Annual Foreign Trade Policy 2007-08

The Annual Supplement 2007-08 to the National Foreign Trade Policy (2004-09) was announced by Shri Kamal Nath, Union Minister for Commerce & industry on April 19, 2007.
1. Exemption from Service Tax on services (related to exports) rendered abroad:
Government has enunciated the principle that we should only export goods and not the taxes and duties thereon. In line with this, services rendered abroad and charged on exports from India would be exempted from Service Tax (12.24% tax was levied at that time) .

2. Exemption / Remission of Service Tax on export of goods
Service tax on services rendered in India and utilized by exporters would be exempted / remitted. Remission mechanism would be institutionalized after working out modalities with Department of Revenue.

3. Categorization of status holders
Categorization of exporters as One to Five Star Export Houses has been changed to Export Houses & Trading Houses, with rationalization and change in export performance parameters.

4. Expansion of Ceiling, Scope and Coverage under Focus Market and Focus Product Schemes:
Under Focus Market Scheme (FMS) and Focus Product Scheme (FPS), coverage / scope of eligible markets / items has been enhanced.
New Markets and Products
16 countries (including 10 from CIS block) are added as new Markets and several value-added low volume export products have been identified and would be entitled to benefits under Focus PS.

Focus Market Scheme & Focus Product Scheme extended to EOUs
EOUs not availing direct tax benefits would also get benefits under FMS and FPS.

5. Extension of DEPB Scheme
DEPB Scheme stands extended upto March 31, 2008. It is proposed to introduce a new scheme instead of DEPB, soon.

While extending the scheme for another year, Government has agreed to reimburse the cost of duty on fuel and special additional duty, on all export related imported goods, to the extent it is not cenvatable. Benefit may be allowed by notifying Brand rate of DEPB for such products.

6. EPCG:
Export Obligation (EO) for tiny and cottage sector
For tiny and cottage, sector export obligation period is raised to 12 years.
Spares, tools and spare refractory for imported Capital Goods
Issue of EPCG for import of spares, tools and spare refractory would be allowed for existing imported plant and machinery (though not imported under EPCG cover).

7. Waiver of Export Obligation due to Force Majeure
Waiver of outstanding export obligations can only be considered where, because of force majeure or other unforeseen circumstances / reasons, exporter is unable to fulfill export obligation.

Concurrent EPCG – Fixation of Average Export Obligation Wherever more than one EPCG authorizations are issued concurrently, fresh EPCG authorization would build upon last required average export obligation only (incorporating the previous EPCG obligation), notwithstanding actual achievements. This removes anomaly whereby better performance is penalized presently.

Block wise Export Obligation abolished
Block-wise fulfillment of export obligation would be done away with. This will reduce unnecessary transaction cost and paper work. While doing so in case of existing export obligations, fresh EPCG would be issued only to such applicant who has fulfilled proportionate export obligation by that time. Simultaneously, services sector will have to maintain the average to avail new EPCG. This would be a supportive measure for export promotion and growth.

Interest on delayed payments : Interest on delayed payments (refund of terminal excise duty / DBK on deemed exports and CST) would be payable in lines of provisions in Customs and Income Tax Acts. This facility would also apply to delayed payments for deemed exports.

Counting for Net Foreign Exchange Earnings of EOU
Supplies of accessories such as buttons and hangers by EOUs to DTA units will be counted for NFE calculations.

Defining manufacture under Income Tax
Definition of manufacturing shall be incorporated in Income Tax Act. This would remove uncertainty regarding taxation for EOU units.

EOU units extended benefits under Focus Market & Focus Product Schemes EOUs not availing direct tax benefits would also get benefits under FMS and FPS schemes.

Co-Developer of SEZ
Developer and Co-developer of Special Economic Zone would be notified for benefits under all duty neutralization schemes like DEPB, DFIA and Advance Authorization Schemes.

9. Import of Samples:
Duty free import of samples up to Rs.75,000/- (Presently Rs.60,000/) would be allowed for all exporters.


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