Service Exports from India Scheme (SEIS) is originated from the Foreign Trade Policy (FTP) 2015-20. In recent time, the SEIS Scheme is a widely-popular concept for the overall industrial development and is passing through various interpretation and associated matters in the department. SEIS benefits have been a lucrative scheme for the service sector industry as a whole, whereby they get additional cash flow for their business growth. Some industries have started adjusting these cash flows in their margins for those who had even reduced their prices for their customers.
The perfect example of this scenario is depicted in the Travel industry in which the majority of the players have already embedded the SEIS tax benefit in their annual cash flows and thus relying on this benefit for their margins. Served from India Scheme (SFIS) and its litigation Originally, SEIS was initiated with a scheme named ‘Served from India Scheme (SFIS)’ which was mainly available in the previous Foreign Trade Policies. During FTP 2009-14, after sanctioning the benefit of SFIS was preliminary for 2-3 years, later on, SFIS had gone under litigation from Directorate General of Foreign Trade (DGFT) authorities. This litigation took definite shape by reference to various judicial decisions being given by High Courts.
The Hon’ble high court took stand in favor of the companies who took the benefit of SFIS and other judicial decisions took a stand in favor of the department according to the case laws. Though SEIS eradicated the litigations of the Indian brand and foreign brand, while it emerged as old wine in new bottle in FTP 2015-20. It emerged with new nuances which have already started forming the clouds and which might result in various litigations in future. When SEIS was launched in FTP 2015-20, the department listed out all the services eligible for the purpose of SEIS under Appendix 3D of FTP 2015-20. This list was linked with the Central Product Classification (CPC) codes as given by the United Nations.
The UN came up with the provisional CPC codes in the year 1998 and later on emerged with version 1.1 and version 2.1 due to the occurrence of the various added services being provided by the companies in the Indian market. Various nuances of SEIS under FTP 2015--20 1. Adoption of new CPC codes The Directorate General of Foreign Trade (DGFT) department is still relying on the provisional CPC codes even till date. The services industry has expanded to a level which cannot be compared with the type of services which were present in the year 1998. The DGFT department had intentionally or unintentionally listed the provisional CPC codes in Appendix 3D which is not in line with the different type of services which is being provided by the companies in today’s era.
2. Evaluation of services Evaluation of services has always been a critical task for a company to check whether they are eligible or not. Even though many of the cases are very straight forward but still many of the cases requires an in-depth understanding of a company’s business so as to characterize the services under a specific category.
3. Management Consulting services Management consulting category has always taken the shape of a residuary category for the purpose of claiming the benefit of SEIS Scheme under FTP 2015-20. When there was no specific category mentioned, the MNC’s were forced to adopt the management consulting as the category for taking the SEIS Scheme benefits as this category encompasses a vast definition in itself and serves a right category for all the companies who were providing back office support services for their clients. There has been no specific guidance from the side of DGFT department for the evaluation of services under this category.
4. Eligibility of SEZ units Though it was totally clear in the preface of the new FTP 2015-20 that the SEZ units would be eligible for the purpose of claiming the benefits of SEIS India but on a pan India level, SEIS Scheme has not been accepted by the SEZ Development Commissioners and all the Commissioners has put the applications on hold. The Noida SEZ, CSEZ, Hyderabad SEZ, MEPZ, and various other SEZ Development Commissioners have not processed the application of SEIS for more than 1 or 2 years.
5. Jurisdictional challenges The law associated with jurisdiction has been given under the Handbook of Procedures 2015-20, however, it does not provide an answer to the various practical situations being faced by the industry. There have been many companies who have a mix of SEZ units and DTA units but has been struggling to find the correct jurisdiction for the purpose of filing the application just because DTA units do not have exports. The DGFT department has raised many questions on these files which have led the companies seeking clarification from the DGFT Headquarters at New Delhi which goes unanswered for a long period of time.
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