The new five-year Foreign Trade Policy (“FTP”) 2015-2020 has introduced the new Service Exports from India Scheme (“SEIS”). This reward scheme shall come into force from the date of notification i.e. 01.04.2015. The rewards under SEIS shall be admissible for services rendered on or after the date of notification of this policy. This policy has also extended SEIS benefits to units located in SEZs with an aim to boost exports from SEZs.
SEIS originates from the benefits to be provided to service exporters of India. Historically, the export benefit to service exporters was available in the form of Served from India Scheme (“SFIS”) which has been under litigation in the past from the side of the Directorate General of Foreign Trade (“DGFT”) authorities. This litigation was brought to an end by the ruling of Hon’ble Delhi High Court in the case of Yum Restaurants (I) Private Limited where Hon’ble Delhi High Court has given clarity on the intent behind providing the benefits of service exports in FTP.
SEIS has been launched to provide more rewards to the service exporters and to offset infrastructural inefficiencies and associated costs involved and to provide exporters a level playing field.
SEIS came with its own eligibility criterias which has been listed under the new FTP 2015-20. Some of the eligibility criterias has been listed below:-
|Para 9.51(i)||Cross border trade: Supply of a ‘service’ from India to any other country|
|Para 9.51(ii)||Consumption abroad: Supply of a ‘service’ from India to service consumer(s) of any other country in India
|Individual and sole proprietorship service providers||$10000|
|Para 9.51(iii)||Commercial Presence: Supply of a ‘service’ from India through commercial presence in any other country|
|Para 9.51(iv)||Presence of natural persons: Supply of a ‘service’ from India through the presence of natural persons in any other country
∗Foreign exchange remittances
∗ Payments for services received from EEFC account;
∗ Foreign exchange turnover by healthcare institutions like equity participation, donations etc.
∗ Foreign exchange turnover by educational Institutions like equity participation, donations etc.
∗ Export turnover relating to services of units operating under EOU / EHTP / STPI / BTP schemes or supplies of services made to such units;
∗ Clubbing of turnover of services rendered by SEZ / EOU /EHTP / STPI / BTP units with turnover of DTA service providers;
∗ 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; and
∗ Service providers in telecom sector.
Service Providers of eligible services shall be entitled to Duty Credit Scrip at notified rates on net foreign exchange earned. Scrips can be utilized for payment of basic custom duty.
The scheme has given relaxation to the actual user condition and the Duty Credit Scrips and goods imported / domestically procured against them shall be freely transferable.
An application for obtaining Duty Credit Scrip shall be filed within a period of 12 months from the end of relevant financial year of claim period. Such application is filed online for a financial year on annual basis in form ANF 3B using digital signature.
Duty Credit Scrip shall be valid for a period of 24 months from the date of issue.
The critical aspect of this scheme is the evaluation and characterization of services provided by the company. Classification of services and finding out the right category of service would be an important factor to be presented and explained before the DGFT authorities.
After the evaluation of services, a detailed application file needs to be prepared and filed with the jurisdictional DGFT to claim the amount of benefit as provided under the scheme.
Net free foreign exchange earnings = Gross Earnings of foreign exchange minus total expenses / payment / remittances of foreign exchange