimum FOB value of export made by LMN Ltd. should be ₹ 20 lakh + 15% i.e. ₹ 3 lakhs =
23 lakhs.

Question 22.
Nirav Shah used some duty paid inputs for manufacture of the export products. However, for the rest
of the inputs, he wants to apply for advance authorization. Can he do so? Advise him with reference
to foreign trade policy. (5 marks; 2019 - May)
Answer:

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Yes, he can do so. In case of part duty free and part duty paid imports, both advance authorization
and drawback are available. Drawback can be obtained for any duty paid material, whether imported
or indigenous, used in goods exported, as per prescribed drawback rates. Advance authorization can
be used for importing duty free material. Drawback allowed must be mentioned in the application for
advance authorization.

Question 23.
XYZ Ltd. has imported inputs without payment of duty under DFIA. The CIF value of such inputs is ₹
10,00,000. The inputs are processed and the final product is exported. The exports made by XYZ Ltd.
are subject to general rate of value addition prescribed under Advance Authorization Scheme. No
other input is being used by XYZ Ltd. in the processing. What should be the minimum FOB value of the
exports made by the XYZ Ltd. as per the provisions of Advance Authorization?
Answer:
DFIA necessitates exports with a minimum value addition of 20% value addition (VA). Therefore, the
minimum FOB value of the exports made by XYZ Ltd. should be ₹ 12,00,000.

Question 24.
State the differences between Advance Authorisation and Duty Free Import Authorisation.
(5 marks; 2016 - Dec)
Answer:
Advance Authorisation Scheme: It is issued to allow duty free import of input which is physically
incorporated in export product.
Duty Free Import Authorisation: is issued to allow duty free import of inputs. It is not available for
import of raw sugar.
_ Difference between AAS & DFIA
AAS DFIA
1. Advance Authorisation shall not be transferable 1. It's transferable after fulfillment of export
even after completion of export obligation obligation
2. Minimum Value Addition 50% in case of tea & 15% 2. Minimum value addition 20% shall be required to
in other cases except in case of gems and jewellery. be achieved.
3. Export obligation is to be fulfilled within 18 month 3. Export obligation is to be fulfilled wlthhi 12 month.
4. AAS is available to gems & jewellery. 4. DFIA is not applicable to gems & jewellery.
5. AAS shall be issued on basis of SION notified or on 5. DFIA shall be issued for product for which SION
the basis of self declaration. have been notified.

Question 25.
Discuss whether a Duty Free Import Authorisation (DFIA) is transferable. (3 marks; 2013 - June)
Answer:
Transferability of DFIA
DFIA is issued to allow duty free import of inputs, fuel, oil, energy sources, catalyst which are required
for production of export product. DGFT, by means of Public Notice, may exclude any product(s) from
purview of DFIA. Once export obligation has been fulfilled, request for transferability of Authorisation
or inputs imported against it may be made before concerned Regional Authority. Once transferability
is endorsed, Authorisation holder may transfer DFIA or duty free inputs, except fuel and any other
item(s) notified by DGFT. However, for fuel, import entitlement may be transferred only to companies
which have been granted authorisation to market fuel by Ministry of Petroleum and Natural Gas. Once
transferability is endorsed, imports/domestic procurement against authorisation or transfer of
imported inputs/domestically procured inputs shall be subject to payment of applicable additional
customs duty/excise duty. While endorsing transferability, authorisation would bear a note as to
liability of such additional customs duty/excise duty. However, in case where CENVAT facility has not
been availed, exemption from additional customs duty/excise duty would be available even after
endorsement of transferability on DFIA. Wherever SIONs (Standard Input and Output Norms)

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prescribe actual user condition and in case of Acetic Anhydride, Ephedrine and Pseudo Ephedrine,
DFIA shall be issued with actual user condition for these inputs and no transferability shall be allowed
for these inputs even after fulfillment of export obligation.
Advance Authorisation is not transferable. In case of advance authorisation value addition is sufficient
but in case of DFIA, 20% value addition is required.
However, for authorisations issued prior to 1.4.2007, exemption from Additional Customs Duty /
Excise Duty shall continue to be available even after endorsement of transferability, as provided in
FTP (RE-2006).

Question 26.
While importing goods under Duty Free Import Authorisation (DFIA), is it required to pay any customs
duty? Is the DFIA transferable? (2 marks; 2013 - Dec)
Answer:
Duty Free Import Authorisation (DFIA) has been introduced w.e.f. 1.5.2006. It is issued to allow duty
free import of inputs, fuel, oil, energy sources, catalyst required for export products. Imports under
DFIA are exempted from payment of basic customs duty, additional customs duty/ excise duty,
education cess, antidumping duty and safeguard duty, if any. After export obligation is fulfilled, the
scrip can be made transferable by Regional Authority. After endorsement of transferability.
Authorisation holder may transfer DFIA or duty free inputs, except fuel. Any other items notified by
DGFT.

Question 27.
'Advance Authorisation' is not transferable, while material imported under DFIA (Duty Free Import
Authorisation) will be transferable after fulfillment of export obligation. Is this true? Write a brief note
to the management about Advance Authorisation and DFIA in this context.
(8 marks; 2016 - June)
Answer:
It is true that Advance Authorisation is not transferable while material imported under DFIA (Duty Free
Import Authorisation) will be transferable after fulfillment of export obligation for this request is to
be made to Regional Authority.
Note to Management about Advance Authorisation and DFIA Advance Authorisation:
1. It is issued to allow duty free import of input, which are physically incorporated in export
product (making normal allowance for wastage). In addition fuel, oil, catalysts which are
consumed/ utilised to obtain export product may also be allowed.
2. Import of mandatory spares which are required to be exported/supplied with resulted
product can be allowed duty free to the extent of 10% of CIF value of Authorisation.
3. Inputs Imported under Advance Authorisation are exempted from payment of Basic customs
duty, additional customs duty, education cess, antidumping duty and safe guard duty if any.
4. Advance Authorisation can be issued to manufacturer exporter, merchant exporter, deemed
exporter, export of SEZ, UNO, supply of 'stores' on board of foreign going vessel/ aircraft
provided that there is specific SION in respect of item supplied.
5. Advance Authorisation and/or materials imported under Advance Authorisation shall be
subject to 'Actual user' condition. However holder of Advance Authorisation will have option
to dispose off product manufactured out of duty free input once export obligation is
completed.
6. Advance Authorisation can also be issued for Annual requirement if exporter having past
export performance (in atleast preceding two years) and entitlement in terms of CIF value of
import shall be upto 300% of FOB value of physical export and/or FOR value of deemed export
in proceeding financial year Or ₹ 1 crore which ever is higher.
7. Minimum value addition required to be achieved under Advance Authorisation is 15% in case
of tea product minimum value addition shall be 50%.

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Duty Free Import Authorisation Scheme (DFIA):

1. Duty Free Import Authorisation is issued to allow duty free import of inputs. In addition,
import of oil and catalyst which is consumed / utilised in the process of production of export
product, may also be allowed.
2. Duty Free Import Authorisation shall be exempted only from payment of Basic Customs Duty.
3. Additional customs duty/excise duty, being not exempt, shall be adjusted as CENVAT credit as
per DoR rules.
4. Duty Free Import Authorisation shall be issued on post export basis for products for which
Standard Input Output Norms (SION) have been notified.
5. Merchant Exporter shall be required to mention name and address of supporting
manufacturer of the export product on the export document viz. Shipping Bill / Airway Bill /
Bill of Export / ARE-1 / ARE-3. Application [Link] be filed with concerned Regional Authority
before effecting export under Duty Free Import Authorisation.
6. Minimum value addition of 20% shall be required to be achieved. For items where higher value
addition has been prescribed under Advance Authorisation in Appendix 4C of AANF, the same
value addition shall be applicable for Duty Free Import Authorisation also.
7. After completion of exports and realization of proceeds, request for issuance of transferable
Duty Free Import Authorisation may be made to concerned Regional Authority within a period
of twelve months from the date of export or six months (or additional time allowed by RBI for
realization) from the date of realization of export proceeds, whichever is later.
8. No Duty Free Import Authorisation shall be issued for an export product where SION
prescribes 'Actual User' condition for any input.
9. Regional Authority shall issue transferable DFIA with a validity of 12 months from the date of
issue. No further re-validation shall be granted by Regional Authority.

Question 28.
Explain the conditions for redeeming authorization under duty free import authorization scheme as
per Foreign Trade Policy. (4 marks; 2016 - Nov)
Answer:
Condition for redeeming authorization under duty free import authorization scheme:
Duty free import authorization is issued to allow duty free import of inputs. Duty free import
authorization scheme shall not be available for import of raw sugar. Drawback as per rate determined
by Central Excise authority shall be available for duty paid inputs, whether imported or indigenous,
used in the export product. For this purpose export shall be complete within 12 months from the date
of filing of online application and generation of file number. Duty free import authorization shall be
issued on post export basis for products for which standard input output norms have been notified.
Minimum value addition of 20% shall be required to be achieved.

Question 29.
XP Pvt. Ltd., a manufacturer, wants to import capital goods in CKD condition from a foreign country
and assemble the same in India. The import of the capital goods will be under notified Project Imports.
The capital goods will be used for pre-production processes. The final products of XP Pvt. Ltd. would
be supplied in SEZ unit. XP Pvt. Ltd. wishes to sell the capital goods imported by it as soon as the
production process starts.
XP Pvt. Ltd. seeks your advice whether it can avail the benefit of EPCG Scheme for importing the
intended capital goods.
Note - Base your opinion on the facts given above assuming that all other conditions required for being
eligible to the EPCG Scheme are fulfilled in the above case.
Answer:
Export Promotion Capital Goods Scheme (EPCG) permits exporters to import capital goods at zero
customs duty or procure them indigenously without paying duty in prescribed manner.

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In return, exporter is under an obligation to fulfill the export obligation. Export obligation
means obligation to export product(s) covered by Authorisation/permission in terms of quantity or
value or both, as may be prescribed/specified by Regional or competent authority. Exports to SEZ unit
will be considered for discharge of export obligation of EPCG Authorization, irrespective of currency,
however, payment must be received from the Foreign Currency Account.
The authorisation holder can either procure the capital goods (whether used for pre-
production, production or post-production) from global market or domestic market. The capital goods
can also be imported in CKD/ SKD to be assembled in India.
An EPCG Authorization can also be issued for import of capital goods under Scheme for Project
Imports notified by CBIC. Export obligation for such EPCG Authorizations would be 6 times of duty
saved to be fulfilled in 6 years.
However, import of capital goods is subject to 'Actual User' condition till export obligation is
completed. Only after completion of export obligation, capital goods can be sold or transferred.
Therefore, based on the above discussion, XP Pvt. Ltd. can import the capital goods under EPCG
Scheme. However, it has to make sure that it does not sell the capital goods till the export obligation
is completed.

Question 30.
Determine Export Obligation an exporter who has purchased following capital goods under EPCG
scheme -
(i) Import of capital goods 'P': Duty payable was ₹ 5 lakh
(ii) Domestic purchases of capital goods ‘S’: IGST payable was ₹ 1,00,000 but notional
customs duties payable (considering it as deemed import) were ₹ 1,20,000.
Answer:
Computation of Export Obligation is as follows -
Capital goods Duty Saved Export obligation factor EO
P ₹ 5,00,000 6 30,00,000
Notional Customs Duties i.e., ₹ 1,20,000
S 4.5 5,40,000
[See Note]
Total Export Obligation 35,40,000
Note: In case of indigenous sourcing of Capital Goods, specific EO shall be 25% less than the normal
EO hence it will be 6 x 75% = 4.5.

Question 31.
Tarun Pvt. Ltd., a manufacturer, wants to import capital goods in CKD condition from a foreign country
and assemble the same in India. The import of the capital goods will be under Project Imports. The
capital goods will be used for pre-production processes. The final products of Tarun Pvt. Ltd. would be
supplied in SEZ. Tarun Pvt. Ltd. wishes to sell the capital goods imported by it as soon as the production
process starts. Tarun Pvt. Ltd. seeks your advice whether it can avail the benefit of EPCG Scheme for
importing the intended capital goods.
Note: Assume that all other conditions required for being eligible to the EPCG Scheme are fulfilled in
the above case.
Answer:
Export Promotion Capital Goods Scheme (EPCG) permits exporters to procure capital goods at
concessional rate of customs duty/zero customs duty. In return, exporter is under an obligation to
fulfill the export obligation. Export obligation means obligation to export product(s) covered by
Authorization/permission in terms of quantity or value or both, as may be prescribed/specified by
Regional or competent authority. Exports to SEZ unit/developer/co-developer will be considered for
discharge of export obligation of EPCG Authorization, irrespective of currency.
The license holder can either procure the capital goods (whether used for pre-production, production
or post-production) from global market or domestic market. The capital goods can also be imported
in CKD/ SKD to be assembled in India.

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An EPCG Authorization can also be issued for import of capital goods under Scheme for Project
Imports'. Export obligation for such EPCG Authorizations would be 6 times of duty saved.
Duty Saved Amount:
Effective duty under Project Imports xxxx
Less: Concessional duty under the EPCG Scheme (xxx)
Duty Saved amount xxxx
However, import of capital goods is subject to 'Actual User' condition till export obligation is
completed. Therefore, based on the above discussion, Tarun Pvt. Ltd. can import the capital goods
under EPCG Scheme. However, it has to make sure that it does not sell the capital goods till the export
obligation is completed.

Question 32.
X Ltd., imported a machine from USA under EPGC Scheme with zero customs duty in the financial year
201516 for production of product 'P'.
Customs duty otherwise payable is ₹ 20 lakh. Find the specific export obligation and average export
obligation. Exports of finished goods 'P' in the preceding 5 licensing years are as follows:
Particulars 2014-15 2013-14 2012-2013 2011-12 2010-11
FOB value of exports in INR 80 lakh 72 lakh 45 lakh 50 25
Answer:
Specific Export Obligation is ₹ 120 lakh. It means capital goods imported under EPCG scheme should
produce finished goods worth ₹ 120 lakh for export over a period of 6 years reckoned from the date
of issue of Authorization.
Average Export Obligation is ₹ 65.67 lakh. It has to be achieved within the overall EO period (i.e. within
6 years reckoned from the date of issue of authorization).
Export obligation consists of average export obligation and specific export obligation. Hence, to
redeem export obligation both specific and average export obligation should be fulfilled.

Question 33.
Answer the following :
(a) Export Promotion Capital Goods (EPCG) Scheme
(b) Explain SION. (4 marks each; 2017 - June)
Answer:
(a) Export Promotion Capital Goods Scheme (EPCG):
EPCG scheme allows import of capital goods for pre-production, production and post production at
zero customs duty, subject to an export obligation equivalent to 6 times of duty saved on capital goods
imported.
Capital goods shall include spares, tools, jigs, fixture, dies, mould, computer software system but not
include second hand capital goods.
Authorisation under EPCG scheme shall not be issued for import of any capital goods for:
(j) Export of electrical energy (power)
(k) Supply of electrical energy (power) under deemed export (Hi) Use of power in their own unit
and
(l) Supply / Export of electricity transmission services.
In case counter vailing duty is paid in cash on import under EPCG, incidence of CVD would not be taken
for computation of net duty saved provided the same is not cenvated.
EPCG scheme covers:
(a) Manufacturer exporters
(b) Merchant exporters
(c) Service providers
(d) Common service provider.
(b) SION: Standard input output norms or SION in short 18 input/inputs required to manufacture unit
of output for export purpose. Input output norms are applicable for products such as electronics,

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engineering, chemical, food products including fish and marine products, handcraft etc. SION is
notified by DGFT and is approved by its Board of Directors. The DGFT from time to time issue
notification for fixation or addition of SION for different export products.
Fixation of SION facilitates issue of advance license to the exporter of items without any need for
referring the same to Headquarter Office of DGFT on repeat basis.

Question 34.
In the context of foreign trade policy, what do you understand by the term "Standard Input Output
Norms (SION)"? What are the basic requirements of SION? (5 marks; 2018 - Dec)
Answer:
Standard Input Output Norms: Standard Input Output Norms or SION in short is standard norms
which define the amount of input/inputs required to manufacture unit of output for export purpose.
Input output norm? are applicable for the products such as electronics, engineering, chemical, food
products including fish and marine products, handicraft, plastic and leather products etc. SION is
noticed by DGFT in the Handbook, and is approved by its Boards of Directors.
An application for modification of existing Standard Input-Output norms may be filed by manufacturer
exporter and merchant-exporter. The Directorate General of Foreign Trade (DGFT) from time to time
issue notification for fixation or addition of SION for different export products. Fixation of Standard
Input Output Norms facilitates issues of Advance License to the exporters of the items without any
need for referring the same to the Headquarter office of DGFT on repeat basis.
Basics Requirements of Standard Input Output Norms
For fixation / modification of Standard Input Output Norms (SION) following details are required:
Technical Details of the export product as per the details given in Appendix 33.
Chartered Engineer certificate certifying the import requirements of raw materials in the format given
in Appendix 32B. Production and Consumption data of the manufacturer/supporting manufacturer of
the preceding three licensing years as given in serial no. 3 of sub section XII, duly certified by the
Chartered accountant / Cost Accountant / Jurisdictional Excise Authority.

Question 35.
Define Export Obligation under Export Promotion Capital Goods Scheme (EPCGS) of Foreign Trade
Policy 2015-2020. What will be the specific export obligation if the Capital Goods are indigenously
sourced under EPCG Scheme? (4 marks; 2016 - May)
Answer:
(i) Meaning of export obligation:
• Export obligation means obligation to export product(s) covered by authorisation or
permission in terms of quantity or value or both, as may be prescribed/specified by Regional
or competent authority.
• Export obligation consists of average export obligation and specific export obligation.
(ii) Specific export obligation (Specific EO): Under EPCG scheme, Specific EO is equivalent to 6 times
of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from
authorization issue-date. SpecificEO is over and above the Average EO.
(iii) Average export obligation (Average EO): Under EPCG scheme, Average EO is the average level of
exports made by the applicant in the preceding 3 licensing years for the same and similar products. It
has to be achieved within the overall EO period (including extended period unless otherwise
specified).
In case of indigenous sourcing of capital goods, specific EO shall be 25% less than the EO mentioned
above, i.e. EO will be 4.5 times (75% of 6 times) of duty saved on such goods procured.

Question 36.
Mr. A, manufactured goods in India and got a contract to supply capital goods within India to M/s. Z
Export Ltd. (holding license under Export Promotion Capital Goods Scheme). Due to some operational
problem, Mr. A sub-contracted supply of capital goods to Mr. M with proper authorization from M/s.

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Z Export Ltd. and included name of Mr. M in main contract of supply before he started supply of goods.
Can Mr. M claim benefit of deemed export for supplies made to Mr. A? Explain with reasons.
(2 marks; 2015 - Nov)
Answer:
The benefits of deemed export is allowed if in certain cases goods are exported by manufacturer and
in some cases the goods are exported by main / sub-contractors.
But in given case, the benefits of deemed export will not be available, because it is not covered under
categories of supply made by main/ subcontractor.

Question 37.
Determine duty credit under Remission of Duties and Taxes on Exported Products (RoDTEP) from the
following particulars (rate of duty credit may be taken to be 2.5%):
(1) Goods X - FOB Value declared in shipping bill is ₹ 15,00,000. (Market Price : ₹ 9,00,000).
(2) Goods Y - FOB Value declared in shipping bill is ₹ 12,00,000. (Market Price : ₹ 10,00,000).
(3) Export of imported goods : ₹ 5,50,000
(4) Export products which are subject to export duty: ₹ 50,000
Answer:
The RoDTEP duty credit is a computed below - (amount in ₹)
(1) Goods X (FOB Value or 1.5 times of market price, whichever is lower is to be taken)
Goods Y (FOB value or 1.5 times of market price, whichever is lower is to be taken) 13,50,000
(2) Export of imported goods (not eligible for RoDTEP)
Export products which are subject to export duty (Not eligible for RoDTEP) 12,00,000
(3) Ineligible
(4) Ineligible
Total 25,50,000
RoDTEP duty credit @ 2.5% 63,750

Question 38.
With reference to the provisions relating to Export Oriented Unit (EOU) Scheme as contained in
Foreign Trade Policy, answer the following questions:
(i) An EOU has started production after 4 years 10 months from the date of grant of Letter
of Permission (LoP). Is it correct?
(ii) A unit intending to trade in handicrafts wants to set up an EOU. Is it allowed?
Answer:
On approval, concerned authority will issue a Letter of Permission (LoP)/Letter of Intent (LoI) which
will have initial validity of 2 years (extendable by 2 years and further extension, if necessary, by BoA),
by which time unit should have commenced production.
(i) In the given can EOU commenced production after 4 years 10 months from the date of
LoP without obtaining extension. Hence, the given statement is incorrect.
(ii) Trading unit can not setup an EOU. Manufacturing units (i.e. make in India) can set up an
EOU.

Question 39.
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. The 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.
Answer
The given scenario is a case of third-party exports.

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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:
(i) Export documents such as shipping bills shall indicate name of both
manufacturing exporter/manufacturer and third party exporter(s).
(ii) 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.

Question 40.
Materials imported under advance licence - Pennar Industries Ltd., imported hot rolled non-alloy steel
wide coils against an advance licence issued under the DEEC Scheme. No import duty was paid at the
time of imports as the assessee availed the benefit of the Exemption Notification which allowed actual
users to import the raw material duty free with the condition that the said material would be used by
the importer itself and converted into specified finished goods and thereafter export those goods.
The assessee, though used the raw material for the manufacture of the specified goods but as the
quality of those goods was not good enough for the purposes of exports, therefore, instead of
exporting these goods, the assessee disposed of the said manufactured goods in the domestic market.
DGFT allowed the assessee to meet export obligation under the licence by arranging the exports from
third party, after satisfying that there was neither misutilization of raw material nor violation of any
other conditions of the licence at cost of exchequer.
The Customs authorities issued a SCN to the assessee demanding duty along with interest and also
levied penalty as conditions under the Notification were not fulfilled. Aggrieved by this the assessee
approaches you for advise. The contention of the assessee is that as the DGFT allowed him to meet
the export obligation through third party, and therefore it had fulfilled its obligation.
Answer:
The facts of the case are similar to that of CC v. Pennar Industries Ltd. [2015] 322 ELT 402 (SC) wherein
the Apex Court held that in order to avail of the benefit of the Exemption Notification, the necessary
condition was to make export of the product which was manufactured from that very raw material
that was imported. This condition was not fulfilled by the assessee as there was no export of the goods
from the raw material so utilised. Instead, exports were made of the product manufactured from other
raw material and that too through third party. Hence, the assessee becomes liable to pay the import
duty which would have been payable by it but for the benefit of exemption Notification which was
obtained by the assessee.
[However, in the present case, the Apex Court reduced the interest from 24% to 9% and further
observed that the Government should bestow its consideration and make appropriate provisions for
dealing with such situations so that when the assessee fulfilled his export obligation which was
accepted by the DGFT, through third party, such person should not be left high and dry.]

Question 41.
Are the clearance of goods from DTA to Special Economic Zone chargeable to export duty under the
SEZ Act, 2005 or the Customs Act, 1962? (5 marks; 2014 - June)
Answer:
Hence the clearance of goods from DTA to Special Economic Zone is not liable to export duty either
under the SEZ Act, 2005 or under the Customs Act, 1962.

Question 42.
XYZ Ltd., a medium micro enterprise, covered under MSMED Act has made exports worth US $ 25
lakhs per annum (on an average) during last 3 years. It wants to export certain goods for export
promotion on free of cost basis, which are worth ₹ 32 lakh. Can it do so, given that 1 $ = ₹ 60.
Answer:

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Exports by MSMEs are given double weightage for determination of one-star status. Hence, for said
purpose, exports are worth = $ 25 lakh x 2 = $ 50 lakh = $ 5 million. Therefore, XYZ Ltd. is eligible for
status of one star export house.
A status holder can export goods free of cost for export promotion -2% of average exports of last 3
years i.e., 2% of $ 25 lakh x ₹ 60 per $ = ₹ 30 lakh. Hence, it can export freely export promotion material
upto ₹ 30 lakh.

Question 43.
X Pvt. Ltd., (One Star Export House) wanted to export general goods (i.e. export freely without any
restriction or prohibition) worth ₹ 25 lakh on free of cost basis for export promotion to USA.
Previous Previous Previous
Particulars Current Year in
Year 1 Year 2 Year 3
(From April - Oct)
Annual Export realization (INR) 9,11,25,000 1,11,00,000 10,80,00,000 8,15,80,000
Whether X Pvt. Ltd., can export goods on free of cost basis, if so what amount. Advise.
Answer:
X Pvt. Ltd. being a status holder can export freely exportable items on free of cost basis for export
promotion maximum of: ₹ 13,37,867.
Therefore, maximum value of export at free of cost is ₹ 13,37,867.
Working note:
[(1,11,00,000 + 10,80,00,000 + 8,15,80,000) / 3] x 2% = ₹ 13,37,867

Question 44.
Two exporters namely, Sunlight Exports Pvt. Ltd. and Moonlight Exports Pvt. Ltd. have achieved the
status of Status Holders (One Star Export House) in the financial year 2017-18. Every year, both the
companies have been regularly exporting goods to approved nations. To achieve such status, what
would have been the minimum export performance of the two exporters?
Both the companies are desirous of establishing export warehouses in accordance with the applicable
guidelines. What should be their minimum export turnover to enable to establish export warehouses?
(6 marks; 2017 - Dec)
Answer:
According to Foreign trade policy Status Holders are business leaders who have excelled in
international trade and have successfully contributed to country's foreign trade. All exporters of
goods, services and Technology having an import-export code (IEC) number shall be eligible for
recognition as a status holder. Status recognition depends upon export performance. Status holders
are given special treatment and privileges to facilitate their trade transaction in order to reduce
transaction cost and time.

Sunlight Pvt. Ltd. and Moonlight Pvt. Ltd. can establish export warehouses in India only if they achieve
the status of Two Star Export House and above. In order to achieve said status, export performance
of the exporters during current and previous three financial years should be as indicated below:
Export Performance
Status Category
[FOB/FOR (as converted) value in US $ million]
One Star Export House 3
Two Star Export House 15
Three Star Export House 50
Four Star Export House 200
Five Star Export House 800

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Question 45.
Answer the question below.
A star export house wishes to import goods which are exempt under Foreign Trade Policy (FTP) subject
to fulfilment of export obligation. However, Customs Notification giving effect to the FTP is yet to be
issued. Can the export house import the goods claiming exemption under FTP in the absence of
Customs Notification? (2 marks; 2017 - Nov)
Answer:
No. The exemptions extended by FTP can be taken only when the exemption notification is issued
under the relevant tax laws. The provisions of Foreign Trade Policy cannot override tax laws.

Question 46.
Indicate five benefits available to "Status Holders" under the reward scheme of Foreign Trade Policy
2015-2020. There is no need to define the term "status holder". (5 marks; 2018 - May)
Answer:
The benefits available to Status holders are as under:
(a) Authorization and customs clearances for both imports and exports on self-declaration basis.
(b) Fixation of Input Output Norms (SION) on priority i.e. within 60 days.
(c) Exemption from compulsory negotiation of documents through banks. The remittance
receipts, however, would continue to be received through banking channels.-'
(d) Exemption from furnishing of Bank Guarantee for Schemes under FTP unless otherwise
specified.
(e) Two Star Export Houses and above are permitted to establish export warehouses.
(f) Three Star and above Export House shall be entitled to get benefit of accredited Clients
Programme (ACP) as per the guidelines of CBIC.

Question 47.
Payal Company, a unit located in Agri Export Zone has made exports of machineries worth US $ 30
lakh per annum (on an average) during the last three years and in the current year. It wants to export
certain goods for export promotion on free of cost basis, which are worth ₹ 25 lakh. 1 US$ = ₹ 50.
Examine whether Payal Company can export, export promotion goods on free of cost basis as
proposed? (5 marks; 2018 -
Nov)
Answer: 64
Status holders are entitled to export freely exportable items on free of cost basis for export promotion
subject to an annual limit of ₹ 1 crore or 2% of average annual export realization during preceding 3
licensing years, whichever is lower.
All exporters of goods having an import-export code (IEC) number shall be eligible for recognition as
a status holder. Payal Company, upon achieving export performance of US $ 12 million [₹ 30 lakh x 4]
during current and previous 3 financial years, is eligible for status recognition as One Star Export
House. Being a unit in Agri Export Zone, exports of Payal Company is eligible for grant of double
weightage for calculation of export performance for grant of status of One Star Export House.
However, the same is not relevant for Payal Company as it is already eligible for grant of One Star
Export House on the basis of its export performance without taking the benefit of double weightage.
Therefore, being a Status Holder, Payal Company is entitled to export freely exportable items on free
of cost basis for export promotion as under:
(i) ₹ 1 crore or
(ii) 2% of ₹ 1500 lakh [US $ 30 lakh* x ₹ 50] which is ₹ 30 lakh whichever is lower.
Thus, Payal Company can export goods worth ₹ 25 lakh for export promotion on free of cost basis.
*ln the above answer, average annual export realization of US $ lakh per annum during preceding 4
years has been assumed to be the average annual realization during preceding 3 licensing years.

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