a report on ib final

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A Report On

GENERAL INCENTIVES FOR EXPORT PROMOTION

Submitted By

Manash Protim Boruah

Roll No:33/D/2011


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Introduction:

Exports are essential for any economy because all export activities generate employmentwithin the country and result in earning of foreign exchange.

It is more important for a country like India where foreign exchange outflow on account of imports is much higher compared to foreign exchange inflows on account of exports.

Most of these initiatives or facilities are announced by Directorate General of Foreign Trade[DGFT] under Policy framework known as Foreign Trade Policy [FTP] . The schemesannounced under FTP form a significant part of strategy of export promotion.

The schemes include exemption or neutralisation from Indirect taxes (Customs Duty,Excise Duty, Service Tax, etc.) on one hand and performance based rewards by way of dutycredits on the other

So The Government of India provides several schemes or incentives to promote exports andto obtain foreign exchange.

These are given below:

1. Marketing development Assistance:

The Ministry of Commerce and Industry has a scheme of MDA, which was launched in 1963with a view to stimulate and diversify the export trade, along with the development of marketing of Indian products and commodities abroad. The MDA is utilized for: Market

research, commodity research, area survey and research; Participation in trade fairs andexhibitions; Export publicity and dissemination of information; Trade delegation and studyteams; Establishment of offices and branches in abroad; Grant-in-aid to Export PromotionCouncils and other approved organizations for the development of exports and the promotionof foreign trade; and any other scheme which is generally aimed at promoting thedevelopment of markets for Indian products and commodities abroad.

2. Market Access Initiative (MAI)

The Ministry of Commerce and Industry has introduced the MAI in April 2001 with the idea

that the Government shall assist the industry in R&D, market research, specific market andproduct studies, warehousing and retail marketing infrastructure in select countries and directmarket promotion activities through media advertising and buyer-seller meets. Financialassistance shall be available under the scheme to EPCs, industry and trade associations andother eligible activities, as may be notified from time to time.

3. Central Assistance to States

The State Governments shall be encouraged to fully participate in encouraging exports fromtheir respectiv e States. For this purpose, a new scheme Assistance to States for

Infrastructural Development for Exports (ASIDE) has been initiated which would providefunds to the States based on the twin criteria or gross exports and the rate of growth of


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exports from different States. Eighty per cent of the total funds would be allotted to the Statesbased on the above criteria and remaining 20 per cent will be utilized by the Centre forvarious infrastructure activities that cut across State boundaries, etc. The State shall utilizethis amount for developing complementary and critical infrastructure

4. Special Economic Zone

In 2005, the Ministry of Commerce, Government of India has enacted the Special EconomicZone (SEZ) Act, with an objective of providing an internationally competitive and hassle freeenvironment for exports. A SEZ is defined as a "specifically demarked duty-free enclave andshall deemed to be foreign territory (out of Customs jurisdiction) for the purpose of tradeoperations and duties and tariffs".

The main objectives of the SEZ Act are:

(a) generation of additional economic activity(b) promotion of exports of goods and services;(c) promotion of investment from domestic and foreign sources;(d) creation of employment opportunities;(e) development of infrastructure facilities.

Incentives and facilities offered to the SEZs

The incentives and facilities offered to the units in SEZs for attracting investments intothe SEZs, including foreign investment include:-

Duty free import/domestic procurement of goods for development, operation andmaintenance of SEZ units

100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of theploughed back export profit for next 5 years.

Exemption from minimum alternate tax under section 115JB of the Income Tax Act. External commercial borrowing by SEZ units upto US $ 500 million in a year without

any maturity restriction through recognized banking channels. Exemption from Central Sales Tax. Exemption from Service Tax.

Single window clearance for Central and State level approvals. Exemption from State sales tax and other levies as extended by the respective StateGovernments.

6. Export Credit Guarantee Corporation of India Limited (ECGC):

It was established in the year 1957 by the Government of India to strengthen the exportpromotion drive by covering the risk of exporting on credit.

Being essentially an export promotion organisation, it functions under the administrativecontrol of the Ministry of Commerce, Government of India. It is managed by a Board of

Directors comprising representatives of the Government, Reserve Bank of India, banking,and insurance and exporting community. ECGC, is the fifth largest credit insurer of the


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world.

ECGC provides a range of credit risk insurance covers to exporters against loss in export of goods and services, and also offers guarantees to banks and financial institutions to enableexporters obtain better facilities from them. Exporters have a lot to benefit from ECGC as it

provides ---

1. insurance protection to exporters against payment risks2. provides information on credit-worthiness of overseas buyers3. provides information on about 180 countries with its own credit ratings4. guidance in export related activities5. makes it easy to obtain export finance from banks/financial institutions6. assists exporters in recovering bad debts

7. Duty Drawback on Goods Exported

Under this Duty Drawback scheme export products get relief of incidence of customs andexcise duties paid on raw materials and components used at various stages of production. It isdefined as rebate of duty chargeable on any imported or excisable material used in themanufacture of goods exported from India. Duty Drawback is admissible for exportsirrespective of mode of export, i.e. whether despatched by Sea, Air, Land Customs or byPost.

8. Export Financing

Financial assistance extended by the banks to exporters at pre-shipment and postshipmentstages. While the pre-shipment finance is provided for working capital for the purchase of raw material, processing, packing, transportation, warehousing, etc, of the goods meant forexport, post-shipment finance is generally provided in order to bridge the gap between theshipping of goods and the realization of proceeds. With a view to providing pre-shipmentcredit to Indian exporter at internationally competitive rates, interest, Reserve bank of Indiaannounced a new scheme in November 1993 to provide Pre-shipment Credit in ForeignCurrency (PCFC) by the banks in India. The PCFC scheme is in addition to normal packingcredit schemes in Indian rupees presently available to Indian exporters. Exporters are alsopermitted to draw foreign exchange from the authorized dealers for the purposes such asforeign travel or for giving advertisement aboard. Therefore, a person resident in India mayopen, hold and maintain with an authorized dealer, a foreign currency to be known as

Exchange Earners Foreign Currency (EEFC) Account, subject to the terms and conditions of the EEFC Account Schemes.

9. Exim Bank Finance

The Export-Import Bank of India (Exim Bank) provides financial assistance to promoteIndian exports through direct financial assistance. Overseas investment finance, term financefor export production and export development pre- shipment credit, buyers buyers credit,lines of credit, relining credit facility, export bills rediscounting, refinance to commercialbanks finance for computer software export, finance for export marketing and bulk importfinance. The Exim Bank also extends non-funded facility to Indian exporters in form of

guarantees. The diversified landing of the Exim Bank now covers various stages of exportthat is from the development of export market to expansion of production capacity for


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exports, production for export and pre-shipment financing. The Exim Bank s focus is onexport of manufactured goods, project exports and export of technology services.

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