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.

Tips to Clear CA Exams

Arjuna: Hey (Hari)Krishna, the very thought of CA Exams itself gives me grief and I feel dejected, therefore, I will not Apply for the Exams!!.”

Krishna: Hey Partha, CA is also just a course. You too can clear it with ease.

Arjuna: Keshava…Hey Keshava! Wherever I look (on the Internet), I see nothing but good for nothing advices to clear the CA Exams. You being the almighty, show me the path to clear my exams with flying colours? 

Krishna: Hey Savyasachi, here you go;

  • Don’t Prepare Just for the Exam:

It may be a paradox, but never prepare for exams for the sake of exams. Clearing exams is actually the easy part. Once you are a CA, your Employer/Client, peers, society at large has high expectations on you. If you ask me, that is where the real exam starts! If you prepare only for the sake of exams, you will have a rude awakening once you start your practice or join  employment. Learn the subjects keeping in mind the application of those subjects in the real world.

  • Don’t Study it like a Theory Subject:

I still remember locking horns with my friend arguing how Company Law is not a theory subject. There are no theory subjects in CA. May be except for ISCA(no disputes there). Always prepare for all the subjects as they are practical subjects. Solve questions and case laws to understand the sections better, than learning the sections. Its good to go thru the bare act once before you start the preparation, but don’t get struck there itself.

  • Imagine as if you are a CA already:

Maybe I am teaching a lot of Law of Attraction these days. But this really helps. When you are studying, imagine as if you are already a CA, and you are trying to help your clients manage their Compliances, update their Books as per Accounting Standards, or helping them make strategic decisions such as “Make or Buy”. This not only makes learning those subjects interesting for you, but helps you retain the core matter of the subject even after you qualify.

  • How can I use this practically?

In continuation to the above point, whenever you learn a new Section/Standard etc, try to find atleast one situation where you can apply the same. This may be in your Articleship, or in other subjects. This builds the reasoning skills and make you a better CA once you start your Career.

  • Stop Mugging the Book:

I have seen my friends who could remember every sentence in the Revision Test Papers and yet could not clear the exams. That is why CA is different. Like any other disciplines, how you apply the knowledge is more important than acquiring the said knowledge. Again, as I mentioned above, always learn with an intention to apply that in your career.

  • Remembering Sections are not so important:

Agreed that, by remembering the sections of the law you may impress the examiner, but I do not see any practical use for the same. Instead, concentrate more on arrangement of sections and what they project as a whole. It will be easier to retain what you learn this way.  

  • Learn the intent:

Try to learn the intent behind the subject, especially in Tax and Law. If there is any restriction, like in Sec 2(22)(e) of Income Tax Act, or the different rates under section 194 for individuals and others, try to understand the intent of the law maker behind that section. This makes you understand the concepts better and keep yourselves updated with the amendments as well.

  • Articleship is Very Important:

One of the key distinguishers in CA as compared to any other professional courses is the mandatory internship known as “Articleship”. Learning while you are working is, according to me, the best kind of learning. You get to experience all the things what you need to learn right in your office itself. Off late the trend of “Dummy Articleship” is on a rise. Most think that they can use the time available to better study and prepare for exams rather than working your Articleship. But this will not only make you void of the practical exposure required for clearing CA but make you less prepared for your post qualifying career as well

  • Coaching may not be always appropriate:

When I was pursing my CA, coaching was an option only for those who were with silver spoons in their mouth. It was only available in Metro Cites and was pricey as well. Now that CA has gained traction and the general public is also aware of the course (on a funny note; I still remember one of my uncles asking me why I enrolled to CA? I could have been better off graduating BA!!!), there are a lot of Coaching centres mushrooming everywhere. In addition, the collages themselves are trying to integrate the CA course into their regular graduation classes with an attractive promise (kind of) of completing both courses together. However, and this is purely my personal opinion, coaching may not be the right approach to CA. or atleast, do not depend entirely on the coaching. I know I have repeated this a lot through this letter, but it’s very important that you learn the subjects thru practical experience and your own understanding of the same. 

  • Always Good to take both groups together:

Although you have the option to take one group at a time, and its tempting to study for 4 subjects rather than 8 at a time, I suggest you take both the groups together. The advantage with this approach is that your strong subjects help you to gain the average required to clear the weaker subjects as well. This will also help you clear your exams in first attempt, as I did