India's Trade Overview

INDIA'S TRADE POLICY

EXPORT INFRASTRUCTURE

Businesses can set  up units that undertake to export their entire production of goods and services (except permissible sales in the domestic tariff area or DTA), under the Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) Scheme for manufacture of goods. These schemes are not applicable for trading units. An EOU/EHTP/STP/BTP unit has to be a net foreign exchange earner.

• An EOU/EHTP/STP/BTP unit may export all kinds of goods and services except items prohibited in ITC (HS). Exports of gold jewellery, including partly processed jewellery, whether plain or studded, and articles, containing gold of 8 carats and above up to a maximum limit of 22 carats only shall be permitted.
• Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) shall be subject to fulfillment of conditions indicated in ITC (HS).
• Procurement and supply of export promotion material like brochure literature, pamphlets, hoardings, catalogues, posters etc up to a maximum value limit of 1.5% of FOB value of previous years’ exports shall also be allowed.
• An EOU/EHTP/STP/BTP unit may import and/or procure, from DTA or bonded warehouses in DTA/international exhibition held in India, all types of goods, including capital goods, required for its activities, provided they are not prohibited items of import in the ITC (HS) subject to conditions in the FTP.

These units have the benefit of certain entitlements that include:

• Exemption from industrial licensing for manufacture of items reserved for SSI sector.
• Export proceeds will be realized within nine months.
• Units will be allowed to retain 100% of its export earnings in the EEFC account.
• Unit will not be required to furnish bank guarantee at the time of import or going for job work in DTA, where:

(i) The unit has turnover of Rs. 5 crore or above;

(ii) The unit is in existence for at least three years; and

(iii) The unit:

(1) has achieved positive NFE / export obligation wherever applicable;

(2) has not been issued a show cause notice or a confirmed demand, during the preceding 3 years, on grounds other than procedural violations, under the penal provision of the Customs Act, the Central Excise Act, the Foreign Trade (Development & Regulation) Act, the Foreign Exchange Management Act, the Finance Act, 1994 covering Service Tax or any allied Acts or the rules made thereunder, on account of fraud / collusion / willful mis-statement / suppression of facts or contravention of any of the provisions thereof;

• 100% FDI investment permitted through automatic route similar to SEZ units.
• The Units Approval Committee may consider on a case-to-case basis request for sharing of infrastructural facilities among EOU. While accepting such proposals, the NFE obligations of the units shall not be altered. Such facilities will be available to units in EHTP/STP after approval from IMSC. However, sharing of facilities between EOUs and SEZ Units is not permitted.

The SEZ scheme was launched in 2005 and made operational through SEZ Rules in February 2006. The objectives of the SEZ Scheme are as follows:

a. Promotion of exports of goods and services;
b. Promotion of investment from domestic and foreign sources;
c. Creation of employment opportunities; and
d. Development of infrastructure facilities.

The salient features of this scheme are as follows:

a. The SEZ scheme provides an ecosystem conducive to exports, wherein all clearances, starting from setting up of the unit, allocation of space, approval of raw material, capital goods, issuance of letters of permission, monitoring of exports, permission for sale in DTA (Domestic Tariff Area) etc. are provided at one place.
b. It provides a mechanism enabling manufacturing units to repeatedly import raw materials and capital goods for export production and export, without the need for Advance Authorization, EPCG Authorization etc each time.
c. The scheme is especially helpful for SME investors as they lack the resources to secure various kinds of approvals, finding space etc.
d. There are large inflows of service-sector led investment into SEZs (specifically for software exports) and this trend is likely to continue over the next decade.

As of May 15, 2019, 416 SEZs had formal approvals and 351 SEZs were notified (excluding 7 Central Government and 12 State/Pvt SEZs). Total investment in SEZs had reached Rs.5,07,644 crore as of March 31, 2019 and they had generated employment for 20,61,055 persons. Exports from SEZs reached Rs 7,01,179 crore in 2018-19, growing by 21% YoY.

Improving Ease of trading measures is a high priority area for the government as Indian exporters face high transaction costs. For example, the average logistics costs in India are about 15% while such costs in developed countries are about 8%.

TIES was launched by the Department for setting up and upgradation of infrastructure projects with overwhelming export linkages like the Border Haats, Land customs stations, quality testing and certification labs, cold chains, trade promotion centres, dry ports, export warehousing and packaging, SEZs and ports/airports cargo terminuses.

The aim of the scheme is to enhance export competitiveness by bridging gaps in export infrastructure, creating focused export infrastructure, first mile and last mile connectivity for export-oriented projects and addressing quality and certification measures. Central and State Agencies, including EPCs, Commodities Boards, SEZ Authorities and Apex Trade Bodies recognised under the EXIM policy of Government of India are eligible for financial support under this scheme.

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