Incentives Schemes under the FTP

CA Harikrishna Puranik

Recently the GoI has extended various cut off dates for claiming incentives such as SEIS/MEIS. This may be your chance to encash such benefit, adding to your arsenal in fighting the CoVid Crisis.

Govt Of India, in order to facilitate and encourage the industry towards achieving positive Current Account Deficit, and level the playing field for Indian Exporters to compete in the global Market, announces various schemes for exporters of good and services.

Major Schemes are:

1 Duty Exemption Schemes (such as AA and DFIA)

2 Duty Remission Schemes (Currently Duty Drawback scheme)

3 Incentive schemes such as MEIS/SEIS.

Though there are lot many articles about incentive schemes, they mainly concentrate at conventional schemes such as Drawbacks (DBK) and Advance Authorisation (AA). In the current article, we will try to explain in simple terms, the concept and procedure of benefitting from SEIS Schemes.

Background:

Central government notified a scheme called Service Exports from India Scheme (“SEIS”) under Foreign Trade Policy 2015-20 (“FTP”). This scheme replaced its predecessor ‘Served From India Scheme (“SFIS”) under which the benefit was not available for foreign brand of the Indian companies. Exporters of the notified services will be awarded an incentive ranging from 3-7% of your Net Foreign Exchange Earning. These incentives are in the form of Duty Credit Scrips, which can be used for payment of import duties such as BCD. Don’t throw down the hat yet, saying we don’t have any imports, to use these duty scrips. The scrips are transferable and are usually purchased in the market at a marginal discount. So you can still pocket the remaining cash.

Pre-requisites:

1.      The Services fall under the broad classification as; 

  1. Cross border trade of eligible services from one country’s to the other country.
  2. Consumption of eligible services abroad.
  3. Services rendered in the commercial presence of one country in the territory of another is not eligible.
  4. Presence of natural person of one country providing their service in the territory of another is also not eligible.

2.      Types of Services Notified in Schedule under Appendix 3D;

Sl. No.Name of the ServicePercent of incentive
Professional services
a.Legal Services7
b.Accounting, auditing and book-keeping services7
c.Taxation services7
d.Architectural services7
e.Engineering services7
f.Integrated engineering services7
gUrban planning and landscape architectural services7
hMedical and dental services7
I.Veterinary services7
jServices provided by midwives, nurses, physiotherapists, and paramedical personnel7
Research development services
a.R&D services on natural sciences7
b.R&D services on social sciences and humanities7
c.Interdisciplinary R&D services7
Rental/Leasing services without operators
a.Relating to ships7
b.Relating to aircraft7
CRelating to other transport equipment7
d.Relating to other machinery and equipment7
Other business services
a.Advertising services5
b.Market research and public opinion polling services5
c.Management consulting service5
d.Services related to management consulting5
e.Technical testing and analysis services5
f.Services incidental to agricultural, hunting and Forestry5
g.Services incidental to fishing5
h.Services incidental5
I.Services incidental to manufacturing5
J.Services incidental to energy distribution5
k.Placement and supply services of personnel5
l Investigation and security5
m.Related scientific and technical consulting Services5
n  Maintenance and repair of equipment (not 8861-8866 including maritime vessels, aircraft or other transport equipment)5
o.Building cleaning services5
PPhotographic services5
qPackaging services5
r.Printing, publishing5
s.Convention services5
Audio-visual services
a.Motion picture and video tape production and distribution service7
b.Motion picture projection service7
c.Radio and television services7
d.Radio and television transmission services7
eSound recording.7
General construction work for building7
General construction work for civil engineering7
Installation and assembly work7
Building completion and finishing work7
 Primary education services7
 Secondary education services7
 Higher education services7
 Adult education7
 Sewage services7
 Refuse disposal services7
 Sanitation and similar services7
Hospital services7
7TOURISM AND TRAVEL-RELATED SERVICES
A. Hotels and Restaurants (including catering)
a.Hotel5
b.Restaurants (including catering)5
B. Travel agencies and tour operators services7
C. Tourist guides services7
8RECREATIONAL, CULTURAL AND SPORTING SERVICES (other than audio-visual services)
AEntertainment services (including theatre, live bands and circus services)7
BNews agency services7
CLibraries, archives, museums, and other cultural services7
DSporting and other recreational services7
9TRANSPORT SERVICES
AMaritime Transport Services
a. Passenger transportation7
b. Freight transportation7
c. Rental of vessels with crew7
d. Maintenance and repair of vessels7
e. Pushing and towing services7
f. Supporting services for maritime transport7
BB. Air transport services
a. Rental of aircraft with crew7
b. Maintenance and repair of aircraft c. Airport operations and ground handling7
CC. Road Transport Services
a. Passenger transportation
b. Freight transportation7
c. Rental of commercial vehicles with operator7
d. Maintenance and repair of road transport equipment7
e. Supporting services for road transport services7
DD. Services auxiliary to all modes of transport
a. Cargo handling services7
b. Storage and warehouse services7
c. Freight transport agency services7

3.  Exclusions:

i) Foreign exchange remittances other than those earned for rendering of notified services would not be counted for entitlement. Thus, other sources of foreign exchange earnings such as equity or debt participation, donations, receipts of repayment of loans etc. and any other inflow of foreign exchange, unrelated to rendering of service, would be ineligible.

ii) Following Foreign Exchange remittances shall not be considered for calculation of entitlement under this scheme:

I) Related to Financial Services Sector include

a) Raising of all types of foreign currency Loans,

b) Export proceeds realization of clients,

c) Issuance of Foreign Equity through ADRs/GDRs or other similar instruments,

d) Issuance of foreign currency Bonds,

e) Sale of securities and other financial instruments,

f) Other receivables not connected with services rendered by financial institutions

II) Earned through contract/regular employment abroad (e.g. labour remittances) would include

a) Payments for services received from EEFC Account,

b) Foreign exchange turnover by Healthcare Institutions like equity participation, donations etc.,

c) Foreign exchange turnover by Educational Institutions like equity participation, donations etc.,

d) Export turnover relating to services of units operating under EOU / EHTP / STPI / BTP Schemes or supplies of services made to such units,

e) Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI / BTP units with turnover of DTA Service Providers

f) Exports of Goods

g) Foreign Exchange earnings for services provided by Airlines, Shipping lines service providers plying from any foreign country X to any foreign country Y routes not touching India at all

h) Service providers in Telecom Sector

4.      Other Conditions

  • Service provider must be located in India.
  • Net Free Foreign Exchange Earning during the year must be higher than $15000($10000 in case of Sole Proprietorship)
  • Must have a Valid IEC number.
  • Incase of entities engaged in both manufacturing as well as service then the net foreign exchange earned by such entity shall be considered for services only (although you can claim MEIS on the goods exported)
  • Earnings in INR is also considered as equalling FC where exports are made in INR.
  • Earning via credit card is also eligible.
  • You must posses a DSC registered with DGFT since the application should be submitted online.

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