CHAPTER-8

DEEMED EXPORTS

Deemed Exports

8.1

"Deemed Exports" refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange.

Categories of Supply

8.2

The following categories of supply of goods by the main/ sub-contractors shall be regarded as "Deemed Exports" under this Policy, provided the goods are manufactured in India:

 

 

(a)

Supply of goods against Advance Licence / Advance Licence for annual requirement/DFRC under the Duty Exemption /Remission Scheme;

 

 

(b)

Supply of goods to Export Oriented Units (EOUs) or Software Technology Parks (STPs) or Electronic Hardware Technology Parks (EHTPs) or Bio Technology Parks (BTP);

 

 

(c)

Supply of capital goods to holders of licences under the Export Promotion Capital Goods (EPCG) scheme;

 

 

(d)

Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by the Department of Economic Affairs, Ministry of Finance under International Competitive Bidding in accordance with the procedures of those agencies/ funds, where the legal agreements provide for tender evaluation without including the customs duty;

 

 

(e)

Supply of capital goods, including in unassembled/ disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till the stage of commercial production and spares to the extent of 10% of the FOR value to fertilizer plants;

 

 

(f)

Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits the import of such goods at zero customs duty;

 

 

(g)

Supply of goods to the power projects and refineries not covered in (f) above;

 

 

(h)

Supply of marine freight containers by 100% EOU (Domestic freight containers-manufacturers) provided the said containers are exported out of India within 6 months or such further period as permitted by the customs;

 

 

(i)

Supply to projects funded by UN agencies; and

 

 

(j)

Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding.

 

 

The benefits of deemed exports shall be available under paragraph (d), (e), (f) and (g) only if the supply is made under the procedure of International Competitive Bidding (ICB).

Benefits for Deemed Exports

8.3

Deemed exports shall be eligible for any/all of the following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to the terms and conditions as given in Handbook (Vol.1):-

 

 

(a)

Advance Licence for intermediate supply/ deemed export/DFRC/ DFRC for intermediate supplies.

 

 

(b)

Deemed Export Drawback.

 

 

(c)

Exemption from terminal excise duty where supplies are made against International Competitive Bidding . In other cases , refund of terminal excise duty will be given.

Benefits to the Supplier

8.4.1

(i)

In respect of supplies made against Advance Licence in terms of paragraphs 8.2(a) of the Policy, the supplier shall be entitled to Advance Licence for intermediate supplies.

 

 

(ii)

If the supplies are made against Advance Release Order (ARO) or Back to Back Letter of Credit issued against Advance Licence in terms of paragraphs 4.1.11 and 4.1.12 of the Policy, supplier shall be entitled to the benefits listed in paragraphs 8.3(b) and (c) of the Policy, whichever is applicable.

 

 

(iii)

If the supplies are made against Advance Release Order (ARO) or Back to Back Letter of Credit issued against DFRC, the supplier shall be entitled to the benefit listed in paragraph 8.3(b) of the Policy.

 

8.4.2

In respect of supply of goods to EOU/ EHTP/ STP/BTP in terms of paragraphs 8.2 (b) of the Policy, the supplier shall be entitled to the benefits listed in paragraph 8.3(a),(b)and (c) of the Policy, whichever is applicable.

 

8.4.3

In respect of supplies made under paragraph 8.2(c) of the Policy , the supplier shall be entitled to the benefits listed in paragraph 8.3(a), (b) and (c), of the Policy, whichever is applicable. 

 

8.4.4

(i) In respect of supplies made under paragraphs 8.2 (d), (f) and (g) of the Policy, the supplier shall be entitled to the benefits listed in paragraphs 8.3(a), (b) and (c),whichever is applicable.

 

 

(ii) In respect of supplies mentioned in paragraph 8.2(d), supplies to the projects funded by such agencies alone, as may be notified by Department of Economic Affairs, Ministry of Finance, shall be eligible for deemed export benefits. A list of such agencies/ funds is given in Appendix-13 of Handbook (Vol.I).

 

 

(iii) The benefits of deemed exports under para 8.2(f) of the Policy shall be applicable in respect of items, import of which is allowed by the Department of Revenue at zero customs duty subject to fulfillment of conditions specified under Notification No.21/2002-Customs dated 1.3.2002, as amended from time to time.

 

 

 (iv) Supply of Capital goods and spares upto 10% of the FOR value of the capital goods to the power projects in terms of paragraphs 8.2(g) shall be entitled for deemed export benefits provided the International Competitive Bidding procedures have been followed at Independent Power Producer (IPP)/Engineering and Procurement Contract(EPC) stage. The benefit of deemed exports shall also be available for renovation/ modernization of power plants. The supplier shall be eligible for benefits listed in paragraph 8.3(a) and (b) of the Policy, whichever is applicable. However , supply of goods required for setting up of any mega power projects as specified in S.No. 400 of Department of Revenue Notification No.21/2002-Customs

dated 1.3.2002, as amended, shall be eligible for deemed exports benefits as mentioned in paragraph 8.3(a), (b) and (c) of the Policy, whichever is applicable, if such mega power project is

 (a) an inter state thermal power plant of capacity of 1000 MW or more; or

 (b) an inter state Hydel power plant of capacity of 500 MW or more.

 

 

(v) Supplies under paragraph 8.2(g) of the Policy to the new refineries being set up during the Ninth plan period and spilled over to the Tenth plan period shall be entitled for deemed export benefits in respect of goods mentioned in list 17 specified in S.No.228 of Notification No.21/2002-Customs dated 1.3.2002, as amended from time to time.

 

8.4.5

In respect of supplies made under paragraph 8.2(e) of the Policy, the supplier shall be eligible for the benefits listed in paragraph 8.3(a) and (b) of the Policy, whichever is applicable. The benefit of deemed exports shall be available in respect of supplies of capital goods and spares to fertilizer plants which are set up or expanded/ revamped/ retrofitted/modernized during the Ninth Plan period. The benefit of deemed exports shall also be available on supplies made to Fertilizer plants, which have started in the 8th /9th Plan periods and spilled over to the 10th Plan period.

 

8.4.6

The supplies of goods to projects funded by UN agencies covered under Para 8.2(i) of the Policy are eligible for benefits listed in paragraph 8.3(a) and (b) of the Policy, whichever is applicable

 

8.4.7

In respect of supplies made to nuclear Power Projects under para 8.2(j) of the policy, the supplier would be eligible for benefits given in para 8.3 (a), (b) and (c) of the Policy, whichever is applicable. Supply of only those goods required for setting up any nuclear power project specified in list 43 at S.No.401 of Notification No.21/2002-Customs dated 1.3.2002,as amended from time to time having a capacity of 440 MW or more as certified by an officer not below the rank of Joint Secretary to the Government of India in the Department of Atomic Energy shall be entitled for deemed exports benefits in cases where the procedure of competitive bidding (and not international competitive bidding) has been followed.

Eligibility for refund of terminal excise duty/drawback

8.5

Supply of goods will be eligible for refund of Terminal Excise Duty in terms of para 8.3 (c) of Policy provided the recipient of the goods does not avail CENVAT credit /rebate on such goods. Similarly, supplies will be eligible for deemed export drawback in terms of para 8.3(b) of Policy on the Central Excise paid on inputs /components, provided CENVAT credit facility/rebate has not been availed by the applicant. Such supplies will however be eligible for deemed export drawback on the customs duty paid on the inputs/components.

Supplies to be made by the main/sub-contractor

8.6.1

In all cases of deemed exports, supplies shall be made directly to the designated Projects/ Agencies/ Units/ Advance Licence / EPCG licence holders. The sub-contractor may, however, make the supplies to the main contractor as per paragraph 8.4 of Handbook instead of designated projects/ agencies.

 

8.6.2

Supplies made by an Indian sub-contractor of an Indian or foreign main contractor, shall also be eligible for deemed export benefits provided the name of the sub-contractor is indicated either originally or subsequently in the contract, and payment certificate is issued by the project authority in the name of the sub-contractor in the form given in Appendix 22C of Handbook (Vol.I).