Export transaction in rupee eligible for sops

Export transaction in rupee eligible for sops

Subject: Economy

Context:

Exporters settling trade in rupee terms will now be able to access export incentives or duty rebates.

Details:

• Earlier incentives to exporters like– duty drawbacks, export promotion capital goods (EPCG) incentives, and advance authorization scheme were available only if payments or export realization came in freely convertible currencies—the US dollar, British pound, euro and Japanese yen.
• The mechanism is aimed at facilitating trade with countries under sanctions, like Iran and Russia and help eliminate depreciation of rupee .

Concept:

• The RBI in July introduced a rupee settlement system for international trade, where the invoicing, payment and settlement of exports and imports to all countries, if approved by RBI, can be in the Indian rupee through special Vostro account linked to the correspondent bank of the partner country for receipts and payments denominated in rupees.
• Benefits given:
  • Duty drawback is the refund of Customs duties, taxes and fees paid on imported items that are matched with subsequently exported or destroyed items.
    • Essentially, duty drawback is an export promotion program intended to eliminate or recover the costs of duties, taxes and fees on merchandise sold on international markets.
    • It is one of the few export incentive programs acceptable under World Trade Organization rules.
  • Export promotion capital goods (EPCG) incentives
    • It allows importation of capital goods required for the manufacturing of export-oriented products specified in the Export Promotion Capital Goods Authorization at concessional/nil rate of duty.
    • The Export Promotion Capital Goods Scheme allows exporters to import capital goods, such as spares for pre-production, manufacturing, and post-production, for zero Customs tax. IGST on capital goods imports under EPCG is also free till March 31, 2022.
    • However, the scheme is subject to an export value equivalent to 6 times of duty saved on the importation of such capital goods within 6 years
    • In cases where the license holder under the EPCG scheme fails to fulfil the stipulated export obligation then the licensee shall be liable to pay the customs dues along with 15% interest per annum to the customs authority.
    • Where the exporter as per his export obligation meets the deadline then only this business can sell the goods in the Domestic Tariff Area.
  • The Advance Authorization Scheme 
    • It is a scheme where the import of inputs will be allowed to be made duty-free (after making normal allowance for wastage) if they are physically incorporated in a product which is going to be exported. An export obligation is usually set as a condition for issuing Advance Authorization.
    • The inputs imported are exempt from duties like Basic Customs Duty, Additional Customs Duty, Education Cess, Anti-dumping duty, Safeguard Duty and Transition Product-Specific Safeguard duty, Integrated tax, and Compensation Cess, wherever applicable, subject to certain conditions.